Movie Gallery loan continues to ease; Delta bonds gyrate on labor, oil news

By Paul Deckelman and Sara Rosenberg

New York, April 17 - Movie Gallery Inc.'s bank debt was seen lower Monday, with traders citing such factors as a lack of post-holiday trading activity in the name as well as a possible continued reaction to last week's news that the troubled company's chief financial officer had resigned.

Bond traders saw Delta Air Lines Inc.'s notes bouncing around at mostly higher levels, taking flight on the weekend news that the bankrupt Atlanta-based Number-Three U.S. airline carrier and its pilots had reached a preliminary agreement on a package of union concessions, apparently averting the possibility of a crippling strike.

But those gains proved to be short-lived, and mostly evaporated on the news that world crude oil prices - considered a leading indicator of future jet fuel price trends - had pushed upward Monday, breaching the psychologically significant $70 per barrel mark.

Movie Gallery's term loan B saw a drop on the bid side, bank debt traders said, citing the usual paucity of trading activity on the first day back after a three-day holiday weekend. They also raised the possibility that investors were still reacting to the resignation last week of CFO Timothy R. Price.

The term loan B closed out the session quoted at 88 bid, 90 offered, down a point on the bid-side from prior levels of 89 bid, 90 offered, traders said.

Late last week, the Dothan, Ala.-based video rental company - Number-Two in the United States behind Blockbuster Inc. - announced that CFO Price had resigned for personal reasons and would be replaced on an interim basis by Mark D. Moreland, senior vice president and treasurer.

Movie Gallery is in the midst of an ambitious turnaround plan that includes store closures, subleasing space in many of its remaining stores to other merchants, and realizing corporate-level synergies from its acquisition last year of larger rival Hollywood Entertainment Corp.

While the company's bank debt seemed easier, its bonds actually firmed a little. A trader in distressed notes said that Movie Gallery's 11% notes due 2010 were about a point better at 46 bid, 48 offered.

GM revolver trades in mid 90s

Back in the bank debt market, General Motors Corp.'s revolving credit loan paper traded several times just shy of the mid-90s on Monday after having seen a drop and a widening out in levels over the past few sessions on refinancing uncertainty, according to a trader.

The Detroit-based automotive giant's revolver traded a couple of times at 94.5 and a couple of times at 94.75 during market hours, the trader said. By comparison, at the end of last week, the bank debt was being quoted really wide at 92.5 bid, 95 offered.

For weeks now there has been speculation that GM might be refinancing its revolver in the near term since there is some doubt as to whether lenders would allow any borrowings under the facility due to the recent restatement of prior financial statements.

"People are thinking it could be an amendment that comes instead of a new deal altogether," the trader said. "So, it has been trading down and widening out."

GM's benchmark 8 3/8% notes due 2033 were seen pretty much little changed, a trader said, quoting them at 71.5 bid, 72.5 offered.

He also saw the bonds of GM's financing arm, General Motors Acceptance Corp., only slightly higher, its 8% notes due 2031 at 94.5 bid, 95.5 offered.

Another trader, who saw GM and GMAC at that level also saw Ford Motor Co.'s. 7.45% notes due 2031 at 72.5 bid, 73 offered, and its Ford Motor Credit financial arm's 7% notes due 2013 at 87.5 bid, 88 offered, both unchanged.

Delphi steady

Among other names in the volatile and troubled auto sector on Monday, the second trader saw bankrupt Troy, Mich.-based automotive electronics manufacturer Delphi Corp.'s bonds pretty much unchanged, with its 6.55% notes due 2006 and 7 1/8% notes due 2029 each unchanged at 66 bid, 67 offered.

Delphi's Troy neighbor, the bankrupt auto interior components maker Collins & Aikman Corp., was up perhaps ¼ point, its 10¾% notes due 2011 rising to 31.75 bid, 32.75 offered .

And bankrupt Toledo, Ohio-based systems maker Dana Corp.'s bonds were up about half a point across the board, with the 6½% notes due 2008 at 78 bid, 79 offered, the 5.85% notes due 2015 at 72.25 bid, 73.25 offered, and its 7% notes due 2028 at 73.5 bid, 74 offered.

Oil spike stops Delta rise

Apart from the autos, traders said that the push in world crude oil prices above the psychologically potent $70 per barrel mark pulled the rug out from under an early rally in Delta Air Lines bonds and left them up only a bit.

Delta had notched impressive early gains on the news that the airline and the union for its approximately 6,000 pilots had reached preliminary agreement on a package of cost-reduction measures.

A trader saw Delta's bonds up as much as three points on the session to 27 bid, 28 offered, on the labor deal, which makes a strike by the pilots against the company less likely now.

Neither Delta nor the Air Line Pilots Association International released details of the deal, which must be approved by the rank-and-file and then okayed by the bankruptcy court before it can go into effect.

Delta - which in late 2004 had successfully squeezed $1 billion in permanent wage and benefit cuts as well as workrule changes and other productivity enhancements from its captains to stave off bankruptcy, at least temporarily - had been asking for another $300 million in permanent givebacks from the pilots, who had threatened to strike if Delta tried to void their contract.

However, another trader said that while Delta "ran strong" on the pilot news, "it ran right into $70 per barrel oil and gave it pretty much all back." He saw Delta's 8.30% notes due 2029 move up to 27.5 bid, a two point gain, on the news, but then surrender most of those gains to end at 26 bid, 27 offered, a gain of half a point on the day.

The escalation in crude oil prices sparked fears that jet fuel prices, a major expense for the airlines, will be heading upward as well, further damaging the prospects for the troubled air carrier industry.

Delta was not alone in its descent on the crude price news; a trader saw the bonds of bankrupt Eagan, Minn.-based Number-Four U.S. carrier, Northwest Airlines Corp., pretty much unchanged in the 44 bid, 45 offered region.

And a trader saw AMR Corp.'s 9% notes due 2012 down 1½ points on the session at 97 bid, 98 offered.

Back on solid ground, a trader in distressed notes called things "pretty quiet" as people straggled back to the market after spending 3½ days off.

He saw no movement in the bonds of asbestos-challenged companies, with bankrupt Toledo, Ohio-based insulation maker Owens Corning at 87 bid, 89 offered and bankrupt Lancaster, Pa.-based floorcovering maker Armstrong World Industries at 73 bid, 75 offered, both unchanged.

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