Delphi draws attention on more potential bad news; Harrah's bonds steady, Majestic Star debt falls

By Stephanie N. Rotondo

Portland, Ore., Aug. 29 - Month-end pricing seemed to be the only thing keeping distressed traders busy during the short session, even as news reports alluded to a potential end for Delphi Corp.

With little positive news coming out of the automotive sector, Delphi has seen its share of negativity. But new reports speculated that the company is facing a real possibility of liquidation. A company spokesperson said Friday that a revised plan is in the works and the goal is to emerge from its long stint in bankrupt territory as a whole company.

Meanwhile, casinos closed the week mixed. Harrah's Entertainment LLC's bonds ended unchanged, while Majestic Star Casino LLC continued to see its debt decline. There was no news out on either company, though both are facing the threat of tropical storm Gustav.

"Half the brokers didn't show up today," said one trader. "Normally, I see about 50 to 60 pictures an hour. Today we're seeing 10 to 20."

"I had no real illusions," he added about the day's activity, or lack thereof. "With luck, we'll actually have something to do next week or the week after."

The bond market was scheduled to be closed Monday in honor of the Labor Day holiday.

More bad news for Delphi

News reports of a potential liquidation and a revised reorganization plan did little to cause movement in Delphi's bonds during the final - short - session of the week.

A trader said the bonds - which include 6.55% notes due 2006, 6½% notes due 2009 and 2013, 7 1/8% notes due 2029, 8¼% notes due 2033 and 6.2% notes due 2033 - remained around the 13 level.

"There was a bunch of news, but it hasn't had any impact," the trader said.

When asked if the lack of players at their desks might be impeding any action in the name, the trader said it was possible. However, "I'm not sure how 'news' the news is," he added. "It's probably already been factored into people's scenarios."

A Wall Street Journal article speculated that liquidation might be in the auto parts supplier's future. On Friday, Lindsey Williams, a Delphi spokesperson, said that the bankrupt company is looking to revise its reorganization plan, although she did not have a time frame for the plan's release.

Delphi filed for Chapter 11 protections in October 2005. The company had planned to emerge from bankruptcy earlier this year, but the subprime mortgage blowout constrained the market, making it difficult for the company to find the financing it needed. Its exit efforts were further hampered when private equity firm Appaloosa Management pulled out of a $2.55 billion investment deal.

Since then, Delphi has taken Appaloosa to court to force the company to hold up its end of the bargain. In the meantime, the company has looked to its former parent, General Motors Corp., to help it during its time of need.

But even negotiations between Delphi and GM have hit obstacles. Most importantly, Delphi bondholder Highland Capital Management LP has objected to the company borrowing an additional $300 million from GM.

Delphi's current debtor-in-possession facility is good through the end of the year.

Elsewhere in the autosphere, a trader saw GM's benchmark 8 3/8% bonds due 2033 up a quarter of a point at 49.25 bid, 50.25 offered, while GMAC LLC's 8% bonds due 2031 edged up to 54.25 bid, 55.25 offered.

Ford Motor Co.'s 7.45% bonds due 2031 were up half point at 51.25 bid, 52.25 offered.

Harrah's stable, Majestic lower

Harrah's Entertainment's debt closed the session unchanged, but Majestic Star Casinos' bonds continued to decline.

A trader quoted Harrah's 10¾% notes due 2016 at 67 7/8 bid, 68 offered. At another desk, Majestic's 9½% notes due 2010 were seen down another point at 60 bid, 61 offered.

Another trader said Majestic's paper ended down half a point to 61.25 bid on volume of more than $6 million, which he said was quite high "on a day like today."

Both Harrah's and Majestic have properties located in Mississippi along the Gulf Coast. That puts the respective casinos in danger of being hit by tropical storm Gustav.

Forecasts expect Gustav - which is potentially going to hit hurricane status - to hit the area Monday or Tuesday. The threat of the storm could keep customers away from the casinos, which have already been hurt by rising gas prices and new gaming centers in areas like Florida.

Paul Deckelman contributed to this article.

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