Delphi gains ground, Dura picks up; Bon-Ton better despite downgrade; LandSource unchanged

By Stephanie N. Rotondo

Portland, Ore., Feb. 12 - It was a mixed bag in the distressed sector Tuesday, traders reported.

"It was pretty mixed," a trader said. "Some names were up, others were down."

Delphi Corp. was one of the names that fared better in Tuesday trading. Those bonds have been steadily slipping of late as concerns about the company's exit financing began to grow. But word from the company's former parent that alternatives are being explored seemed to give at least a small amount of hope to investors.

Dura Automotive Systems Inc., in a similar boat as Delphi in regards to exit financing, saw activity in its bonds pick up. The automotive parts supplier's debt has lightly traded ever since the unsecured creditors took the company to task for what is seen as mistreatment of that group. Still, it was unclear what prompted the paper to move.

Poor 2007 figures and a lowered EBITDA guidance are to blame for a recent downgrade of Bon-Ton Stores Inc. But despite that, the struggling retailer's notes gained some ground during the session.

In the bank debt arena, LandSource Communities Development LLC's first-lien term loan B headed higher after the company announced it had extended its forbearance agreement. But by the end of the day, the loan settled back in to virtually unchanged.

Delphi, Dura gain ground

News that former parent General Motors is looking at alternatives for Delphi's exit financing prompted Delphi's previously weakening bonds to move higher, albeit slightly.

The Troy, Mich.-based company's debt - which trades relatively close together - was quoted at 34 bid, 35 offered by one trader. Another source saw the bonds gaining about half a point to the 32 area.

In a conference call held Tuesday, GM's chief financial officer, Fritz Henderson, conceded that it has been difficult for Delphi to find the financing necessary to exit bankruptcy, given the tight credit market. Henderson said that alternatives are being explored in the event that Delphi is unable to come up with the funds for its approximately $6.1 billion finance package.

Delphi has already reduced its exit facility once, thereby reducing payouts to its creditors. While it is believed that the automotive parts supplier will eventually find the funding, some have said that GM may be forced to front the cash itself. Investors have shown some hesitancy regarding the name, as the search for financing continues to drag on.

Facing a similar problem, Dura Automotive is reportedly reworking its reorganization plan in hopes of finding financing as well.

A trader said activity in Dura 8 5/8% senior notes picked up Tuesday, though the debt remained around the 12 level.

"A bunch of paper traded," he said, adding that he had no clue what sparked investor interest.

Earlier this month, some of the company's top executives chose to forgo bonus payments. The execs cited continued objections from some of its creditors, including the unsecured creditors committee. That group has been fighting with Dura over its reorganization plan, which leaves subordinated noteholders in the cold.

In its quest to find exit financing, the company is reportedly reworking its plan, including slashing its post-bankruptcy bank debt in half.

Downgrade no problem for Bon-Ton

Despite a ratings downgrade, retailer Bon-Ton Stores' bonds managed to close better on the day.

A trader pegged the 10¼% notes due 2014 around 67, which he called "a little better." The paper traded around 66 during the previous session.

However, another trader saw Bon-Ton down 1 point at 65.5 bid, 66.5 offered, characterizing the retail sector in general a point lower.

Late Monday, Moody's Investors Service downgraded the department store, citing weak 2007 sales, declining store sales and a lowered EBITDA guidance revision for the fiscal year.

Moody's gave Bon-Ton a corporate family rating of B2 with a stable outlook from B1. The company's bonds were also downgraded to Caa1 (LGD 5) from B3 (LGD 5).

LandSource extends forbearance

LandSource Communities Development's first-lien term loan B traded up on news that the company's forbearance agreement was extended into next week, but by late in the day, levels had settled back in, according to a trader.

The term loan B was said to have traded at 75 on Tuesday, compared to 72 on Monday, the trader said.

Levels, however, went out on Tuesday around 72 bid, 75 offered, compared to 72 bid, 74 offered on Monday, the trader added.

During market hours, LandSource held a private lender call. It was around this time that news emerged that the company's forbearance/amendment agreement has been extended for five days.

The original forbearance agreement was obtained last week and was also in effect for a period of five days.

As part of the original agreement, pricing on the first-lien term loan B was raised to Libor plus 475 bps from Libor plus 275 bps and lenders got a 12.5 bps fee.

The company needs the forbearance agreement because it is facing non-compliance with a borrowing base covenant due to a recent land appraisal that showed deterioration in the underlying value of that land.

To regain compliance with the covenant and cover a cash-flow shortfall over the next two years, the company needs $800 million.

The sponsors, however, have already told lenders that they are only willing to put in $300 million.

LandSource is a joint venture between Lennar Corp., LNR Property Corp. and MW Housing Partners. Its primary investment is the Newhall Land and Farming Co., which owns 15,000 acres in Santa Clarita Valley, Calif.

Broad market mixed

Charter Communications Inc.'s longer dated paper continues to falter, its 11¾% notes due 2014 at 49 bid, 49.5 offered, a trader said.

Also weaker was Six Flags Inc., whose 8 7/8% notes due 2010 slipped to around 71.

A trader deemed Residential Capital LLC's longer dated issues, such as the 6½% notes due 2012, better. The trader quoted the bonds up 1 to 2 points at 61 bid, 62 offered.

Spectrum Brands' debt, which has been declining since the Rayovac battery maker posted a loss for the first quarter, continues its downward trend. A trader said the bonds lost another couple points, its 11½% notes due 2013 at 78 bid, 78.5 offered and its 7 3/8% notes due 2015 at 63 bid, 64 offered, from around 65.5 previously.

In the forest-products sector, a trader said AbitibiBowater's 8.55% notes due 2010 fell 2 points at 74 bid, 75 offered. He said the company "sold a newsprint factory to Catalyst [Paper Corp]. - but they continued to drop" despite the asset sale.

He also saw Tembec Inc.'s 8½% notes due 2011 off 3 points at 33 bid, 34 offered.

Another market source saw those same bonds 4 points lower at 34 bid.

Sara Rosenberg and Paul Deckelman contributed to this article.

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