Delphi bonds skid lower on bankruptcy fears, ratings downgrades; LifeCare prices eight-year deal

By Paul Deckelman and Paul A. Harris

New York, Aug. 5 - Delphi Corp.'s bonds became the latest disaster du jour on Friday, quoted sharply lower on news that the Troy, Mich.-based automotive components manufacturer is in talks with its unions and with former corporate parent General Motors Corp. in hopes of restructuring the company so that it can avoid having to file for bankruptcy.

The company's 6.55% notes due 2006, in particular, were hard hit, seen down as much as 10 points on the session to the mid 80s.

In the new-deal arena, LifeCare Holdings Inc. closed out a fairly busy week with a smallish calendar offering of eight-year notes. However, secondary market traders said the new offering went nowhere fast.

One quoted the 9¼% senior subordinated notes due 2013, which had priced earlier in the session at par, as being offered at 100.25, but with "no bid. No one could find a bid on it."

Overall, in the face of tumbling Treasuries and a drop in stock prices, high yield was unchanged to slightly lower on Friday, according to one source.

Clearly, the focus of the day was the established issues in general, and Delphi in particular, which in the words of a trader "couldn't get out of their own way at the end of the day."

He saw the 6.55% '06s, which had finished up around 96.5 bid, 97.5 offered on Thursday, as having plummeted Friday to a closing level around 89.5 bid, and at one point, had traded into an 88 bid, "so those are down a fair amount," he said, with no small degree of understatement.

"Basically, after the news came out this morning, [that Delphi had to dip into its credit facilities to fund its operations, and confirmed the restructuring talks with GM and the United Auto Workers union], the bonds were quoted down four or five points, then they snapped back a little bit, and then, at the end of the day, another news headline came out [about ratings agency downgrades from Standard & Poor's, Moody's Investors Service and Fitch Ratings], and they just traded through their opening levels this morning" on the downside.

The trader saw Delphi's 6½% notes due 2013 at 77.5 around midday, when the bonds were trying to come back from the initial jolt of bad news; he saw its 6½% notes due 2009 at 82 bid, 84 offered.

"We had some accounts that came in, looking for offerings around midday," he said, "and then they kind of just all went the other way."

Another trader saw Delphi as "the only major mover" on the day. He saw the 6.55s at 88 bid, 89 offered, down some 10 points on the session. He said he had not seen any of the company's other bonds, but "you can assume that the longer-dated stuff was going to widen out some more" from recent levels.

A market source saw the 6.55% notes falling to 86 at the end of the day, down from the 94 level at which they had opened the session, and down even further from Thursday's close at 98.5.

The source saw the company's 6½% notes due 2009, though, ending not much changed on the session at 85. However, during the session, those bonds were spotted as low as 78.

The source also saw the 2013 61/2s ending at 71.625, and Delphi's 7 1/8% notes due 2029 at 70.5.

Another source pegged the 6½% 2009 bonds ending down 7½ points on the session at 81.5.

Delphi's New York Stock Exchange-traded shares lost 82 cents (14.19%) to close Friday at $4.96. Volume of 25.4 million shares was more than five times the usual level.

A trader said that Delphi's distress seemed not to have very much impact on other names in the automotive sector.

Goodyear volatile but ends near unchanged

"I didn't really see too much action or inquiry on any of the other auto names," he said, although he did see Goodyear Tire & Rubber Co. "ping ponging around a little bit" after the Akron, Ohio-based tire giant released strong second-quarter numbers.

He saw Goodyear's benchmark 7.857% notes due 2011 gyrating around, with a few trades as high as "a 102 handle," and others as low as 97.5 bid, 98.375 offered, before ending at 99.5 bid, 100.5 offered, not much changed on the session for all of the jumping around.

"The bonds were actually traded at 100.5 bid, 100.75 offered early in the morning," he said, "then they kind of leaked lower throughout the day."

Apart from Delphi and Goodyear, the trader said, "I didn't really see too much else," with "maybe a couple of buyers around" for bankrupt Troy, Mich.-based components supplier Collins & Aikman products Co.'s 10¾% notes due 2011 at 29 bid, 31 offered.

Another trader meantime saw GM's 8 3/8% notes due 2033 down a point at 85 bid, 86 offered, while Ford Motor Co.'s 7.45% notes due 2031 were likewise a point lower, at 80.5 bid, 81.5 offered.

In general, the trader said, "the whole market felt a little weak today. It's hard to tell whether it was just [because it was a summer] Friday and no one cared. We'll see on Monday whether things go right back up or not.

"There didn't seem to be too much demand - and not a lot of guys were really in."

LifeCare at the wide end talk

Meanwhile the only issue to price during the final session of the first week of August 2005 came from Plano, Texas, long-term acute care hospitals operator LifeCare Holdings.

The company priced a $150 million issue of eight-year senior subordinated notes (Caa1/CCC+) at par to yield 9¼%, at the wide end of the 9% to 9¼% price talk.

Banc of America Securities and JP Morgan ran the books for the acquisition financing.

A $3 billion week

LifeCare brought the opening week of August to an issuance total of slightly more than $3 billion in 12 dollar-denominated tranches.

Not bad for August, perhaps, but decidedly less than the previous week's approximately $4.2 billion in five tranches, which included SunGard Data Systems, Inc. $2 billion two-tranche deal and L-3 Communications $1 billion issue, both of which priced on Wednesday, July 27 - the biggest single day of junk issuance since the spring of 1999.

Back to the most recent week, tallying the $3 billion and change that priced during the first week of August the market ended the week having seen nearly $66 billion of issuance in 243 dollar-denominated tranches. That compares to approximately $90 billion in 364 tranches which had priced in 2004 by the August 5.

Columbus McKinnon starts Wednesday

One roadshow start was heard during the Friday session.

Karen L. Howard, vice president and interim chief financial officer of Columbus McKinnon Corp., told Prospect News that the company expects to begin a roadshow on Wednesday for an approximately $136 million offering of senior subordinated notes with a seven-, eight-, or 10-year maturity.

Credit Suisse First Boston has the books for the debt refinancing deal from the Amherst, N.Y. designer, manufacturer and marketer of hoists, cranes, chain and forged attachments.

Howard was not disappointed to hear that Columbus McKinnon's deal was the only one presently positioned on the forward calendar to price during the third week of August, according to data compiled by Prospect News.

As to the second week of August, which is the week at hand, the forward calendar contains only four tranches from four issuers totaling $630 million.

They include:

* Intcomex's $130 million of five-year second-priority senior secured notes due 2010 (Caa1/B-), via Banc of America Securities;

* Dollarama Group's $200 million of seven-year senior subordinated notes (B3/B-) via Citigroup, JP Morgan and RBC Capital Markets;

* Mac-Gray Corp.'s $125 million of 10-year senior notes (B1/B+) via JP Morgan; and

* Ahern Rentals $175 million of eight-year second-priority senior secured notes (B3/B-), being led by CIBC World Markets.

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