Delphi better; Federal-Mogul hits high; Calpine deadline looms; Transmeridian steady

By Stephanie N. Rotondo

Portland, Ore., June 19 - Traders in distressed debt said automotive names continued to be active in an otherwise slow market as news spilled out of the sector like a bad oil leak. Overall, the distressed companies are feeling an overall firmness.

Delphi Corp.'s bonds were one of several debt issues seen getting better, as the company seeks to obtain an exclusivity extension.

The extension is due in part to a recent bidding war that has been waged for the Troy, Mich.-based company. News reports in the last week have also stated that a deal with its labor unions might be inked soon.

Investors are looking to a positive outcome from Federal-Mogul Corp.'s confirmation hearing, which began on Monday. As the company pleads its case, the bonds have reached historic highs, according to one trader.

Outside of the automotive realm, Calpine Corp.'s bonds, which have been relatively quiet of late, were seen being quoted more Tuesday, as the company's deadline to file its reorganization plan nears. The deadline, in fact, is Wednesday, but traders had not heard anything on the plan.

Though also quiet, Transmeridian Exploration Inc.'s bonds could see more activity soon, as a trader says investors are talking about the name more and more. The hold up, he said, was deciding which part of the capital structure in which to invest.

Delphi better

Among the active automotive names, Delphi's bonds continued to improve, as one trader pegged the 8¼% notes due 2033 better by 3 points at 127.

The trader said he was not sure why the bonds were getting stronger but said it could be due to a pending agreement with Delphi's unions.

Another trader saw the 6.55% notes that were to have come due last year at 118.25 bid, 118.75 offered, up 0.75 point on the day.

Still, there could be several reasons for the bonds' firmness, including overall sector strength.

Another reason the bonds might be better is the bidding war underway between two hedge fund groups: One led by Appaloosa Management and the other led by Highland Capital Management.

In light of the fight for control of the distressed automotive parts maker, Delphi recently asked a bankruptcy judge to give it more time to develop its reorganization plan. The company is asking the judge to extend the deadline to Dec. 31 from July 31.

A hearing on the exclusivity extension is scheduled for June 26.

Federal-Mogul hits high

Also awaiting court approval is Federal-Mogul, which entered court Monday to seek approval on its reorganization plan.

As investors wait, the bonds have been gaining. One trader said the notes - which all move within a point or so of each other - have "reached historical highs" at the 103.5 bid, 104.5 offered mark, "as they fight it out" in court.

According to court documents, the confirmation hearing is scheduled to run through Thursday.

Remy moves higher

Traders saw Remy International Inc.'s bonds firm for a third straight day in the wake of the troubled Anderson, Ind.-based automotive electrical systems manufacturer's Friday morning statement indicating that its bondholders support the company's restructuring plan, which will be implemented via a pre-packaged bankruptcy filing.

A trader said the 7½% notes due 2011 were at 98 bid, par offered, while the 8 5/8% notes due 2007 were seen at 107 bid, 109 offered.

"How about that," the trader said. "It's unbelievable."

"The thing just keeps on going up," another trader said, noting that its Delco Remy 11% notes due 2009 and its 9 3/8% notes due 2012 were each hovering around the 97.25 bid level, which he called up another 3.25 points, on top of the earlier gains that had carried those bonds all the way up into the high 90s from levels they held at mid-week last week around 66 and 70, respectively. "It's just unbelievable how they keep on going up," he added.

The trader meantime saw Remy's 8 5/8% notes slated to mature this Dec. 15 still at 107, the level at which they ended Monday, he said.

Another trader exclaimed "the Delco Remys are flying again," seeing the 11s at 97 bid and the company's floating-rate notes due 2009, previously seen trading just above the par level, at 105. He quoted the 8 5/8s trading as high as 112, "all up another 10 points, or whatever."

Yet another trader saw the 8 5/8s up a more modest 1 point on the session at 106.5 bid, 107.5 offered but called the 11s 5-point winners at 95.5 bid, 100.5 offered.

A different source said the 8 5/8s went out at 110, up some 4 points on the session, while the other three issues all settled at 100.5, a 5-point gain on the 11s and 9 3/8s, while the floaters were about unchanged at that desk.

Calpine stirring up

Calpine's quiet-of-late notes were seen quoted more frequently Tuesday, though trading volume was light.

A trader said he saw the 8½% notes due 2011 up about a point at 127 bid, 128 offered, while the 8½% notes due were at 121 bid, 122 offered, which he called "not much changed."

"There are not a whole lot of trades going on," he said.

However, word on the Street is that the company is close to "getting out of the woods," as one trader put it.

The deadline for the power company to file its reorganization plan is Wednesday.

Transmeridian steady

Investors are "kicking the tires" of Transmeridian's debt, a trader said, as a recent financing deal sparked some interest.

The trader said the 12% notes due 2010 last traded Monday around 96 but thinks speculation might spur some investors to take part in the company.

According to the trader, at this point investors have to choose which part of the structure they want to get into, the bonds or the convertibles - both of which he feels will be covered in the event of a bankruptcy.

The company has been trying to unload some of its oil fields and has even said it would be willing to sell the entire company if the price was right. The trader said that some felt the recent financing deal was "a means to an end," aimed at creating a bridge for a future takeout.

The oil drilling and exploration company announced Monday that it had obtained commitments for a $40 million private placement of its junior redeemable convertible preferred stock.

Sirva loan down

Sirva Inc.'s term loan was once again active at lower levels as investors continued to react to the company's recently held amendment/update conference call, according to a trader.

The term loan ended the day at 95¾ bid, 96½ offered, down from Monday's closing levels of 96 bid, 96¾ offered, the trader said.

On Monday morning, Sirva held a call for the current lenders under its senior secured credit facility to request covenant relief through 2008.

The company said that it will need this relief because of the weaker-than-expected domestic real estate market, and the amendment is necessary for it to present auditors with an acceptable covenant outlook for 10-K's and 10-Q's.

The weakness in the domestic real estate market resulted in higher-than-anticipated levels of home inventory for the company, increased losses on homes sold out of inventory, lower-than-expected moving volumes, increased reserves for loss on home sales and home sale expenses during the second half of 2006 and higher-than-expected gross investment in inventory homes.

Both the company's Global Relocation and Moving Services North America businesses saw EBITDA negatively impacted by these events. At fiscal year ended 2006, Global Relocation's EBITDA was $24.6 million, down from $33.1 million at the end of the previous year, and Moving Services North America's EBITDA was $27.6 million, down from $28 million at the end of the previous year.

Sirva's consolidated EBITDA at the end of 2006 was $34 million, down from $42.2 million at the end of 2005.

Lenders were also updated on Sirva's progress to bring its filings with the Securities and Exchange Commission up to date.

The company filed its restated 2004 10-K and 2005 10-K in January, 2006 10-Q's for the first three quarters in May, and it expects to file its 2006 10-K in June. It anticipates being current with its second-quarter 2007 10-Q.

Sirva is a Westmont, Ill.-based relocation services provider.

Sea Containers up

Sea Containers Ltd.'s bonds were seen up, despite the fact that the British government agency that oversees company pensions said Monday that it will issue its an order of Financial Support Direction to Sea Containers, commanding the bankrupt Bermuda-based maritime and railroad transportation company to make payments to cover the shortfalls in two pension plans covering employees in its Sea Containers Services subsidiary in the United Kingdom.

Those two pension schemes, dated 1983 and 1990, have deficits of £83 million and £17.5 million, respectively. The £100 million of pension obligations comes on top of the hundreds of millions of dollars of claims against the company filed by the holders of its junk bonds and other creditors.

A trader saw Sea Containers' 7 7/8% notes due 2008 as having gone up to 92.5 bid, 94.5 offered from prior levels at 89 bid, 91 offered, while its 10¾% notes due 2006 pushed upward to 97 bid, 99 offered from 93 bid, 95 offered. Its 10½% notes due 2012 advanced to 95.5 bid, 97.5 offered from 92 bid, 94 offered.

A second trader saw Sea Containers "strong again today," despite the extra potential burden on its reorganization finances if the pension regulator's order is upheld, while yet another pegged the 103/4s at 97 bid, 98 offered, up 3 points on the day.

Bally bonds gain

A trader saw continued gains in the notes of the soon-to-be bankrupt Bally Total Fitness Holding Corp., its 10½% notes due 2011 gaining another 2 points to 109 bid, 110 offered.

Another source called the Chicago-based fitness center operator's 9 7/8% notes scheduled to come due on Oct. 15 a point ahead at 99. The Bally bonds rose Monday and again on Tuesday after it announced that a wide majority of the bondholders had endorsed the company's reorganization plan, which like Remy's, will be implemented via a pre-packaged Chapter 11 filing, and which will cancel all existing stock and leave the company's ownership in the hands of the bondholders.

However, a trader at another desk saw Bally bonds moving in the opposite direction, the 9 7/8s off a point to 98.5 bid, 99.5 offered and the 101/2s at 108.5 bid, 109.5 offered, down half a point.

Broad market mixed

Elsewhere in the distressed precincts, a trader saw troubled Atlanta-based consumer products company Spectrum Brands Inc.'s 11¼% notes due 2013 a point better at 95 bid, 97 offered, while its Rayovac Inc. 7 3/8% notes due 2015 were likewise up a point at 82 bid, 84 offered.

He saw Tembec Inc.'s bonds down, with the Montreal-based forest products company's 8 5/8% notes due 2009 off almost 2 points at 65.5 bid, 66.25 offered, while its 8½% notes due 2011 were down 1.5 points at 56 bid, 57 offered and its 7¾% notes due 2012 were a point down at 55 bid, 56 offered.

Primus Telecommunications Group's 8% notes due 2014 were up a point at 74 bid, 75 offered, while Movie Gallery Inc.'s 11% notes due 2012 were down a point at 82 bid, 83 offered.

And lastly, a trader quoted Fedders Corp.'s 9 7/8% notes due 2014 at 35 bid, 37 offered.

Sara Rosenberg and Paul Deckelman contributed to this article.

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