Delphi bank debt recovers from Wednesday loss; Charter seen continuing to firm

By Paul Deckelman and Sara Rosenberg

New York, Aug. 25 - Delphi Corp.'s revolving loan bounced back Thursday to trading levels that had been seen prior to Moody's Investors Service's downgrade of Ford Motor Co. and General Motors Corp. to junk status on Wednesday, traders said, as investors realized that the rating actions were already expected, making the double downgrade a non-event. The company's bonds were meantime seen mixed.

Charter Communications Inc.'s bonds were seen better for a second straight day, continuing the firming trend kicked off by Wednesday's announcement that the St. Louis -based cable systems operator will exchange new debt for $8.4 billion of existing bonds.

Delphi's revolver was quoted at 96 bid, 96.25 offered at the close Thursday, up from 95.5 bid, 96 offered at the close Wednesday, a trader said. However, before the downgrades, the revolver was being quoted at 96 bid, 96.25 offered on Wednesday.

The company's term loan was once again unchanged at 103.125 bid, 103.5 offered, the trader added.

A trader in distressed bonds said that "nothing" was going on in the bonds of the Troy, Mich.-based automotive electronics manufacturer.

However, a market source at another shop saw Delphi's 6½% notes due 2013 lose a point to end at 80.5 bid, while its 6½% notes due 2009 were also down a point, at 85.5. The benchmark 6.55% notes due 2006 were seen unchanged at 92, he said, while Delphi's 7 1/8% notes due 2029 gained 1/8 point to end at 76.125.

Another trader agreed that there was "no real change" in the company's bonds, which remained "inactive." He quoted the 6.55s holding steady in the 91 bid, 93 offered area.

Delta's bonds and its bank debt had retreated on Wednesday, a trader said, when Moody's lowered Ford's senior unsecured rating to Ba1 from Baa3 with a negative outlook and GM's senior unsecured rating to Ba2 from Baa3 with a negative outlook. GM, Delphi's former corporate parent, is still Delphi's single largest customer, while Ford is also emerging as one of the company's larger accounts.

According to Moody's, Ford's downgrade reflects further erosion in the operating results and cash flow generation because of weakened market share and continued challenges in addressing its uncompetitive cost structure in North America. Since improvement in the company's cost structure can only be implemented over a period of time, financial performance is expected to remain weak.

GM's downgrade reflects continuing operating losses in its North American automotive operations as well as challenges in restructuring the company to achieve a viable long-term competitive position as a leading global automaker.

Market participants said that the Moody's move hardly came as a surprise. They explained that the rating downgrades were expected because Standard & Poor's lowered both companies to junk months ago.

Earlier this month, both Delphi's revolver and the term loan suffered some losses, and its bonds and shares retreated as well, after the company revealed that it drew $1.5 billion under its $1.8 billion revolver in order to have cash readily available to finance operations if needed.

After that turmoil, however, Delphi's bank debt levels have been steadily inching higher as investors have gotten more comfortable with the idea that GM may step up to aid its onetime subsidiary via a financial bailout of some sort, perhaps not unlike what Ford recently did for its troubled former unit, Visteon Corp. The investors have also moved away from seeing a potential Chapter 11 filing by Delphi as likely.

Foamex steady despite stock moves

Also in the automotive sector, Foamex LP bonds were seen little moved, even as the Linwood, Pa.-based foam rubber products company's penny stock shares - which shot up some 78% on Wednesday for reasons unknown - plummeted more than 30% on Thursday.

A trader saw the company's 9 7/8% notes due 2007 at 18 bid, 20 offered, with "no real trading seen in the name," and saw its 10¾% notes due 2009 "opened and closed" at 89 bid, 90 offered.

Another, however, saw the 103/4s up a point, at 90.

Foamex's stock meantime was riding a roller coaster, giving up nearly half of the gains it had notched on Wednesday. Those Nasdaq-traded shares - whose ticker symbol was changed to FMXIE to indicate that it is delinquent in its reporting obligations to the Securities and Exchange Commission - fell eight cents (32%) to 17 cents, on volume of 5.5 million, about eight times the norm.

Charter firm

A trader saw Charter Communications bonds building on Wednesday's debt exchange offer-related gains, with the company's 8% notes due 2012 at 101.75 bid, 102.25 offered, up from 100.5 bid, 101.25 offered on Wednesday.

Another trader, however, saw Charter's bonds - while "still trading around actively" on Thursday, not really going anywhere price-wise.

"They're holding at higher levels and trading in the context of the market," he said, but saw no price change in Charter's 8 5/8% notes due 2009, which remained at 82 bid, 84 offered. On Wednesday, those bonds had jumped six points to get to that level.

Another trader who also saw those '09 bonds around that same level opined that Charter "looked pretty much unchanged. They had their run [Wednesday]."

Charter plans to exchange new bonds for about $8.4 billion of existing notes slated to mature in 2008 and 2009 and in 2011 and 2012, thus extending their maturity and cutting its total debt burden by as much as $1.5 billion.

United up

A trader saw United Airlines parent UAL Corp.'s bonds gain, pegging them a point higher at 15 bid, 16 offered. That rise followed what he called "a blip" on the news radar - United's announcement that the bankrupt Elk Grove Village could get as much as $3 billion in exit financing from its lenders, $500 million more than expected.

That information was contained in an update on to the Number-Two U.S. air carrier's employees from the company's chief executive, Glenn Tilton.

"Our business plan is viable and financeable and has the full support of the banks," he said.

Other airlines quiet

Traders saw little or no activity in other airline bonds, with Northwest Airlines Corp. continuing to operate through a sixth day of a strike by nearly 4,500 mechanics, plane cleaners and custodians. No new talks were scheduled. Eagan, Minn.-based Northwest, the fourth-largest U.S. airline carrier, is using a combination of replacement mechanics, supervisory personnel and third-party contractors to keep its planes flying. A trader saw its 7 7/8% notes due 2008 unchanged at 45.

A trader saw Delta Air Lines Inc.'s 7.90% notes due 2009 unchanged at 18.25 bid, 19.25 offered.

"Everything in the airlines," he said, "was pretty flat."

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