Dana, Dura, Hayes Lemmerz up; Movie Gallery gains despite poor rental figures; GM, Delphi better

By Ronda Fears and Sara Rosenberg

Memphis, April 11 - Distressed debt paper was better overall Tuesday, traders said, but it was a light trading session. Slow traffic aside, transportation issues hogged attention on distressed desks with auto and auto-related names topping lists of the most mentionable on the distressed roster.

Airline stocks fell Tuesday as crude oil futures approached $70 a barrel early in the day on the New York Mercantile Exchange, although those prices eased back to settle higher by 24 cents at $68.98 dollars a barrel - but in bond land traders said they essentially saw distressed airline paper unchanged because their recent fare increases seem to be sticking.

"The market had a pretty good tone in general but it was light trading compared to normal," said a sellside trader at a shop in New York. "In general, the tone of the auto suppliers was better."

General Motors Corp. and General Motors Acceptance Corp. were higher, and that probably boosted Delphi Corp. But the impact of late-breaking news about GM helping Delphi look for buyers of non-core assets was uncertain. Also, automotive suppliers were higher, which traders attributed to the sector and several specific names like Dana Corp., Dura Automotive Systems Inc. and Hayes Lemmerz International Inc. getting talked up at Morgan Stanley's annual automotive conference.

Part of the reason GM and GMAC issues gained traction earlier Tuesday might be attributed to GM announcing it would sell its 7.9% equity stake in Isuzu Motors Ltd. GM bonds gained 1 point to the 71 bid, 72 offered area and GMAC issues rose 2 points to the 94 bid, 95 area. GM's revolver also was feeling stronger as trades went off as high as 961/4. Residential Capital Corp., a unit of GMAC, pricing an upsized $3.5 billion, three-part note offering Tuesday probably didn't hurt, either.

Delphi issues add 4 points

Delphi's bonds tracked back in an upward pattern Tuesday, after drifting lower Monday from an upside ride on Friday in response to bankruptcy court approval of a plan to offer buyouts to thousands of its hourly employees - funded in part with a pledge from former parent GM - to get them to take early retirement, a sellside market source said.

Tuesday Delphi paper gained 4 points to the 66 bid, 67 offered spot in the regular session, a trader said. Then after the markets were closed news hit the tape that GM's top purchasing executive had confirmed the automaker is trying to help Delphi find buyers for non-core assets. Meanwhile, GM has been contracting with new suppliers for certain parts in the event that Delphi workers go on strike.

Delphi is seeking to cancel its union contracts - and the United Auto Workers and other unions have threatened to strike if that happens. In an effort to avoid a strike, GM has offered to pay for buyouts to up to 17,000 Delphi workers and allow 5,000 Delphi workers to flow back to GM.

Dura presentation impresses

Dana, Dura and Hayes Lemmerz bonds were all described about a half-point better as the companies were "talked up" at the Morgan Stanley conference.

Toledo, Ohio-based Dana filed for bankruptcy on March 3. Rochester Hills, Mich.-based Dura and Northville, Mich.-based Hayes Lemmerz are not in bankruptcy but have suffered from the pressure trickling down from the major automakers.

A fixed income fund manager in New York said Tuesday that he was particularly impressed with Dura's presentation Monday at the Morgan Stanley conference.

Dura's chief financial officer, Keith R. Marchaindo, said that maker of transmission shift levers, door modules, window systems and other components has adequate liquidity with a new $75 million bank facility add-on. He also said the company faces no serious debt maturities before May 2009, when $524 million of 9% notes come due, and is on schedule with a restructuring plan announced in February.

"They seemed very relaxed and confident for a company that is a heartbeat away from bankruptcy. It sounded like the restructure was a slam dunk," the buysider said.

"They made it sound like they had their act together. Actually, I think they have it together pretty well. They do not have any nasty liquidity events till the 2009 bonds come due. Somehow I do not see the 2009 issue causing them to file. The bondholders would get a lot less than par in a bankruptcy so I think that Dura is in the driver's seat there.

"Of course, a lot can happen if GM files [bankruptcy], or there's some other noise like a [UAW] strike in 2007. But for the moment, these guys look like they can keep breathing for a bit, and probably will restructure the 2009 debt that they cannot buy in on a step-over on the seniors when it comes due."

Dana 5.85s spike on CDS

The buysider said he had heard the Dana 5.85% bonds due 2015 spiked up over 25 points right at the close to par, but a sellside trader explained that it was a matter of a credit default swap contact getting closed out.

"The was not a true market," the trader said. "There's no way those [Dana bonds] are trading at par, more like 74, 741/2."

Earlier in the day another sellside trader had said there was lots of activity in the 5.85s until around noon and the action died off. He had described the issue around noon as off about a quarter-point at 74.

Traders said there could be a surge in closing out CDS contracts, citing the International Monetary Fund's annual report that was released Tuesday. The report suggests that investors in structured credit products risk not being able to sell or obtain an acceptable price following a market downturn because buyers may shun the fast-growing market.

Automotive-related issues are at the apex of the risk structure, one of the traders pointed out. GM and Ford Motor Co. pretty much were to blame for liquidity issues in the structured credit markets last year when ratings downgrades to junk territory sparked a massive sell off in some parts of synthetic collateralized debt obligations.

"Like an automobile, these [CDOs] have a lot of moving parts," one of the traders said. "Sometimes it's a lot easier to put together than take apart."

Following the recent defaults of Delphi and Dana an auction was held to determine cash valuations for settlement, but no universal method has yet emerged.

Movie Gallery higher again

Movie Gallery, Inc. bonds and bank paper were higher Tuesday despite negative news about rental figures industrywide.

The term loan was quoted higher by about a quarter to a half a point at 89¾ bid, 90½ offered, while the 11% bonds due 2012 added a point to 48 bid, 48½ offered.

Data from Rentrak Home Video Essentials released Monday showed that first-quarter video rental spending declined 1.9% to $2.12 billion, a drop in part attributed to milder than usual weather across the country.

On Monday Movie Gallery bonds up about 3 points with no fresh positive news on the Dothan, Ala.-based No. 2 video rental store chain.

Calpine up on extension

Calpine Corp.'s second-lien bank debt moved up by about a point on Tuesday as news emerged that the company received an extension to file a reorganization plan before competing plans are allowed, according to a trader.

The second-lien loan closed out the day quoted at 95½ bid, 96 offered, the trader said.

The San Jose, Calif.-based independent power producer now has until Dec. 31 to file a plan of reorganization as opposed to the original April 20 deadline.

Owens Corning inching up

Owens Corning's bank debt continued to inch its way higher during Tuesday's session as people have been refocusing on the name, according to a trader.

The bank debt closed out the day stronger by about a quarter of a point at 154 bid, 155 offered, the trader said.

On Monday, Owens Corning had gotten a quarter to a half a point push up, as did other asbestos related names, when news emerged that USG Corp.'s disclosure statement received court approval, paving the way for the company to solicit votes from asbestos personal injury claimants on its plan of reorganization.

In addition, on Monday Owens' pre-bankruptcy institutional lender agent Credit Suisse obtained interim approval from the U.S. Bankruptcy Court for the District of Delaware to deem the bank holder classes under the company's plan of reorganization as unimpaired in order to take advantage of claim treatments negotiated in a settlement.

Owens Corning is a Toledo, Ohio, building materials company.

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