Primus Telecom bonds seen firmer after numbers; Delphi pushes GM lower

By Paul Deckelman and Sara Rosenberg

New York, Feb. 10 - Primus Telecommunications Group Inc.'s bonds were seen better on somewhat better than-expected fourth-quarter numbers - even though the McLean, Va.-based telecom company's net loss was considerably greater than the red ink it posted a year earlier.

In the automotive sphere, General Motors Corp.'s bonds were seen lower, with traders saying they were being pulled down by concerns about possible labor troubles at former GM unit Delphi Corp., which could disrupt production at the problem-plagued world's largest carmaker.

Delphi rival Visteon Corp.'s bonds were meantime seen better after the former Ford Motor Co. parts unit swung into the black in the fourth quarter - at least on paper - and said that its operational reorganization efforts were well under way.

Dealings in the bank debt of distressed issues were seen as extremely quiet and featureless, although there was a little bit of activity very late in the day as another auto name, J.L. French Automotive Castings Inc., filed for Chapter 11 bankruptcy protection while it restructures its debt.

A trader saw the Sheboygan, Wis.-based company's first-lien bank debt quoted at par bid, with none offered, while its second-lien debt was seen bid in the 30s.

The automotive supplier also announced plans to close its underperforming operations in Benton Harbor, Mich., and Saltillo, Mexico. However, the U.S. Chapter 11 filing does not include J.L. French's overseas operations and affiliates.

Back among bond names, the already bankrupt Troy, Mich.-based automotive components supplier Delphi's bonds were lower, a trader said, which in turn "helped to knock down GM."

He saw Delphi's 6.55% notes due 2006 down ¾ point at 53.25 bid, 54 offered, while its 7 1/8% notes due 2029 were off a point at 54 bid, 54.75 offered.

In turn he said, "GM hit a bid, on the chance that Delphi may or may not do something," which pulled the struggling Detroit giant's flagship 8 3/8% notes due 2033 down ¾ point to 71 bid, 71.5 offered. Its General Motors Acceptance Corp. financial unit's 8% notes due 2031 were half a point lower at 95 bid, 95.75 offered.

GM "went on a ride and ended a little lower," a second trader agreed, quoting the 8 3/8s down a full point at 71 bid, 72 offered, while the GMAC 8s were down half a point at 95.

GM investors were watching the latest developments in Delphi's bankruptcy reorganization case, where the judge on Friday approved Delphi's $21 million executive bonus plan for 400 managers - although not CEO Steve Miller.

But judge Robert Drain also insisted on changes to parts of the plan after opposition from Delphi's unions, which argued that it was unfair to give executives bonuses while the rank-and-file work force was being asked by the company to agree to sizable pay and benefit concessions to keep Delphi afloat. The company insists the bonuses are needed to prevent an executive suite brain drain at a time when Delphi needs its experienced managers to stick with the company and not go elsewhere.

Drain asked for the elimination of a controversial provision that awards bonuses even if the company's financial targets are not met, as well as changes that would address how Delphi's board decides who is eligible to receive the bonuses.

But he rejected requests by unions and other critics of the bonus plan that he delay his decision for several months until the status of Delphi's union negotiations becomes clearer.

Delphi and the United Auto Workers union and several smaller labor groups have been battling for several months over management's requests for major concessions. Delphi has set a deadline for next Friday for their agreements, and has indicated that if no agreement is reached by then it may ask Drain to void the company's contract with its unions. The unions have indicated that they could strike in that event - and that has got GM concerned, since its erstwhile problem child is GM's single largest components supplier - and any job action could shut down the parts pipeline and disrupt the carmaker's production.

Earnings, outlook boosts Delphi

Elsewhere in the automotive area, Visteon's bonds were seen on the move after the company reported net income for the 2005 fourth quarter ended Dec. 31 of $1.338 billion ($10.25 per share) - a sharp turnaround from the $138 million loss ($1.10 per share) it showed in the year-earlier period. The company did acknowledge that the hefty paper profit was due to a whopping $1.8 billion gain it booked in connection with last year's transfer of 23 high-cost North American factories to Visteon's former corporate parent, Ford, as Ford worked with Visteon to restructure the latter's manufacturing operations and save it from a possible bankruptcy filing. Excluding that gain and other special items it still lost $102 million for the quarter.

However, Visteon executives told analysts on a conference call following the release of the financial results that with the Ford transaction now out of the way and the higher-cost facilities jettisoned, the way was now clear for Visteon to build its business and ultimately return to profitability, and they predicted that the company, which was free cash flow-negative in 2005, would generate at least $50 million of free cash flow in 2006 (see related story elsewhere in this issue).

Visteon's bonds "were very active today [Friday]," a trader said, seeing its 8¼% notes due 2010 as having "traded higher in the morning, right off the bat," up two points to 84.5 bid, 85 offered, before backing off that high; he saw the bonds going home still ¾ point higher at 83.25 bid, 84.25 offered.

Another trader said the bonds "popped in the morning" and saw "a fair amount of trading" throughout the day before ending at those levels.

While Visteon was up, former parent Ford's 7.45% notes due 2031 were seen ¼ point lower at 71.5 bid, 72 offered.

Primus lifted on results

Apart from the auto names, a trader saw Primus Telecom's bonds "up significantly," even though the company posted a fourth-quarter net loss of $24.9 million (24 cents a share), considerably worse than its year-ago net loss of $1.8 million (two cents a share). He said that the numbers released Thursday night "were not as bad as in the past," which helped push its 8% notes due 2014 up as much as seven points in intraday trading to 71 bid, before those bonds came off that peak and gave up half of their gains to still end up 3½ points at 67.5 bid, 68.5 offered.

He also saw the Primus 12¾% notes due 2009 hit an intraday high of 71 before pulling back a little to close at 67 bid, 68 offered, up six points on the session and a whopping points on the week.

While the Primus loss was much more than the year-ago red ink, it was still only half of the $51 million loss it suffered in the third quarter. Primus also reported $15 million of adjusted EBITDA - up from $2 million the quarter before, said that it had reduced sales, general and administrative expenses by 10% from the prior quarter, and had sequentially cut its loss from operations to $6 million from $33 million in the third quarter.

On an adjusted basis, Primus showed a $15.8 million loss (15 cents a share).Revenue fell 14.9% to $287.2 million from $336.9 million last year.

Asbestos names down again

Bonds of bankrupt asbestos-challenged companies Owens Corning and Armstrong World Industries were seen down another point or so on Friday, continuing the weaker trend seen since around Wednesday on worries about whether the Senate will pass the bill setting up a proposed $140 billion national trust fund to pay out asbestos-related medical claims and get those claims out of the courts, where companies might be hit with greater penalties. The bill has been kicking around Capitol Hill for over a year now.

Owens Corning's 7½% notes due 2018 were seen down 1¼ points on the day, and about four points on the week, at 87.75 bid, 88.75 offered. Armstrong's bonds were meantime at 74 bid, 76 offered, down about two points on the day.

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