Refco bonds push higher as unit-sale talks reported; HealthSouth bank debt firms

By Paul Deckelman and Sara Rosenberg

New York, Jan. 10 - Refco Inc.'s bonds were seen active for a second consecutive session as developments percolated on several fronts in the bankrupt New York based financial services company's reorganization effort. The bonds ended up by several points.

In the bank loan market, HealthSouth Corp.'s unsecured term loan gained a little more ground on Tuesday, also having been moving around for a second straight session.

Automotive names - robust performers previously in the new year - seemed to stall out on Tuesday on some bearish assessments of General Motors Corp.'s efforts to sell a majority stake in its General Motors Acceptance Corp. financial arm.

A market source quoted Refco's 9% notes due 2012 as having pushed up to 80 bid, well up from 76.5 previously. Those bonds had traded actively on Monday, getting as high as 77, but ultimately dropped back into that 76 context to end essentially unchanged.

A trader at another desk saw the bonds ending at 78, which he called up more than a point from their opening at 76.5 bid, 77.5 offered - and he saw that opening a point up from their close Monday.

News reports Tuesday said that Carlos Abadi, the principal of the investment company Abadi & Co., is in talks to acquire Refco's unregulated broker-dealer unit and take it out of bankruptcy.

Those reports quoted a lawyer for Abadi as saying his client is in talks with customers of Refco Capital Markets Ltd. and is prepared to value their claims.

Among options said to be under discussion are letting them cash out at a discount, allowing them to receive preferred shares in a reorganized Refco Capital Markets, or other alternatives.

While that was going on, New York bankruptcy judge Robert Drain was holding a hearing on several matters, including whether an independent bankruptcy trustee should be awarded control over Refco's affairs. The jurist ruled that such a trustee was not needed - that is, if the futures and commodities broker's board of directors, which includes ousted and disgraced former chief executive Phillip Bennett, quits by Friday. Drain's ruling is seen as a victory for Refco and its official committee of unsecured creditors, who argued that the company's new CEO, former New York City controller Harrison Goldin, can fairly administer Refco's affairs and maximize the value of the company's bankruptcy estate.

Refco sought Chapter 11 protection in October, after Bennett was forced to resign as CEO and later indicted for securities fraud, accused of hiding bad debts deep within the company's balance sheets. He has pleaded innocent to the charges.

HealthSouth loan higher

In the bank loan market, HealthSouth's term loan was seen having moved up to 101.5 bid, 102 offered from the prior day's closing levels of 101.375 bid, 101.875 offered, according to a trader.

The bank debt started last week quoted around 100.25 bid, 100.75 offered, but has been pushing higher primarily driven by improved performance in the company's bonds, which was sparked by the expectation that current financials will be filed shortly.

And, as was reported last week, there is also a whisper out in the market that the Birmingham, Ala.-based provider of outpatient surgery, diagnostic imaging and rehabilitative healthcare services may attempt some sort of a global refinancing after the financials are completed, which would push the call-protected bank debt to the 102 premium level.

Adelphia lower

Back among the bond investors, a trader saw Adelphia Communications Corp.'s bonds easier across the board, although he had seen no fresh news out about the bankrupt Greenwood Village, Colo.-based cable operator - although it should be noted that Adelphia on Monday filed a supplement to its fourth amended plan of reorganization with the bankruptcy court.

The source saw Adelphia's 10 7/8% notes due 2010 dip to 59 bid from 60.25 previously, and its 10¼% notes due 2006 at 58.5 bid, down from 60.

Auto rally stalls

Troubled automotive names were seen struggling Tuesday as some of the wind went out of the sails of the recently robust automotive grouping.

A market source saw Delphi Corp.'s 6½% notes due 2009 retreat to 56.375 bid, from 58.5 offered, while the bankrupt Troy, Mich.-based automotive electronics maker's 6½% notes due 2013 eased a point to 56.5.

Bankrupt Novi, Mich.-based automotive frames maker Tower Automotive's 12% notes due 2013 were off two points to 80.5 bid, 81.5 offered, with a trader opining that the company's latest monthly results reported to the court "were not good," adding to investor angst about the sector, which had been rising for several days, led by Delphi's former parent, GM.

The giant carmaker's whose bonds had firmed solidly as recently as Monday on optimistic projections, including hopes for a sale of a controlling stake in GMAC laid out by CEO Rick Waggoner at the North American International Auto Show.

But on Tuesday, investors seemed to cool their headlong enthusiasm for the troubled Detroit giant, sobered perhaps by Moody's Investors Service's warning late Monday that failure to sell that majority GMAC stake "would likely result in Moody's re-linking the ratings of GM and GMAC, and leave GM with a limited set of options to choose from if it is to shore up GMAC's capital market access."

And later on Tuesday, a trader pointed out, "Kerkorian's guy, York, basically said that GM wouldn't be able to sell a majority stake of GMAC - they would have to sell pieces, rather than the majority stake, which sort of defeats the purpose" of selling that controlling interest in the financing arm, which is to get GMAC's ratings back to investment grade and thus lower its borrowing costs, by selling control to a secure, investment-grade financial entity.

Former Chrysler exec York also said in a speech to automotive analysts that GM should adopt a "crisis mode" because of the urgency of its situation, including cutting its dividend and selling its Saab and Hummer divisions.

The trader saw GM's flagship issue, the 8 3/8% notes due 2033, down a point at 70.5 bid, 71.5 offered, while GMAC's 8% notes due 2031 "were down almost two points" at 100.5 bid, 101.5 offered.

At another desk, a market source called GM "kinda mixed," with the 8 3/8s down ¾ point to 70.5 and GM's 8¼% notes due 2023 ¼ point lower at 69, but its 7 1/8% notes due 2013 half a point better at 70.5.

He also saw the GMAC 8s dip to 101 bid from prior levels at 102.25.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.