Movie Gallery bank debt continues retreat; Owens Corning bonds slide again

By Paul Deckelman and Sara Rosenberg

New York, May 16 - General heaviness in the distressed loan market continued to take its toll on Tuesday, with names like Movie Gallery Inc., Armstrong World Industries Inc. and General Motors Corp. all succumbing to the pressure, according to a trader.

In the junk bond market, the bonds of Armstrong were also seen lower, following downward the bonds of Owens Corning, which continued its retreat from the highs it hit last week when the Toledo, Ohio-based insulation maker announced that its creditor groups had okayed its proposed bankruptcy reorganization plan. Movie Gallery and GM were also among the names that were lower.

Movie Gallery, a Dothan, Ala.-based movie rental company, saw levels on its term loan B drop by a quarter of a point on the bid side to 96.5 bid, 97.5 offered, the bank loan trader said.

On Monday, Movie Gallery's loan had come off by about a quarter of a point from last week's closing levels, with market heaviness and profit taking cited as the primary drivers.

Over on the bond side of the ledger, a trader in distressed notes quoted its 11% notes due 2012 "down a bit" at around 70 bid, versus 72 late Monday and levels as high as 75 late last week, after the company reported much better-than-expected first-quarter earnings, chiefly due to its acquisition last year of the larger Hollywood Entertainment Corp., a rival chain operator.

Meanwhile, among the asbestos names, traders were seeing Owens Corning's bonds - which had peaked at around 122 bid last week in the sessions following the announcement of its bankruptcy plan deal - continuing to come in, as they had on Monday when they fell about six or seven points on profit taking. The bonds were being quoted Tuesday around the 113.5-114 bid area.

Armstrong's bonds were meantime also in retreat; they had risen with Owens Corning's to highs around 89-90 bid, then fell about four points or so on Monday. On Tuesday, they came in further, to bid levels around 82, offered levels at 84.

The bankrupt Lancaster, Pa.-based floorcovering maker's bank debt, meantime, was also easier. Those levels weakened by half a point on the bid side to 85 bid, 87 offered, the trader continued. On Monday, Armstrong's loan had fallen all the way from 89 bid, 90 offered to 85.5 bid, 87 offered, also on heaviness and sell offs for profit.

Delphi little moved on strike vote

In the automotive area, Delphi Corp. bonds - which were seen in retreat on Monday on a combination of profit-taking off hefty recent gains and investor unease over the likelihood that its unionized workers would vote to give their leaders authority to call a strike against the beleaguered company, were seen pretty much hanging in at little-changed levels - traders said they were mixed - even on the unsurprising news that the rank-and-file had, indeed, given their union chiefs the green light to call a strike.

However, investors in the notes of GM, - for whom Delphi is the single biggest parts supplier - took the bonds lower as even as a strike potentially came a step closer.

The news that Delphi's roughly 23,000 hourly employees represented by the United Auto Workers union had voted to give their leaders the authorization to call a strike should the bankrupt Troy, Mich.-based auto parts manufacturer try to void their negotiated contract and unilaterally impose a sharply lower pay and benefits scale came as a surprise to exactly nobody. Some 95% of the employees at 21 Delphi plants voted for the strike authorization.

Even though the expected approval was cited by one or two market participants Monday as a catalyst behind lower Delphi bond prices that session, once it was actually announced, there was little further erosion seen in the company's bonds. A trader saw the bonds mixed, with Delphi's 6.55% notes slated to come due later next month down ¾ point at 76.75 bid, 77.75 offered, and its 7% notes due 2029 at 75 bid, 76 offered, up ¼ point. A second trader actually called the bonds firmer, pegging the '06s at 78.5 bid, 79.5 offered, and the '29s at 76 bid, 77 offered, "up a couple."

A market source at another desk called the 6.55s unchanged at a shade over 77, while the '29s were down ¾ point at 74.25.

Delphi, which filed for Chapter 11 protection last year in part due to the impact heavy labor costs have had on its operations, is trying to get the courts to approve junking the current contract. Whether the company would actually do so if the court said yes in another subject, since it would surely lead to a strike that might kill the embattled Delphi altogether and cause great harm to its single largest customer, GM. The court maneuvering may be just a negotiating tactic as Delphi tries to get GM and the UAW to help it lower its costs without a strike. GM, which spun Delphi off in 1999, has already agreed to fund early-retirement buyouts for up to 13,000 Delhi workers and to take back another 5,000.

GM lower

Although GM has much to lose in the event of a strike, several key executives, including its CEO and chief financial officer, have recently expressed optimism that a strike could be averted, even as the Delphi employees were voting to authorize one.

However, GM's 8 3/8% notes due 2033 were seen down a point at 75 bid, 75.5 offered in apparent reaction to the Delphi vote, a trader opined. He saw the 8 3/8% notes due 2031 of the giant carmaker's General Motors Acceptance Corp. financial arm down ¾ point at 93 bid, 93.5 offered.

In the bank debt market, GM's revolver was heard to fall half a point to 96½ bid, 97½ offered, a trader added.

Visteon steady on financing

Also in the automotive realm, Visteon Corp.'s bonds were seen little changed on the news that the Van Buren Township, Mich.-based parts maker had secured $1.5 billion of new financing. Its 8¼% notes due 2010 were steady at 93.75 bid, 94.5 offered, while its 7% notes due 2014 were perhaps ¼ point off at 83.25 bid, 84.5 offered.

Dana rises on Icahn rumor

A trader saw bankrupt Toledo, Ohio-based parts maker Dana Corp.'s bonds a bit firmer, and cited market speculation - apparently sparked by a news report - that billionaire investor Carl Icahn was supposedly buying Dana bonds in order to be in a position to have a major ownership stake in the company when it reorganizes. Several other market sources, however, said they had not heard any such buzz. Dana's 7% notes due 2028 were up half a point, at 80 bid, 81 offered.

Elsewhere, Werner Holding Co. Inc.'s 10% notes due 2007 languished at around a 30-31 context, market participants said, following Monday's announcement by the Greenville, Pa.-based maker of industrial ladders that it had not made the scheduled May 15 interest payment on the bonds, and was instead in talks with its creditors on a potential reorganization. Those bonds had traded in the mid 30s last week, but dipped to around 31 on Monday on the news.

"I was not seeing a lot of quotes in it," a trader said, adding "it didn't seem like that big an event."

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