Airline bank debt seen lower; Delphi bonds gain as court OKs buyout plan

By Paul Deckelman and Sara Rosenberg

New York, April 7- Airline bank debt was seen losing a little altitude during Friday's session, traders said, being quoted at somewhat weaker levels. They thought the downturn was primarily just due to market technicals.

In the junk bond market, Delphi Corp.'s bonds were seen having pushed about two or three points higher in anticipation of news - announced late in the day - that the judge overseeing Delphi's bankruptcy restructuring has okayed the company's plan to cut its bloated labor costs by offering many of its 34,000 hourly employees buyouts to take early retirement.

Two notable airline names whose bank debt was seen trading around on Friday were UAL Corp. and Delta Air Lines Inc.

A trader saw Elk Grove Village, Ill.-based UAL's term loan trading down about a quarter of a point to 102.5 bid, 103 offered. UAL, the parent of Number-Two U.S. air carrier United Airlines, emerged from Chapter 11 on Feb. 1 after a reorganization process that took more than three years.

Meantime, bankrupt Atlanta-based Number-Three carrier Delta's term loan trading down by about a quarter of a point as well, to 101 3/8 bid, 101 5/8 offered, the trader said.

A junk trader meantime saw the distressed airline sector on Friday as "absolutely dead." Delta's 8.30% notes due 2029 and the company's other bonds were seen clinging to levels in the mid-20s, while the bonds of bankrupt Eagan, Minn.-based Number-Four U.S. carrier Northwest Airlines Corp. were rangebound in the lower to mid 40s.

Back on terra firma, a trader in distressed issues said that Friday was "not exactly a robust day."

He saw a pullback in the 8½% notes due 2008 issued by Calpine Corp. subsidiary Calpine Canada Energy Finance ULC; on Thursday, those bonds had jumped about seven points to levels around 67 bid, while most of the bankrupt San Jose, Calif.-based power generating company's other bonds - recently very strong - lost a couple of points. There was no fresh news out to explain that divergence, although some people in the market theorized that the court overseeing the Chapter 11 reorganization might be leaning toward a ruling that would help bondholders of the Canadian unit, which was the focus of much legal strife for the parent company last year when dissident bondholders took to the courts to demand that Calpine use asset-sale proceeds to redeem those bonds, rather than for other purposes.

However, after that big jump on Thursday, the trader saw those Calpine Canada Finance notes at 64 bid, 65 offered, down about two or three points on the day. "They seemed to be pretty active," he said, with "a lot of people quoting it."

Another trader saw the '08 bonds firm a little off their lows to end at 63 bid, 65 offered, up half a point from their nadir but still well down from Thursday's close at 67.5 bid, 68.5 offered.

He also saw other Calpine issues down, with the parent company's 8½% notes due 2011 two points lower at 34 bid, 36 offered and its 8½% notes due 2010 half a point down at 92.5 bid, 93.5 offered.

Calpine meantime asked the court to approve as much as $44 million in bonuses to keep key employees on board as it restructures its operations. News reports on Friday said that Calpine's energy trading center in Houston has been hit with numerous defections, including some by senior staff members.

The company is also seeking approval for an agreement to pay CEO Robert May as much as $20.8 million in two years if he is successful in bringing the company out of bankruptcy.

Delphi higher

Elsewhere, Delphi's bonds "moved up nicely," a trader said, in apparent anticipation that the U.S. Bankruptcy Court for the Southern District of New York would approve the company's plan, unveiled last month, to offer buyouts of up to $35,000 to 13,000 hourly workers represented by the United Auto Workers union.

He saw Delphi's 6.55% notes due 2006 start the day at 63.5 bid, 64.5 offered, and then move up to 65 bid, 66 offered at the end of the day.

Another trader saw the bankrupt Troy, Mich.-based automotive electronics manufacturer's '06 notes move as high as 66 bid, 67 offered, from 63.25 bid, 64.25 offered previously, and saw its 7 1/8% notes due 2029 also up more than two points on the session, at those same levels.

Late in the day, the wires crackled with the news that, as expected, bankruptcy court judge Robert D. Drain had given Delphi the green light to proceed with its plan, which was announced in mid-March in conjunction with an effort by Delphi's former corporate parent General Motors Corp. to also reduce its expenses by offering buyouts to many workers. Besides its own buyouts, GM is funding Delphi's buyout program, which could cost as much as $455 million, and will also accept transfers of up to 5,000 additional Delphi employees back to GM, which owned Delphi until the latter's 1999 spinoff.

Delphi could further reduce its 34,000-person hourly workforce if it negotiates similar buyout deals with several smaller unions that represent about one-third of the hourly workers.

GM is trying to help Delphi out to keep the labor situation there from deteriorating any further; Delphi is GM's single biggest parts supplier and GM does not want its problem child's woes to disrupt the steady flow of parts GM needs to keep up its production schedule. Separately from the GM-funded buyout deal, Delphi - after having failed to reach agreement with GM and the UAW on a consensual agreement to bring down its heavy labor costs - filed motions with the court seeking permission to void its union contract, and to also junk certain parts supply contracts with GM, which Delphi claims are not profitable.

GM down

Despite the good news coming out of Delphi, a trader said that GM's own bonds, and those of its General Motors Acceptance Corp. financing subsidiary were lower, with GM's 8 3/8% notes due 2033 half a point lower at 70.5 bid, 71.5 offered. He also saw GMAC's 8% notes due 2031 a point lower at 93 bid, 93.5 offered.

Among other distressed auto names, a trader saw the bonds of bankrupt Toledo, Ohio-based components maker Dana Corp. down half a point "across the board," with its 6½% notes due 2008 at 79 bid, 80 offered, its 5.85% notes due 2015 at 74.5 bid, 75.5 offered and its 7% notes due 2028 at 76 bid, 77 offered.

Bankrupt Troy, Mich.-based automotive interior components maker Collins & Aikman Corp.'s 10¾% notes due 2011 were "not much changed" at 32 bid, 33 offered, a trader said, apparently little helped by the news that Collins & Aikman will abandon the unprofitable interior fabrics business, while bankrupt Novi, Mich.-based vehicular frames maker Tower Automotive's 12% notes due 2013 were seen likewise becalmed at 66 bid, 68 offered.

The trader also saw little movement in the bonds of asbestos-challenged companies on Friday - although he noted that they had risen smartly during the week on a combination of news and rumors about possible settlements. He saw bankrupt Lancaster, Pa.-based floorcovering maker Armstrong World Industries' bonds at 74 bid, 75 offered, and bankrupt Toledo-based insulation maker Owens Corning's notes at 85 bid, 86 offered, "both of them still well bid for."

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