Dura bank debt continues gyrations, bonds better; Movie Gallery off again

By Paul Deckelman and Sara Rosenberg

New York, Oct. 18 - Dura Automotive Systems, Inc.'s second-lien term loan reversed its direction as it actually moved up by about 2 points after spending the earlier part of this week in a downward spiral, traders said.

The beleaguered Rochester Hills, Mich.-based automotive parts maker's bonds, which had been battered down into the upper 20s after it failed to make a scheduled coupon payment on them, were seen to have moved up to the lower 30s.

Also in the automotive area, Remy International Inc.'s bonds - which had fallen badly on Tuesday - were seen regaining some of their lost ground during Wednesday's dealings.

Airline issues such as Delta Air Lines Inc. and Northwest Airlines Corp. were better, given a boost by the continued lower price of oil on world markets as well as better-than-expected quarterly results from industry leader AMR Corp., the parent company of American Airlines.

But Movie Gallery Inc.'s bonds were seen lower, continuing to suffer from negative fallout regarding a news story about hedge funds' dealings in the troubled video chain operator's stock and bonds.

Also on the downside, MagnaChip Semiconductor Ltd.'s bonds were in retreat, a slide which traders attributed to generalized tech-sector weakness.

Dura loan turns north

Dura Automotive's second-lien loan closed out the day at 79 bid, 81 offered, up from Tuesday's levels of 77 bid, 79 offered, a bank debt trader said.

That paper had been falling since the company announced on Monday that its subsidiary, Dura Operating Corp., would not be making a $17.25 million interest payment on its 8 5/8% senior notes due 2012.

Prior to that news - which was not totally unexpected - the loan was being quoted last Friday at 80 bid, 82 offered.

The notes' indenture provides for a 30-day grace period before the nonpayment becomes an event of default.

If the payment is not made during the grace period, then the company will be in default under its second-lien term loan, 9% senior subordinated notes, as well as its 8 5/8% notes.

Dura bonds seen better

Those bonds, meantime, were seen "bouncing 2 points," a trader said, to about the 31 bid, 32 offered area, on "no news - just short covering."

Another trader saw the bonds "feeling better at the end of the day," up 3 points on the session at 31 bid, 32.5 offered

Those Dura senior bonds had traded all the way down to around the 28 bid, 30 offered area, trading flat, or without accrued interest, after the company failed to make the interest payment.

Dura is expected to use the 30-day grace period to try to negotiate an arrangement with the bondholders to head off a default and a probable slide into Chapter 11.

Dura's 9% subordinated notes due 2009 were seen better as well, up ½ point to 6 bid. Like the seniors, those bonds too are trading without their accrued interest.

A trader in distressed bonds, comparing Dura's movements to those of bankrupt parts makers Delphi Corp. and Dana Corp., said that Dana "held about where it was," with the Toledo Ohio-based company's 7% notes due 2028 holding around 68 bid, 69 offered, about where they had finished on Tuesday, Delphi "improved a little," with the Troy, Mich.-based company's 6.55% notes that were to have matured on June 15 firming to par, "and Dura off in its own world" - meaning Dura's troubles have failed to spark much sympathy movement among the other parts makers.

Remy rebound

However, one exception to that blanket assessment might be Remy International, whose bonds "were running back up," a trader said, after having slid badly on Tuesday by anywhere from 8 to 13 points on the day, depending on whom you spoke to.

He saw the senior notes of the Anderson, Ind.-based maker of Delco Remy automotive electrical systems up about 5 points on the day, and its junior notes up as much as 8 points, with its 9 3/8% subordinated notes due 2012 at 38 bid, 39.5 offered, and its 11% subs due 2009 bid at 40.5 and looking for offerings.

"People were looking for those bonds as the day progressed," he said.

A market source at another desk actually pegged the 9 3/8s off slightly at 38 bid - but said the 11s were 8½ points better at 39.5, while the company's 8 5/8% senior notes due 2007 were 4 points better at 88.5 and its senior floating-rate notes due 2009 were ¾ point better at 96.5.

Remy "came back 7 points," said another trader, who saw the 9 3/8s at 36 bid, 37 offered.

While some traders chalked Tuesday's slide in the bonds up to generalized investor angst playing off the pounding that fellow automotive parts name Dura has been taking lately, the latter trader suggested that the market may have been reacting to news that the company had hired the Rothschild investment bank as an advisor as it seeks to allocate its assets.

"Perhaps people thought that this was a sign they were going to file [for bankruptcy], but when it became apparent the firm was only advising them on asset allocation, the bonds recovered."

Airlines climb on oil, AMR numbers

Elsewhere, a trader saw AMR's 9% notes due 2012 "already trading at 101.5 bid, 102.5 offered," up another point from that level on Wednesday, helped by the Fort Worth, Tex.-based airline giant's better-than-expected third-quarter earnings.

"What a difference a year makes," he said, in referring to the fact that those same bonds were trading in a range of 67 to 74 a year ago as the company continued to lose money.

It was the second straight quarterly gain for AMR - the first time that has happened in six years, as the airline operator was helped by recently lower fuel prices in addition to stronger revenues.

AMR, on its quarterly conference call, also touted its efforts so far this year at improving its balance sheet (see related story elsewhere in this issue).

Another trader, however, did not see much movement in the company's bonds, which have already been trading at very strong levels. He quoted them unchanged at 101.25 bid, 102.25 offered, while AMR's 9% notes due 2016 were at 99 bid, 101 offered.

Among other airline names, Delta was about a point better on the session, another trader said, with the bankrupt Atlanta-based air carrier's 8.30% notes due 2029 around 33 bid, 34.5 offered. He did not notice any movement in Northwest's bonds, calling them unchanged in the high 50s.

Another trader did see the bankrupt Eagan, Minn.-based carrier's 10% notes due 2009 at 58.5 bid, 59.5 offered, while Delta's 8.30s were also up a point, at 33.5 bid, 34.5 offered. The trader attributed those gains to the continued easing in the price of crude oil, which points to likely lower prices for jet fuel, as well as the better AMR numbers. The trader saw the AMR 9s of '12 at 102 bid, 103 offered, up a point.

Movie Gallery lower

On the downside, traders saw Movie Gallery's 11% notes due 2012 down a point on the session to around 57 bid, 58 offered.

That was on top of a 4 point slide seen in the Dothan, Ala.-based video chain operator's bonds on Tuesday in apparent response to an article in Monday's editions of The New York Times reporting that the Securities and Exchange Commission is looking into whether any of the hedge funds on a private call with Movie Gallery executives in early March to update its big debtholders as to the company's declining financial situation took their inside knowledge of the company's struggles and traded on it.

The feds are reportedly looking into whether the hedge funds used the inside information they gleaned from the lender call - information which would not be announced to the public for nearly two additional weeks - to short the stock, the bonds and the debt.

MagnaChip trades off

A trader saw MagnaChip Semiconductor's 8% notes due 2014 down as much as 5 points on the session to 52 bid, 53 offered, citing disappointing tech-sector earnings as a likely catalyst.

Another market source saw those bonds down 4 points on the session to the 52 level, and pegged the chipmaker's 8.64% notes due 2011 down nearly a point at 82.5. However, its 6 7/8% notes due 2011 were seen pretty much unchanged at 80.5.

Rotech lower after presentation

Rotech Healthcare Inc.'s 9½% notes due 2012 "were moving all around," a trader said, seeing the Florida-based healthcare products company's notes falling as low as 62 bid, 64 offered, before bouncing off those lows to end at 66 bid, 68 offered - still down 3 points on the session.

The trader said that the company was presenting at a Jefferies & Co. investor conference, "but the fast money was moving them down" before the bonds started to come back up a bit.

Rotech's bonds have been struggling ever since a recent suggestion by a government Medicare panel to limit reimbursements for in-home delivery of oxygen, an important Rotech business.

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