Refco bank debt up, but bonds retreat; Pliant bonds firm on reorganization plan

By Paul Deckelman and Sara Rosenberg

New York, March 20 - Refco Inc.'s bank debt was stronger on Monday as some talk circulated around the market about possible disbursements. However, the bankrupt New York-based financial services company's bonds were seen several points lower.

Elsewhere, Pliant Corp.'s bonds were seen to have firmed after the bankrupt Schaumburg, Ill.-based packaging maker filed a restructuring plan with the U.S. Bankruptcy Court in Wilmington, Del.

Among the automotive names, Delphi Corp.'s bonds were seen up for a second consecutive session on investor hopes that former parent General Motors Corp. and the United Auto Workers union will be able to come to some sort of agreement to help the bankrupt Troy, Mich.-based automotive electronics maker - and former GM subsidiary - cut its heavy labor costs without provoking a threatened strike by its 34,000 hourly workers. Those hopes picked up some momentum on weekend news reports indicating progress was being made.

Bankrupt Toledo, Ohio-based automotive components maker Dana Corp.'s bonds, however, were stymied for a second consecutive session Monday, their impressive two-week run up following the company's Chapter 11 filing in early March apparently stalled.

Refco's bank debt was being quoted Monday at 99 bid, par offered, up by about a point, a trader in that market said.

"I think there was a hearing on Friday where some information came out on potential interim disbursements," the trader said in explanation of the positive momentum.

Also on Friday, judge Robert Drain of the U.S. Bankruptcy Court for the Southern District of New York, authorized Refco Global Holdings LLC, a Refco Inc. affiliate, to sell its Japanese securities brokerage unit, Refco Japan Inc., to four purchasers for $4.6 million.

Separately, Drain on Friday gave final approval for Refco's hiring of Goldin Associates LLC, headed by former New York City comptroller Harrison Goldin, as its crisis manager. The judge had previously okayed Goldin's hiring on an interim basis.

However, bond market denizens are less optimistic about their chances for a substantial recovery from Refco; a trader in distressed notes quoted the company's 9% notes due 2012 as having fallen to 49 bid, 51 offered from prior levels at 53 bid, 55 offered, although he could give no real reason for the downturn.

Refco filed for Chapter 11 protection from its junk bond holders and other creditors in October following the discovery of some $430 million of bad debts buried deep in the balance sheet and the ouster of then chief executive officer Phillip Bennett.

Pliant up after filing plan

Elsewhere, traders were quoting Pliant's bonds higher, after the company filed its plan of reorganization with the Wilmington court.

A trader saw its 11 5/8% notes due 2009 at 97 bid, 98 offered, which he called up two points on the session, while its 11 1/8% notes due 2009 were up 1¼ points at 110.25 bid., 111.25 offered.

He saw the company's other bond issue, its 13% notes due 2010, unchanged at 26.75 bid, 28 offered.

Another trader saw "most of the action" in the 11 1/8s, which he also called up two points at 97 bid, 98 offered, while the 13s were unchanged at 27 bid, 28 offered.

Pliant, which filed for protection on Jan. 3, envisions a pre-negotiated debt-for-equity exchange which will eliminate $578 million of debt and preferred stock and reduce the company's interest payments by $85 million.

Armstrong loans strong

Bankrupt Lancaster, Pa.-based floorcovering maker Armstrong World Industries Inc.'s bank debt headed up on Monday as the asbestos-challenged names overall felt firm, according to a trader.

The bank debt was quoted at 71 bid, 72 offered, up about 2½ to three points on the day, the trader said.

Its bonds were meantime a point higher at 71 bid, 73 offered, while the bonds of another asbestos-linked firm, bankrupt Toledo, Ohio-based insulation maker Owens Corning, were seen having firmed to 83 bid, 84 offered from prior levels in the upper 70s. Investors are still holding out hopes that a bill setting up a $140 billion industry- and insurance-financed trust fund mechanism, taking asbestos claims out of the courts, may be passed by Congress some time this year.

Movie Gallery loan, bonds down

Among the non-bankrupt distressed names, Movie Gallery Inc.'s term loan headed lower on Monday with no particular reason seen behind the weakening levels other than market technicals, according to a trader.

The term loan closed out the session quoted at 92 bid, and a range of 92.5 to 93 offered, compared to Friday's closing levels of around 93 bid, 94 offered, the trader said.

"It's quiet today. Could just be quoted off of one seller and that's skewing the market. I don't know how real that level is," the trader said.

The Dothan, Ala.-based video-rental chain operator's 11% notes due 2012 were seen having retreated to 51 bid, 53 offered Monday from 54 bid, 56 offered, continuing to pull back from the highs those bonds had hit in anticipation that the company's bank lenders would give it some covenant relief. When the lenders came through, as expected, last week, bondholders were seen taking profits on the gains those bonds had notched in the run up to the bankers' decision.

GM higher

Bond traders following the automotive issues saw General Motors' bonds, and those of its General Motors Acceptance Corp. financial unit mostly better, apparently bouncing back from the retreat they suffered on Friday, when the market reacted to the news that GM's 2005 loss would be $10.6 billion - $2 billion more than originally reported - and that accounting errors in figuring GMAC's returns would delay the filing of the 10-K with the Securities and Exchange Commission until the end of the month, at the earliest.

On Monday, a trader saw GM's benchmark 8 3/8% notes due 2033 a point better at 74 bid, 75 offered, and pegged GMAC's 8% notes due 2031 at 93 bid, 94 offered, also up a point. However, he saw other GMAC bonds that don't trade as actively as the 8s largely unchanged, including its 6¾% notes due 2014 at 89 bid, 90 offered, and its 6 7/8% notes due 2011 at 91 bid, 92 offered.

At another desk, a trader saw the GM benchmarks up 1½ points on the day at 74.5 bid, 75.5 offered, and estimated the GMAC 8% bonds half a point better at 92.5 bid, 93.5 offered.

However, yet another trader saw GM up only about a half a point at 92.75 bid, 93.25 offered, and actually figured the GMAC bonds down a point, at 92.75 bid, 93.25 offered.

A market source tracking GM's 7¼% notes due 2013 saw those bonds almost a point better at 75.75 bid.

A possible catalyst for the firming in GM might be the weekend news reports that the company, Delphi, and its unions, represented in the bargaining by the largest labor group, the UAW, might finally be making progress towards untying the Gordian knot of how to lower bankrupt Delphi's bloated labor costs - as well as GM's - without completely gutting the provisions of the contracts covering some 34,000 hourly workers at Delphi, and over 100,000 hourly employees at GM.

Last week, GM bonds rose, and so did Delphi's, on a Wall Street Journal story indicating the three parties were near an agreement - but that rally faded as the union quickly said that no such deal was imminent.

The new news reports quoted parties close to the negotiations as saying that representatives of the two companies and the union met through the weekend and were still in talks on Sunday evening in Detroit. They were said to be dickering on the payments and benefits that union workers would receive to accept early retirement. One idea reportedly being kicked around is an attrition program that could include the possibility of Delphi workers coming back to GM.

GM is looking to cut some 30,000 hourly jobs over the next three years at plants around the country. Delphi, meantime, wants to cut is work force and lower labor costs to bring them more into line with the cost structures at other auto-supply companies, since Delphi is currently paying wages and benefits under a cost structure it inherited from carmaker GM, which spun Delphi off in 1999.

Any change to the Delphi contract would have to be approved by the U.S. Bankruptcy Court for the Southern District of New York, which is overseeing Delphi's restructuring.

Delphi has threatened to go to the court and unilaterally seek permission to abrogate its contract with the UAW and several other unions if no agreement on a consensual solution to its problem is reached by March 31. However, it should be noted that Delphi has already extended that deadline several times in order to keep talking. The unions have threatened to strike if Delphi makes any sudden moves to junk their contracts. Such a strike would be disastrous for GM, which depends on its former subsidiary for a steady stream of high-tech parts.

Delphi said on Monday that it would delay filing its own year-end report, to wait and see the outcome of the current talks with GM and the UAW.

The company said in an SEC filing that discussions with the other parties were ongoing but "the outcome is uncertain and may have a significant impact on the company's Dec. 31, 2005 financial statements."

Delphi gains on GM hopes

The prospect of GM finally helping its troubled problem child out - perhaps even the way that GM rival Ford Motor Co. helped its struggling former parts subsidiary Visteon Corp. avoid a probable bankruptcy last year - gave Delphi bonds a boost amid a generally lower automotive sector on Friday, since most of the extra $2 billion of losses GM 'fessed up to were due to larger charges connected with the Delphi bankruptcy. On Monday, Delphi continued to gain, with a trader calling its bonds a point higher at 63 bid, 65 offered.

At another desk, a trader saw the bonds even better, up 1¼ points across the board, with Delphi's 6.55% notes due 2006 at 63.25 bid, 64.25 offered, and its 7 1/8% notes due 2029 at 64.25 bid, 65.25 offered.

Dana steady

Other automotive names were generally higher - but one sector name that did not share in all of the upside movement was Dana, whose bonds seem to have reached their ceiling after an impressive nearly two weeks of gains that followed the March 3 bankruptcy filing.

Driven by technical factors probably related to the need for Dana bonds to settle credit default swaps contracts, as well as market perceptions that bondholders would likely enjoy a fairly substantial recovery, those bonds had zoomed over that time to around 80 bid from prior levels in the low-to-mid 60s, but were seen having plateaued on Friday. In Monday's dealings, a trader saw its 6½% notes due 2009 down a point around 78 bid, 79 offered. Another trader saw its 6½% notes due 2008 unchanged at 79 bid, 81 offered, but saw its other bonds all down a point at 77 bid, 79 offered.

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