Goodyear firms as long strike finally ends; Delphi seen lower after bigger monthly loss

By Paul Deckelman, Paul A. Harris and Ronda Fears

New York, Jan. 2 - It was back to work on Tuesday, now that the holidays have come and gone - but not really.

The national day of mourning in honor of the late former president Gerald Ford closed down the stock market - and although the fixed-income markets were technically open for an abbreviated session, as recommended by The Bond Market Association, for all intents and purposes Tuesday was as much a semi-holiday with nothing really going on as this past Friday had been. In fact, one very bored secondary trader observed that "it was even worse than Friday" in terms of a lack of activity.

"Not many people were in, and of the people that did come in, most of them left early," the trader said around mid-day - still an hour or two before the "official" scheduled close. "Charter [Communications Corp.] was up maybe a little - but really, nobody was in."

Another trader echoed that sentiment - and said that with not a lot of people doing very much, "there was a whole lot of blah."

One name which did show some movement, albeit on relatively thin trading, was Goodyear Tire & Rubber Co., whose bonds had a little bounce to them in the wake of Friday's news that a lengthy strike against the Akron, Ohio-based tiremaking giant's North American operations was over - and it would now be ramping up production to make up for nearly three months of reduced output.

In the distressed-debt market, several sources saw a sharp fall in Delphi Corp.'s bonds - particularly the bankrupt Troy, Mich.-based automotive parts supplier's widely quoted 6.55% notes that were to have come due in 2006, which follows Friday's news of a sharply wider monthly loss in November versus October's results, as well as other recent news indicating a delay in its bankruptcy reorganization process.

Primaryside activity meantime began 2007 in the same deep freeze in which it ended 2006 - a year which saw record new issuance of some $157 billion of junk debt, a borrowing binge fueled by ample liquidity poured into the junk market from such non-traditional sources as hedge funds and private-equity funds, both as direct buyers of bonds, and as funders of the numerous buyouts and other merger and acquisition transactions which occurred last year, particularly in the latter half.

Goodyear pretty good

Back in the secondary sphere, Goodyear's widely followed 7.857% notes due 2011 were seen having moved up to around 101.5, a gain of nearly a point on the session.

Goodyear's 9% notes due 2010 were slightly better at 105.5. No quotes were seen on the company's two other bond issues - its 7% notes due 2028 and its 6 3/8% notes due 2008, which ended last week at 89.875 and 98.625.

The somewhat better tone in Goodyear followed the news that the strike against the company by 14,000 hourly employees at 16 plants in the United States and Canada was over, after 12 striking locals in 10 U.S. states and four provinces north of the border approved a new contract. Members of the United Steel Workers union who had put down their tools and picked up picket signs when their old contract expired on Oct. 5 went back to their jobs at those plants on Tuesday after nearly three months' absence.

During that time Goodyear had managed to limp along using temporary replacement workers and management employees, as well as supplementing its truncated domestic production with output from its overseas factories.

Goodyear issued a statement Tuesday, quoting company North American tire division president Jon Rich as saying that "Goodyear welcomes the return to work of our USW associates." He added that he had "no doubt our associates will quickly return to their normal high levels of performance and productivity."

Goodyear said that with production at the affected tire and engineered products plants slated to ramp up over the next few weeks, full supply of Goodyear products is expected to be available soon after that.

Goodyear says the new three-year agreement will help reduce its costs by $610 million in that time frame, with savings of $70 million this year, $240 million in 2008 and $300 million in 2009, and $300 million a year thereafter.

Key points of dispute between the company and the union were Goodyear's plans to close down its Tyler, Tex. plant and to create a healthcare trust to fund retiree costs. Goodyear wanted to close the high-cost Texas plant last fall, over strong union opposition, but agreed to keep it open until the end of this year. When Tyler does close, Goodyear estimates that action will produce $50 million of annual savings.

On retiree healthcare, Goodyear originally proposed spending about $660 million a year to fund a healthcare trust for its former employees, but the union deemed that inadequate and demanded twice as much. The two sides ultimately compromised and settled on a $1 billion spending figure.

Reacting to the news, Standard & Poor's said Tuesday that it had affirmed Goodyear's B+ corporate credit and other ratings, with a stable outlook and removed them from CreditWatch, where they had been placed with negative implications shortly after the strike began.

S&P said the relatively weak Goodyear ratings reflect its "aggressive financial risk profile, characterized by low earnings in North America, a leveraged capital structure and significant underfunded employee benefit liabilities" - factors which "more than offset" the company's business strengths, including its position as one of the three largest global tire manufacturers, its good geographic diversity, its strong distribution and its well-recognized brand name.

GM higher

Also in the automotive arena, General Motors Corp. bonds were better, despite a lack of fresh news about the carmaker. Its benchmark 8 3/8% notes due 2033 rose to 93 bid from prior levels around 91.875, while GM's 7.4% notes due 2025 and 7 1/8% notes due 2013 were each ½ point better at 84.5 bid and 94.5 bid, respectively.

Sirius firms ahead of numbers

Elsewhere, Sirius Satellite Radio Inc.'s bonds were a little firmer during the session, with the upstart New York-based satellite broadcasting company's 9 5/8% notes due 2013 finishing at par bid, up from their 98-ish context on Friday, although trading was light.

After the market had closed, the company announced that it ended 2006 with 6.024 million subscribers - slightly more than the middle of the 5.9 million to 6.1 million range the company had projected in early December.

Sirius also said that it had achieved its first-ever quarter of positive free cash flow in the fourth quarter, after capital spending, in line with its previously announced expectations.

The positive subscriber figures and bullish free cash flow news could be an influence on Wednesday's trading in the '13 bonds.

Delphi dives

In the distressed market, Delphi's 6.55% notes due 2006 were seen by one market source to have been unchanged at around 111 - but another saw those bonds come in around 5 points on the session, to about the 105.5 mark.

A trader at another desk saw the 6.55s fall as low as 100.5 bid - down from levels earlier in the session around 105.5, and well down from Friday's close at 110.5

He attributed that slide to efforts by some in the market to take advantage of any extension in year-end selling - and also described the 100.5 figure as a "low-ball bid" which few other players were likely to hit.

Trading was thin, enhancing the effect of the price downturn.

Delphi's 8¼% notes due 2033 backtracked to 119 bid from 121.5 last Friday.

Last week, Delphi requested an extension to the exclusive periods during which it has the sole rights to file a plan of reorganization to July 31 from Feb. 1. A hearing is scheduled for Jan. 12.

On Friday, the company reported that it had lost $226 million in November - a sharply wider loss than the $54 million that the company reported for October.

Over the first 11 months of 2006 - the December report is due out later this month - Delphi reported a cumulative loss of $4.66 billion.

Primary quiet

A high yield syndicate source said that the market seemed firm on no apparent activity Tuesday.

The source, who spoke shortly after the bond market's early close on a national day of mourning for the late former U.S. president Gerald R. Ford, added that Treasuries were also better on the day.

Meanwhile sources reported no news in the primary market, but reiterated expectations that the new issue market will likely begin to approximate December 2006's busy pace before the month of January is too far advanced.

Visibility on $30 to $50 billion

Various syndicate officials concede they have visibility on anywhere from $30 billion to $50 billion of potential bond financings that are expected to come during the first half of 2007.

And market sources are forecasting that the opening month of 2007 will be every bit as busy as the final month of 2006.

Continuing a trend that gained momentum in the fourth quarter of 2006, the first deal out of the gate in 2007 figures to be another LBO mega-deal, sources say.

Aramark Corp. is expected to start a roadshow in early January for a $2.270 billion notes transaction that will involve senior and senior subordinated notes via JP Morgan and Goldman Sachs.

Proceeds will be used to fund the approximately $8.3 billion LBO of the company by chairman and chief executive officer Joseph Neubauer together with funds managed by sponsors by Thomas H. Lee Partners LP, Warburg Pincus LLC, JPMorgan Partners, GS Capital Partners and CCMP Capital Advisors.

Also expected during January is Rexnord Corp., with a $460 million offering of senior notes via Credit Suisse, Bank of America Securities and UBS Investment Bank.

The proceeds will be used to help fund the acquisition of Jacuzzi Brands, Inc.'s Zurn plumbing products business for approximately $950 million.

And Alion Science and Technology Corp. disclosed in filing it made in mid-December with the Securities and Exchange Commission that it plans to offer $200 million of unsecured senior notes in January.

Proceeds will be used to repay its bridge loan and a portion of its term loan.

The company also disclosed that a group of lenders that includes Credit Suisse has agreed to delay applying a 1% premium on the bridge loan for two months.

Freeport seen as January business

Finally, in the run-up to the holiday break sources were advising Prospect News that while the Firestone Acquisition Corp. (Freescale Semiconductor Inc.) $5.95 billion multi-tranche deal that priced in mid-November represents record issuance, it is a record that will not likely stand for very long into the new year.

Indeed on Friday an informed source said that Freeport McMoRan Copper & Gold, Inc. is expected to bring high yield bond offerings totaling $6 billion during January.

The deal will be comprised of unsecured notes with seven- to 10-year maturities, expected to be priced in the range of 8¼%, according to a market source.

Proceeds will be used to help fund the acquisition of Phelps Dodge.

The financing also includes $10.5 billion in secured institutional term loans.

JP Morgan and Merrill Lynch & Co. are leading the capital raising.

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