Financing boosts Fedders; Rumor hurts Remy; Airlines see heavy volume

By Stephanie N. Rotondo

Portland, Ore., March 6 - Fedders Corp.'s bonds were lifted Tuesday by news that the company signed a commitment letter for a $90 million refinancing deal.

Rumors and speculation have surrounded the company of late as it missed a coupon payment last week and entered into the grace period. It seemed uncertain that the company would announce a refinancing deal.

In other rumor mill buzz, Remy International Inc. might be looking for its own financing, as market insiders are hearing that the distressed auto parts supplier is looking for debtor-in-possession financing.

The rumor spurred a lot of movement in the company's bonds, which lost 3 points during trading on Tuesday.

Also seeing a lot of activity is distressed airline paper. Delta Air Lines Inc. and Northwest Airlines Corp. have seen heavy trading of late, though Tuesday brought very little price change.

Fedders financing boosts bonds

Air quality solutions producer Fedders rallied amid news that the company had signed a commitment letter with Goldman Sachs Credit Partners LP for $90 million in financing under senior secured credit facilities.

Market participants have been speculating for some time that a refinancing deal was in the company's future. The company acknowledged it was looking for refinancing in a Feb. 20 Securities and Exchange Commission filing, in which the company also said it had amended its term loan.

Traders said that the bonds were now trading flat, or without their accrued interest, after the Liberty Corner, N.J.-based air conditioner manufacturer apparently did not make the scheduled March 1 coupon payment, opting instead to make the payment during the following 30-day grace period. The company has not officially said that it had not made the payment, but this was what the market surmised.

"They're trading flat, with due bills," one trader said.

Traders were more optimistic about Fedders once the refinancing news came out. One trader said that before the news, the company's 9 7/8% notes due 2014 were trading at 54 bid, 56 offered. Post-announcement saw an almost 6 point gain, with the bonds trading at 61 bid, 62 offered. The notes finally settled at 60.5 bid, 62 offered, with two bills going to the seller, the trader said.

At another desk, a trader saw the bonds open at 52 bid, 54 offered, rise to as high as 60 bid, 62 offered in intraday trading, and then come down from that peak to finish at 57.5 bid, 58.5 offered.

"From open to close, it was a pretty nice swing, about 4 points," he said, although the credit had fallen from the day's highs.

Elsewhere, a trader saw the bonds as high as 61 bid, 63 offered, well up from a wide Monday close of 53 bid, 56 offered, although he saw them finishing at 58.5 bid, 60.5 offered.

Proceeds from the financing deal will refinance the company's existing $50 million senior credit agreement. The deal is subject to meeting certain conditions as stated in the commitment letter, on or prior to March 30.

Now, however, new questions are popping up. Traders are now wondering when the facility will be up and running and when the coupon payment will be made.

"It takes time to gets things moving," the trader noted.

Once the facility is launched, the trader said he sees a positive outlook for the company.

"If they make that asset sale, then we'll be off to the races," he said.

Calls made to the company were not returned Tuesday.

Rumor drops Remy

The rumor mill seemed to be the driving force behind the activity in Remy's bonds Tuesday. A trader said the 8 5/8% notes due 2007 "sold off pretty aggressively," dropping about 3 points.

According to several market sources, the underperforming auto name is looking for DIP financing, a sign that the company might file for Chapter 11 protection.

As the buzz swirled around, the notes came in at 78.5, according to one trader. He said the bonds traded as high as 82.5 and as low as 77.5 during the trading day.

At another desk, a distressed trader saw the notes start the day at 82 bid, 83 offered, closing at 78 bid, 79 offered.

Remy's 11% notes due 2009 retreated to 22 bid, 24 offered from 26 bid, 28 offered. The company's 9 3/8% notes due 2012 retreated to 10 bid, 21 offered from 23 bid, 25 offered, traders said.

The speculation didn't surprise many market players.

"I guess that wouldn't be a surprise," a trader said.

It wouldn't surprise me," another trader said. "They need it. I think they are bankrupt."

Calls made to the company were unreturned Tuesday.

"If Remy doesn't get an out-of-court restructuring done in the next few months, bankruptcy appears inevitable," wrote Shelly Lombard, senior high-yield analyst with Gimme Credit LLC, in a report issued last week. "The subordinated bonds are likely worthless in a bankruptcy. They are an expensive option since everything has to go right - no bankruptcy and high valuation - for them to be worth anything. The senior bonds could be worth par in or out of a bankruptcy but the bonds would certainly trade down if the company files."

Airlines trading heavily

It was a "flat day" for airlines, according to one trader. He said distressed airline paper "just kind of bounced a little with the general market."

The trader pegged Delta Air Lines' 8.30% notes due 2029 unchanged at 58, while at another desk, a trader saw them at 57 bid, 58 offered. Yet another trader placed the Atlanta-based No. 3 carrier's widely traded notes as having moved up from 55.25 bid, 56.25 offered at Monday's close to levels around 57.5 bid, 58.5 offered late Tuesday.

A trader quoted Northwest's 10% notes due 2009 "a little bit better" at 89, which he called up half a point. A second trader agreed, placing the notes at 88.5 bid, 89 offered. However, another trader said the notes came in at 87.75 bid, 88.75 offered from prior levels at 86 bid, 88 offered.

Northwest's 7 7/8% notes due 2008 were seen up half a point at 87.

"There is still lots of volume in the airlines," a trader said.

Northwest said late Monday that its systemwide consolidated traffic rose 2.8% last month from a year ago, while capacity increased 3.9%. However, with the added capacity, load factor - a key airline industry metric - fell 0.9% to stand at 79.9%.

Movie Gallery unchanged

Dothan, Ala.-based Movie Gallery Inc.'s 11% notes due 2012 were seen relatively unchanged at 87.75 bid, 88.75 offered by one trader, while another said the notes firmed a point to 88 bid, 90 offered. Market insiders said the company is meeting with the lenders of its $900 million credit facility to price the bank debt.

Commercial nursery supplier Hines Horticulture Inc. lost a couple of points in its bonds, a distressed trader said. The 10¼% bonds due 2011 were quoted at 82 bid, 83 offered.

Elsewhere, Sea Containers Ltd.'s bonds were seen about a point better, as its 10¾% notes firmed to 89 bid, 90 offered. Le Nature's Inc. bonds were 1½ points better, at 34.5 bid, 35.5 offered and Iridium LLC's bonds gained a point of altitude at 22 bid, 24 offered.

Paul Deckelman contributed to this article.

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