Delphi paper dips; Buffets bonds steady; Charter Communications softer

By Stephanie N. Rotondo

Portland, Ore., Jan. 7 - Whether it was continued investor hesitation or more global concerns, something prompted market players to back away from distressed bonds Monday.

Most traders reported a "very quiet" day at the beginning of the second week of 2008. One trader noted that there was "across the board weakness" as sellers infiltrated the market.

"People were puking stuff," he said. "That's what it seemed like."

With a plethora of bad news out there - including increased concerns about tensions with Iran - there was little to encourage investors to jump into the bearish marketplace.

"It's deadly quiet," said another trader. "No one is reacting to anything."

Still, another trader said it was "just a Monday."

As the distressed sector weakened, Delphi Corp. led the way. The automotive parts supplier's bonds lost as much as 6 points on the day. While there was nothing specific to propel the decline, one trader said that anything automotive-related was "crummy."

Buffets Inc., now in its 30-day grace period after missing its first of the year coupon payment, has quieted down, traders said. The restaurant operator's bonds, which fell 10 points in just one day last week, remain unchanged from Friday's levels as the company begins the restructuring process.

In this market, being highly leveraged is not the best idea - something Charter Communications Corp. is finding out. A trader said the cable provider's bonds have continually weakened, as investors are averse to companies with too much risk.

Delphi paper dips

Delphi paper continued to decline, following the path it began in the first week of 2008 trading.

"It's a crummy business," one trader said. Market-wide, many believe that the automotive sector will continue to underperform.

The trader said the Troy, Mich.-based company's debt was trading lower at around 46 bid, 48 offered, noting that its various issues are beginning to trade at about the same level.

Another trader said the bonds fell "about a six-pack," the 6½% notes due 2009 around 48.5, the 6.55% notes that were to have matured in 2006 at 46.5 bid, 47.5 offered and the 6½% notes due 2013 at 45 bid, 47 offered.

At another desk, a trader pegged the 6.55% notes and the 2009 issue at 46 bid, 47 offered, which he called down 3 to 4 points. He agreed that all the issues are beginning to move closer together.

Another trader saw Delphi's bonds take a pounding, quoting its 6.55% notes down 5 points (on top of Friday's losses) to 46 bid, 47 offered. He cited an article in Monday's editions of The Wall Street Journal detailing how Delphi "is lagging behind in its efforts to exit bankruptcy" - especially when compared with sector peer Dana Corp., which has also been restructuring but which is expected to emerge sooner, with its exit funding all nailed down, unlike Delphi.

Another trader noted that Delphi was both "the volume leader and the price [change] leader," quoting the 6.55% as having fallen from levels around 56 bid, 58 offered on Friday to opening levels Monday around 50 bid, 52 offered, and from there down to 46 bid, 48 offered.

Delphi's 7 1/8% bonds due 2029 were off almost 5 points to just below 47 bid.

Delphi is expected to launch for syndication $6.8 billion in exit financing, according to a Reuters report. The proposed exit facility led by J.P. Morgan and Citigroup will include a $1.6 billion six-year asset-based revolver, a $3.7 billion seven-year first-lien term loan and a $1.5 billion eight-year second-lien term loan - of which former parent General Motors Corp. has agreed to purchase $750 million.

The exit facility will work in tandem with a $2.55 billion equity infusion from Appaloosa Management.

Elsewhere in the sector, Dura Automotive Systems Inc.'s 8 5/8% notes due 2012 "actually improved," a trader said, to 10 bid, 12 offered, a 2-point pickup from Friday.

Buffets bonds steady

After losing 10 points in just one day last week, activity in Buffets' bonds has died down.

The steep decline came after the company failed to pay its Jan. 2 coupon. Following the missed payment, several ratings agencies downgraded the company further into junk territory.

A trader said the 12½% notes due 2014 were unchanged from Friday's levels, which was when the debt started to quiet down. He pegged the bonds at 27 bid, 29 offered.

Another trader echoed that market, also deeming the debt unchanged.

However, another trader said the bonds regained 2 points Monday to end at 28 bid, 30 offered.

Buffets confirmed on Thursday that it had failed to make the interest payment and would enter into the 30-day grace period. Furthermore, the company said that failure to make the payment within that time period could not only result in acceleration of that issue but of its other debt as well.

The company added that it would begin the restructuring process.

Charter takes a beating

Charter Communications "continues to get battered," a trader said, a result of the company's high leverage.

The trader quoted the 10% notes due 2014 lower at 53 bid, 54 offered as well as the 10% notes due 2011 at 73 bid, 74 offered.

"Levered credit in this market is getting hammered," he said.

Another trader called the junior notes down 5 points on the day - its 10% notes due 2014 swooned to 52 bid, 54 offered - while its senior bonds were off a point, the 8 3/8% notes due 2014 at 93.5 bid, 94.5 offered.

At another desk, Charter's 9.92% notes due 2014 were seen down 6 points on the day to 51 bid.

The cable provider has failed to perform well financially in recent quarters - presumably, due at least in part to its customer service.

Two recent reports placed Charter at the bottom of the list of customer service. Last month, national research firm Forrester Research Inc. called Charter the worst in the way of customer service. The February issue of Consumer Reports followed suit, giving the company an overall rating of 188 out of 250.

Housing, mortgage names mixed

The housing and mortgage industry was mostly unchanged to weaker Monday, in line with the rest of the market.

A trader deemed Tousa Inc.'s 8¼% notes due 2011 unchanged at 45 bid, 47 offered, and Standard Pacific Corp.'s 7% notes due 2014 were likewise unchanged at 64 bid, 66 offered. WCI Communities Inc.'s 9 1/8% notes due 2012 actually bucked the overall market trend and gained three-quarters of a point to 55.75 bid, 57.75 offered.

In the mortgage sector, Countrywide Financial Corp.'s bonds were "a little wider," a trader said.

Another trader quoted the 6¼% notes due 2016 down 3 points, at 50 bid, 53 offered, its 5 3/8% notes due 2009 at 68.5 bid, 69.5 offered and its 3¼% notes coming due in May at 88 bid, 89 offered, down 1.

Another source pegged the 6¼% notes at 51 bid, down 3 points.

Meanwhile, Residential Capital LLC's 6% notes due 2013 were unchanged at 48 bid, 60 offered, while Thornburg Mortgage Inc.'s 8% notes due 2013 traded "a little lower than last week," according to one trader, at 83.5 bid, 84.5 offered.

Paul Deckelman contributed to this article.

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