GM, Ford up on better sales data; Le-Nature banks debt, bonds off

By Paul Deckelman and Sara Rosenberg

New York, Nov. 1 - General Motors Corp.'s bonds and those of arch rival Ford Motor Co., were seen better in Wednesday's dealings, traders said, after the troubled automotive giants posted stronger sales figures for October.

Elsewhere, Le-Nature's Inc.'s bank debt and bonds were seen sharply lower on market buzz that a massive accounting fraud at the Latrobe, Pa.-based producer of flavored bottled waters, lemonades, fruit drinks and teas is about to be revealed.

Movie Gallery Inc.'s bonds were solidly higher after the Dothan, Ala.-based video rental store chain operator made the scheduled interest payment on those bonds, and said that it was okay, liquidity- and covenant-wise, through the end of the year.

Wolverine Tube Inc.'s bonds gyrated around at lower levels, after the Huntsville, Ala.-based maker of piping and other tubular metal products said its restructuring plans could include filing for bankruptcy protection if a consent and exchange offer to holders of those senior notes is not approved.

And bonds of a company already in Chapter 11, Calpine Corp., were meantime higher, along with a jump in its penny stock shares, although nobody seemed to know what has been pushing them up.

Sales data boosts GM, Ford

A trader in distressed bonds said that GM's benchmark 8 3/8% notes due 2033 were a point better at 89 bid, 90 offered, and saw the 8% notes due 2031 of its General Motors Acceptance Corp. financing unit 2 points better at 107 bid, 108 offered, after the world's largest carmaker posted a 17.3% increase in October vehicle sales versus a year ago, fueled by a 33.2% rise in sales of its high-margin trucks and sport utility vehicles.

Those sales were said to have been helped by lower gasoline prices, which made car-buying consumers more amenable to buying the bigger vehicles - most of them relative gas guzzlers - than they had been during the summer, when pump prices were about $1 per gallon more than they are now.

Another trader, who saw the GM bonds at 89 bid, 89.5 offered, saw Ford's 7.45% notes due 2031 also up a point, at 79 bid, 79.5 offered.

Number-Two domestic manufacturer Ford's U.S. sales were up 8%, thanks mostly to a 22.1% gain in car sales, although truck and SUV sales were up just 0.8% from the year-ago period.

Still, Ford's performance was good enough to remain Number-Two and hold off the hard-charging Toyota. Ford sold a total of 214,806 vehicles in October, versus Toyota's 189,011. Top dog GM sold 297,401 vehicles.

The second trader said that the god news from the manufacturers had little impact on the bonds of such bankrupt automotive parts makers as Delphi Corp., Dura Corp. and Dana Corp.

However, a source at another desk saw Dura's beleaguered 9% notes due 2009 up 2 points - a huge percentage gain - to 8 bid.

Le-Nature's troubles

Outside of the autosphere, Le-Nature's' term loan B plummeted on talk of "massive" fraud at the company, according to traders.

The term loan B was quoted at 25 bid, 35 offered late in the day, down from a trading level of around 70 in the morning, one trader said.

"I think it all started with lawsuits by two investment groups. It looks like a potential Refco all over again," a second trader remarked.

The trader went on to say that the talk is that Le-Nature's allegedly falsified financial results and that the chief executive officer, Gregory Podlucky, and three other top company officials were relieved of their duties.

A judge on Tuesday appointed a custodian for Le-Nature's, after concluding the company "engaged in potentially criminal conduct" in operating its business.

Judge Leo E. Strine Jr. of the Delaware Court of Chancery appointed Kroll Zolfo Cooper, a New York specialist in crisis management and operation of financially distressed companies, as custodian of Le-Nature's.

The judge relieved Podlucky and three other top officials of their duties at the company, though all will remain on the board of directors.

A junk bond investor, meanwhile was quoting the company's bonds trading in the 80s - well down from Tuesday's levels at 101.

The bonds "blew up big time," he declared.

Judge Strine moved to remove management against the backdrop of a lawsuit by the preferred holders against the company, alleging mismanagement.

The holders charged that the company reported revenues of $250 million, but "real revenues were more like $50 million."

Wolverine batted around

Among the established issues, Wolverine Tube's 10½% notes due 2009 were seen having fallen sharply after the company warned that it might consider a pre-packaged Chapter 11 filing if its exchange offer and consent solicitation to the holders of those bonds is not completed.

A trader saw those bonds fall as low as 83 bid, or a 4½ point intraday drop, before the bonds came back from their lows to close down about 2½ points at 85 bid, 86.5 offered.

The company's less-frequently traded 7 3/8% notes were seen 2 points easier at 82.75 bids, 83.75 offered.

"They tanked," another trader said of the Wolverine bonds, "but then they came a long way back."

He saw the 101/2s fall to about 82 bid, from 85 previously, but then firm from those lows to close down about a point on the day at 84 bid, 85 offered.

Meantime, he said, the company's New York Stock Exchange-traded shares "got hammered," plummeting $1.72 (59.93%) to $1.15. Volume of 7.4 million shares was more than 22 times the usual turnover in the name.

Wolverine said in a filing with the Securities and Exchange Commission that a pre-packaged Chapter 11 filing to facilitate its restructuring plan would be under consideration if some conditions to its planned exchange offer and consent solicitation are not met. Its S-4 registration statement for the exchange offer and consent bid also included a solicitation for a pre-packaged Chapter 11 plan.

It said the pre-packaged plan would provide "substantially the same consideration" to the senior noteholders as the exchange offer and consent solicitation.

The company stressed in its statement that "we are still continuing to explore a range of alternatives, and no decision has been made on which course of action the company will ultimately take."

It also said that its liquidity is "sufficient" to sustain its operations in the near- to mid-term.

Movie Gallery gains on coupon payment

Also making a similar claim on Wednesday was Movie Gallery, which said it would be in compliance with its covenants and have adequate liquidity through year's end.

More importantly, the company made the scheduled $17.9 million Nov. 1 interest payment on its 11% notes due 2012. Those bonds had been up about 2 points on the session on Tuesday and essentially matched that in Wednesday's dealings, rising to about 64 bid, 66 offered - up 2 points on the session, and 4 points over the last two sessions.

The company statement allowed that while there was no guarantee about that its results might be or how successful it might be in completing sales of non-core assets, Movie Gallery believes that cash on hand, cash from operations, cash from non-core asset sales, and available borrowings under its revolving credit facility "will be sufficient to operate the business, satisfy working capital and capital expenditure requirements, and meet the company's foreseeable liquidity requirements, including remaining in compliance with the financial covenants contained in the credit facility and debt service for the remainder of fiscal 2006."

Calpine bonds up

Elsewhere, Calpine's bonds "were stronger," a trader said, quoting the bankrupt San Jose, Calif.-based power producer's 8½% notes due 2011 "up a point yesterday [Tuesday] and maybe 2 points the day before, and up another point" to 1½ points in Wednesday's action.

Calpine was "moving," another trader said, seeing its 7¾% notes due 2009 at 74.5 bid, 76.5 offered, up 1½ points on the session, and its convertible issues "all up 3 or 4 points," depending on their maturities. He saw the 8½% notes due 2008 issued by the company's Calpine Canada Energy Finance II unit move up to 67 bid, 69 offered, a gain of 3 points.

Calpine's Pink Sheets-traded shares meanwhile were up a dime, or 33.90%, to 39.5 cents, on volume of 14.4 million, about six times the usual activity level.

There was no fresh news out about the company, and no startling new developments in its ongoing reorganization case before the U.S. Bankruptcy Court for the Southern District of New York that might explain the push upward.

"Obviously, something is going on - but we don't know what," the trader said "the bonds continue to move up."

One explanation heard in some quarters is the recent talk in the market that Calpine might reinstate its second-lien bank loan paper and resume making current payments on it. Such speculation gave the bank debt a firm boost last week, helping it run up to around a 109-110 context.

In theory, this is good for the bonds, and even for the stock, since it dramatically reduces the pool of claims against the company, making a larger recovery more likely for unsecured creditors, like the bondholders.

That also opens the door to the idea of providing some compensation to the shareholders, who normally - though not always - get completely wiped out in a corporate bankruptcy. While reinstating the second-lien paper does not guarantee full recovery for the unsecured creditors, it does make it more of a feasible possibility.

Paul A. Harris contributed to this story

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