Movie Gallery stock jumps, but bonds barely bump; GM bank debt easier, bonds steady

By Paul Deckelman and Sara Rosenberg

New York, June 27- Movie Gallery Inc.'s shares took off Tuesday on takeover speculation - but the Dothan, Ala.-based video chain rental company's junk bonds were little moved amid all the excitement, traders said.

In the distressed-bank loan market, General Motors Corp.'s revolver was weaker on Tuesday, traders there said, falling with the auto sector as a whole, despite ample news out about the Detroit giant. Its bonds, meantime, and those of its General Motors Acceptance Corp. financing unit were seen pretty much unchanged.

Bond traders said that Movie Gallery's 11% notes due 2012 were pretty much unchanged on the day despite the zoom in its stock prices - fueled by renewed market buzz that the Number-Two U.S. home video rental chain operator might be an acquisition target for, perhaps, larger rival Blockbuster Inc., or for internet-based video-delivery service Netflix Inc., movie seller Amazon.com or for private equity investors.

A trader saw its bonds 73.25 bid, 74 offered, up about half a point, while a second saw the bonds "73ish. I don't see any change." Yet another called the bonds up a point, at the most, at 73 bid, 74 offered, but flatly declared "they didn't follow the stock up."

The company's Nasdaq-traded shares, in contrast gained 76 cents (13.69%) on the day to close at $6.31, and at one point intraday were has high as $7.50, or about a 35% jump over Monday's closing levels. Volume of 5.9 million was over twice the usual turnover. The shares had crept along at their low opening levels till around mid-morning, then shot up into the $7 range, and continued to trade in a generally higher context for the rest of the day.

Blockbuster's 9% bonds meantime were unchanged at 91.5 bid, 92 offered.

GM loan lower

Elsewhere, GM's revolver closed out the day quoted at 94½ bid, 95 offered, down a half a point, a bank loan trader said.

"It's weaker with all the other auto names. The whole auto sector has been feeling really [bad]. There's no liquidity in it," the trader explained.

There meantime seemed to be not much movement, despite a lot of news, in GM's bonds, nor those of GMAC. A trader saw GM's benchmark issue, the 8 3/8% notes due 2033,"roughly unchanged" at 74.625 bid, 75.625 offered.

He noted that GM executives were predicting Tuesday that the carmaker would have a "brutal' June sales-wise, with sales expected to show a 30% drop from year-ago levels, which had been artificially boosted by the employee discount incentives which GM was offering to all consumers at this time a year ago. This time around, they said, GM will not be giving those kinds of prices to non-employees, although it will briefly offer 0% financing for up to six years on most Chevrolet, Buick, Pontiac and GMC models in an effort to cut inventories. That sale begins Thursday and ends July 5.

"So GM's June sales are going to be bad," he said. "Then you have the opposing wind, blowing the other way, which is the positive news about the buyouts," with GM having announced late Monday that some 35,000 of its 113,000 unionized hourly employees had accepted buyout offers, putting GM well ahead of its stated goal of at least 30,000 job cuts by 2008, "but nobody seems to really care much about that right now."

GM's New York Stock Exchange-traded shares meanwhile fell $1.85 (6.67%) to $25.90, on volume of 27.3 million, more than double the norm.

GM bonds edge up

"The stock took it on the chin, based on the [projected June] sales numbers, but the stock has been more volatile than the bonds. It had gotten a little ahead of itself" on prior indications that the buyout program announced a month ago was going well, "and it set itself up for a fall a little more."

The bonds, he concluded "were not exactly setting the world on fire."

Another trader quoted the 8 3/8s "actually up" half a point at 75 bid, 75.5 offered, agreeing that "the bonds did much better than GM's stock, at least, did." He saw GMAC's 8% notes due 2031 up ¼ point at 93 bid, 93.5 offered.

Standard & Poor's said Tuesday that GM's debt ratings, including its B corporate credit rating, will remain on CreditWatch for a possible downgrade, despite the company's success in trimming its labor costs through the buyout offers.

"Still, market share losses, and the need to execute on the other cost-based aspects of the plan such as plant closings, remain concerns," S&P analyst Robert Schulz wrote in his commentary announcing the decision, also noting the fact that GM's "most pressing near-term issue is resolving several issues concerning GM's exposure to Delphi [Corp.], its former unit and an important supplier."

Delphi's 6.55% notes due 2006 were unchanged at 81.5 bid, 82.5 offered, while the bankrupt Troy, Mich.-based electronics manufacturer's 7 1/8% notes due 2029 were ¼ point better at 76 bid, 77 offered. Delphi's bonds, like those of its erstwhile corporate parent, showed little real response to Monday's positive buyout news. The company - trying desperately to cut its heavy labor costs as it restructures via Chapter 11, offered buyouts to all of its approximately 23,000 hourly employees represented by the United Auto Workers union and said Monday that some 12,600 had accepted. Delphi continues to negotiate on offering similar buyouts - which like the UAW worker offers, would be largely funded by GM - to its 10,000 hourly employees represented by unions other than the UAW.

Bankrupt Toledo, Ohio-based auto components maker Dana Corp.'s 6½% notes due 2008 were up ¾ point at 84 bid, 85 offered, while its 7% notes due 2028 were at 76.5 bid, 77.5 offered, unchanged on the day.

Elsewhere among the automotive names, a trader saw GM arch-rival Ford Motor Co.'s 7.45% notes due 2031 half a point better at 70 bid, 70.5 offered, and the latter's Ford Motor Credit Co. financing arm's 7% notes due 2013 also up half a point at 85 bid, 85.5 offered.

Among other automotive-related names, he saw Lear Corp.'s 8.11% notes due 2009 were unchanged at 96.5 bid, 97.25 offered, while the Southfield, Mich.-based interior, seating and electronic components maker's 5¾% notes due 2014 were ¼ point better at 80.5 bid, 81 offered.

A trader saw bankrupt Southfield-based brakes maker Federal-Mogul Corp.'s bonds move as high as 61 bid on "good numbers," before ending the day at 58 bid, 60 offered, still up more than a point on the session.

At another former GM subsidiary, Remy International Inc.'s 8 5/8% notes due 2008 were steady at 92.5 bid, 94.5 offered, while its 11% notes due 2009 were likewise unchanged at 56 bid, 58 offered.

Owens Corning up again

The only other real movement in the junk market Tuesday came in the continuing rise of Owens Corning's bonds, which have been firming since last week on the news that the bankruptcy court overseeing its restructuring had approved an agreement with the Toledo-based insulation maker's key creditor groups - including its asbestos claimants - which gets them behind its proposed reorganization plan. That in turn has raised hopes that the company - in bankruptcy since 2000 - may actually emerge from Chapter 11 this year, perhaps as soon as Oct. 31.

Owens Corning's 7½% notes due 2018 were seen by a trader as having pushed as high as 89 bid from an opening level at 84 bid, 86 offered, before coming off that peak to end up two points on the day at 86 bid, 88 offered.

Another trader saw the bonds up 2½ points on the day at 86.75 bid, declaring that at that shop, "Owens Corning was all that moved - everything else was very quiet."

Also among the asbestos-challenged names, a trader saw "nothing happening" in bankrupt Lancaster, Pa.-based floorcovering maker Armstrong World Industries Inc., even though its bonds frequently move in tandem with Owens Corning's. He quoted the 6.35% notes that were to have matured in 2003 at 73 bid, 74 offered, up less than a point on the session.

Another trader saw those bonds open at 71 bid, 73 offered, push up to 73 bid, 75 offered, shadowing Owens Corning's mid-session rise, then close at 72 bid, 74 offered, a one-point gain.

Adelphia steady

That trader also saw the recent rise in Adelphia Communications Corp. bonds "stall out" on Tuesday. That rise had been fueled by last week's accord settling key inter-creditor disputes for the bankrupt Greenwood Village Colo.-based cable operator. But on Tuesday, he said, Adelphia's 10¼% notes due 2006 were at 53 bid, 55 offered, and its 10¼% notes due 2011 at 56 bid, 58 offered, both unchanged on the session.

Adelphia's bank debt was meantime also pretty much unchanged during Tuesday's dealings, as investors are waiting on a hearing scheduled for Wednesday that is hoped to confirm a plan covering its TCI, Parnassos, and Century joint-venture units, a trader said.

The TCI and Parnassos bank debt closed out the day quoted at 98.5 bid, 99.5 offered, and the Century Old and Century New bank debt closed out the day quoted at 95.5 bid, 96.5 offered, the trader said.

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