Automotive bonds continue to struggle; Mirant up as creditors OK plan

By Paul Deckelman

New York, Nov. 16 - Automotive bonds like Delphi Corp. and its former corporate parent General Motors Corp. were seen continuing to struggle to gain traction Wednesday amid news that Delphi intends to press on with its demands for big cuts in what its hourly workers are paid - while its unions will have none of it.

Mirant Corp. notes were meantime seen solidly firmer, as the bankrupt Atlanta-based power generating company said that key creditor groups had approved its latest amended plan of re-organization.

Airline bonds were steady, despite a planeload full of news developments, including Delta Air Lines Inc.'s move to ask the courts to set aside its current contract with its pilots' union, and the news that the Senate had okayed a measure that would let struggling airline carriers take as long as 20 years to replenish their underfinanced pension plans.

A trader saw Delphi's bonds unchanged at 54 bid, 55 offered, while another trader saw the bonds at that same price, but called them down half a point on the session.

Yet another trader, however, saw those bonds up slightly on the session, on "rumblings about Delphi-UAW saying that they're open to talks."

He quoted the Delphi bonds, post news, at 54.75 bid, 55.75 offered, up about a quarter of a point.

But the news coming out of the Motor City on Wednesday was anything but encouraging. Delphi made another proposal to its unions in an effort to win wage and benefit concessions - but union leaders on Wednesday called the company's latest offer "ridiculous," said it was insulting - and said they would not present it to the rank-and-file union members.

Delphi - which was spun off from General Motors Corp. in 1999 - inherited high-cost labor contracts from its former corporate parent, and has said that it cannot sustain such costs any further.

The bankrupt Troy, Mich.-based automotive electronics manufacturer has complained that those inherited contracts - some for as much as $65 per hours in wages, pension and fringe benefits - put it at a severe disadvantage relative to its rivals. Delphi wants to cut that by anywhere from half to two-thirds, but the United Auto Workers union and five other unions said that the plan is unacceptable.

Delphi said Wednesday that it proposes to pay its roughly 33,000 hourly workers base wages of between $10 and $12.50 an hour, and a total wage and benefit package of over $21, which, it said, puts Delphi in a competitive base pay and benefit range with its U.S. unionized and non-unionized competitors.

The unions have not ruled out the possibility of a strike if no agreeable proposal comes from their talks with Delphi.

GM also lower

Bad news at Delphi is bad news at GM, since Delphi is its largest parts supplier, and since GM could be on the hook for as much as $12 billion in Delphi pension and healthcare costs as a result of the latter's Chapter 11 filing back on Oct. 8.

Its New York Stock Exchange-traded shares dropped $1.32, or 5.8%, to close at $21.29 Wednesday, their lowest level since December 1991.

A trader meantime saw the company's benchmark 8 3/8% notes due 2033 half a point lower at 66 bid, 67 offered. GM's 7 1/8% notes due 2013 were down 1½ points at just under 70 bid, while General Motors Acceptance Corp.'s 6 7/8% notes due 2012 were also off 1½ points at 91.5

Remy bounces

A trader saw another, much more badly distressed automotive name "catching a bid today," and firming from recent lows. That would be Remy International Inc. an Anderson, Ind.-based maker of automotive starters and alternators.

The company's 9 3/8% notes fell as low as 22 bid on Tuesday, down from 30 bid, but the bonds "seem to have caught a bid [today] and firmed back up to 27 bid, 28 offered."

The bonds had originally fallen in response to poor quarterly numbers and a threatened credit ratings downgrade by Bank of America.

Mirant jumps higher on vote

Mirant's bonds were characterized by a trader as "a lot firmer," quoting the company's 2½% convertible notes due 2021 as high as 99.875, before going out at 99.75 bid, 100.75 offered, up 1¼ from Tuesday's finish. He also saw the 5¾% converts at 109.5 bid, 110 offered.

At another desk, a trader saw Mirant's bonds up by one to two points across the board, with the 21/2s a point higher at 99.5 bid, 100.5 offered, the 53/4s up 1½ points to 110 bid, 111 offered, and the company's 7.40% straight bonds that were to have matured last year up two points at 116 bid, 117 offered. Mirant's 7.9% notes due 2009 were a point better at 116.5 bid, 117 offered.

The Mirant rise follows the company's announcement that key classes of creditors and shareholders have approved Mirant's second amended Chapter 11 reorganization plan.

More than 97% percent of its unsecured creditors and shareholders who voted on the plan approved it. The unsecured creditors voting in favor of the plan hold more than 80% of the company's unsecured debt.

Next up for Mirant is the Dec. 1 confirmation hearing on the plan before the U.S. Bankruptcy Court for the Northern District of Texas. That could get ugly, since some creditor classes of Mirant's subsidiaries voted against the plan, and some other parties also filed objections to the plan's confirmation. At the Dec. 1 hearing, Mirant will ask the court to overrule any opposition that has not been resolved before or at the hearing.

Airlines firm

Elsewhere, bonds of Delta Air Lines were seen unchanged to up perhaps ¼ point at 19 bid, 20 offered, while those of Northwest Airlines Corp. were seen perhaps half a point better at 35.5 bid, 36.5 offered.

Late in the session, after trading had wound down for the day, came the news that Delta had asked the U.S. Bankruptcy Court judge overseeing the Atlanta-based air carrier to void its contract with Delta's pilots' union so the beleaguered airline can impose deep wage and benefit cuts and avoid further financial erosion. Delta is seeking to slash $325 million from its collective bargaining agreement with its pilots, saying the money is needed to keep its operations running.

The 6,000 member pilot's group has offered $90.7 million in concessions - and has held out the possibility that its members could strike the airline should Delta try to cram a larger pay and benefits cut down the union's throat. Delta has called the idea of a pilot's stroke a "suicide-murder" that could force the airline to shut down, for good.

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