Delphi bank debt steady, but bonds off on wider loss; Adelphia bonds lower

By Paul Deckelman and Sara Rosenberg

New York, Nov. 9 - Delphi Corp.'s bank debt levels held in steady Wednesday, despite the company's release of third quarter numbers that included widening losses. However, the Troy, Mich.-based automotive components manufacturer's junk bonds were seen several points lower.

Also lower on the session were the bonds of Adelphia Communications Corp. and its Century Communications Corp. subsidiary following the submission of the bankrupt Greenwood Village, Colo.-based cable operator's latest amended reorganization plan.

Refco Inc.'s bonds were seen pretty much holding steady as the bankrupt New York-based financial company held an auction for its valuable futures unit. The winning buyer is expected to be announced Thursday.

Delphi's term loan was trading around 104, unchanged on the session, according to a bank debt trader.

But while the bank debt was steady, the company's bonds were anything but. A market source quoted its 6.55% notes due 2006 as having fallen to 59 bid from prior levels around 63, while its 6½% notes due 2009 also wound up at 59, after having started the day at 61.5.

He also saw Delphi's 7 1/8% notes due 2029 drop to 57.5 bid from 62.5 offered, a five-point loss on the day, and its 6½% notes due 2013 falling to 58.5 bid, from 63.25.

At another desk a trader, noting that the bonds trade on top of one another anyway, pegged the Delphi paper at 57 bid, 58 offered, a four-point retreat.

That bond volatility followed the release of quarterly earnings data. For the quarter, Delphi's net loss was $788 million ($1.40 per share), far wider than last year's net loss of $119 million (21 cents per share).

Revenue was $6.28 billion, down from $6.64 billion in third quarter 2004.

"The sizable loss in this quarter only underscores the urgent need to address our U.S. labor cost issues," said Robert S. Miller, chairman and chief executive officer, in a company news release.

"Delphi can not continue indefinitely to operate our facilities in the U.S., which lose a substantial amount of money, without being able to adjust our cost structure. The continued pressures Delphi faces from low GMNA [General Motors North America] production volumes, commodity price increases, pension and post retirement health care cost increases, along with the cost of paying for idled workers, will only intensify our U.S. losses until we come up with a competitive, sustainable plan of reorganization for our U.S. operations through the Chapter 11 process."

Delphi drags on other auto names

A bond trader said that Delphi's rocky road - along with Fitch Ratings' downgrade of General Motors Corp.'s debt and a Wall Street Journal article about the giant carmaker - pulled many of the other names in the automotive sector lower, notably Visteon Corp., which on Tuesday had reported its own bearish quarterly results and fell accordingly. The Van Buren Township, Mich.-based components maker's notes continued to retreat Wednesday, its 7% notes due 2014 seen down two points at 81.375 bid, and its 8¼% notes due 2010 three points lower at 88.5.

Among bankrupt component makers besides Delphi, a trader also saw Collins & Aikman Products Co.'s 10¾% notes due 2011 around 48 bid, 50 offered, which he termed "perhaps a little easier," while Tower Automotive's 12% notes due 2013 were holding steady around 86 bid.

Adelphia declines

Outside of the autosphere, traders saw some movement in Adelphia Communications' bonds, and those of its Century Communications unit.

One saw Adelphia's 10¼% notes due 2011 drop to 66 bid, 67 offered from prior levels at 69 bid, 71 offered, while its 10¼% notes due 2006 fell to 60 bid, 62 offered from 63 bid, 65 offered.

At another desk, though, the company's 10 7/8% notes due 2010 were actually seen up half a point to 63.5. The source there said that "the Centurys were the only ones that really changed, quoting the subsidiary's zero-coupon notes that were to have come due in 2003 at 94 bid, down two points, while its 8 7/8% notes due 2007 fell to par bid from 106 previously.

Another source, however, saw the 8 7/8s at 101 bid, down 3 ½ points on the session.

The company's notes fell after Adelphia filed its fourth amended reorganization plan with the U.S. Bankruptcy Court for the Southern District of New York.

Refco auction

That court was meanwhile the scene of Refco's auction for its futures unit, the results of which are expected to be announced Thursday. The futures unit was seen fetching as much as $1 billion in proceeds for the bankrupt Refco, which entered Chapter 11 last month.

A trader saw the Refco 9% notes due 2012 unchanged at 75 bid, 77 offered, while at another desk, an observer quoted those bonds as high as 77.375 bid, up 3/8 on the day.

A third trader pegged the bonds at 76 bid, 77 offered.

Four prospective bidders were thought to remain as of late in the day Wednesday. One is broker-dealer Interactive Brokers Group, which submitted the highest publicly acknowledged offer so far, bidding $858 million for Refco's futures brokerage business.

A second reported bidder is Man Financial, whose bid had not been publicly disclosed, while a third reported bidder was a private equity team made up of the investment arm of the Dubai government, California supermarket billionaire Ron Burkle's Yucaipa Cos., and Marathon Asset Management, LLC. Before the auction, the Dubai-Yucaipa group - without Marathon - offered to pay $828 million for the futures unit.

The fourth reported bidder was the private equity group led by buyout firm J.C. Flowers & Co. - the original bidder for the futures unit. It dropped out after Interactive topped the Flowers group's $768 million initial bid for the unit, but then was heard to have gotten back into the fray.

A fifth bidder, Chicago -based brokerage Alaron, had been among the bidders who handed in offers by the deadline on last Friday, but the company said on Wednesday that Refco disqualified the offer, which was for Refco's private client business. It gave no further details.

News reports also mentioned that hedge fund Cerberus Capital Management was involved in the process, although there was no clear indication whether it was pursuing a solo bid or a joint one with another prospective bidder.

In other developments Wednesday, Refco asked the judge overseeing its case for permission to liquidate its futures brokerage so it can transfer its accounts to the eventual winning buyer. It said that structuring the transfer as an asset sale, rather than a standard business acquisition, with Refco transferring the existing customer accounts to the buyer and liquidating whatever unbought assets are left, would be the "most efficient procedure," Refco said in its motion.

Refco Inc. and 23 affiliates filed for bankruptcy-law protection Oct. 17, after it revealed that ex-CEO Phillip R. Bennett had hidden a $430 million debt to Refco just before the latter's successful summer IPO. That bombshell disclosure sparked a sharp loss of investor confidence in the company and a cash crunch, forcing it into insolvency.

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