Remy bonds had back down; Calpine continues climb

By Paul Deckelman and Sara Rosenberg

New York, Nov. 13 - Remy International Inc.'s bonds resumed their slide in Monday's dealings after having bounced around crazily at mostly lower levels on Friday after the Anderson, Ind.-based manufacturer of automotive electrical systems announced a wider third-quarter loss versus a year ago - even though they had regained some of their lost ground late in the final session of last week.

However, the bonds of the bankrupt San Jose, Calif.-based power producer Calpine Corp. - which on Friday had posted its first quarterly profit in two years as it benefited from hotter weather - were up for a second consecutive session on Monday.

And Iridium LLC's bonds were seen up several points from recent levels, although there has not been much news coming out of the court case that pits company bondholders against the failed satellite telecommunications company's former corporate parent, electronics giant Motorola Inc.

In the bank loan market, traders saw very little activity in distressed-company paper.

Remy ride continues

Back in the junk bond sector, Remy International was a big mover for a second straight session, hurt by wider third-quarter loss and continual investor anxiety about what the company's next move may be.

Those jitters continued despite a conference call Friday on which company executives sought to reassure the bondholders wondering about the company's having hired investment bankers Rothschild Inc. as an advisor.

On Friday, the bonds had swung wildly back and forth, with its issues nosediving by as much as 10 points, or even more, before coming part of the way back from those lows to end only a few points lower on that day.

However, on Monday, the downward slide resumed, a trader said, quoting the company's 8 5/8% notes due 2007 falling to 81 bid, 83 offered, a 2 point loss from where the bonds had ended on Friday. On Thursday, before the earnings announcement, the bonds had been anchored around 90 bid.

He saw the company's 11% notes due 2009 down 2 points at 36 bid, 38 offered - about a 10 point drop from where they had been before the spit hit the fan and all hell broke loose.

The trader also saw Remy's 9 3/8% notes due 2012 at 33 bid, 35 offered, down 2 points on the day, and well down from trading levels around 41 at which those bonds had opened Friday.

However, each of the three issues were still a point or more off the lows which they had initially hit on Friday.

Those Remy bonds had dropped precipitously on Friday after the company - which makes and markets automotive electrical and electronic components under the well-known Delco Remy brand - reported an operating loss of $3 million for the third quarter ended in September, a deterioration from the $1.5 million operating income in the comparable quarter in 2005. Net loss for the third quarter increased by $2.5 million to $30.5 million compared with a net loss of $28 million for the same period last year.

Remy also announced that Rothschild has been retained to provide advice and assistance regarding refinancing alternatives. Remy's president and chief executive officer, John Weber, said the company "continue[s] to make progress on the potential divestiture of non-core businesses. Rothschild's role is to assist us in the optimal application of proceeds from such divestitures. It is important we access the best advice we can to help us make the right decisions."

Some weeks ago, Remy bonds had traded off on market speculation that Rothschild had been hired, with some investors apparently feeling that the investment bank was being brought aboard in preparation for a possible bankruptcy filing - strictly unofficial and unconfirmed speculation which has not panned out.

The Remy bonds moved back Friday up after the conference call at which Weber and the other executives reassured investors about the company - although the securities couldn't hold those gains in Monday's dealings.

The CEO went on to emphasize that Remy continues to make its scheduled interest payments as required by its loan agreements and indentures.

Remy reported debt, net of cash-on-hand, of $725 million at Sept. 30, compared to $722 million at Dec. 31, 2005, according to Kerry Shiba, the company's chief financial officer.

Available liquidity, including unrestricted cash of $25 million, was $119 million at the end of the third quarter.

"Our liquidity remains strong," Shiba said.

GM bonds better on loan news

Elsewhere in the automotive realm, the announcement that General Motors Corp. will bolster its liquidity via a $1.5 billion secured loan before the year end gave a boost to the Detroit giant's bonds, a trader said.

He saw the leading carmaker's benchmark 8 3/8% notes due 2033 at 90.625 bid, 91 offered, up 5/8 point on the day.

GM said that it is doing the loan now partly because changes to U.S. pension and retiree health care accounting rules would make such an arrangement unlikely next year.

The company said that those changes in the way pensions and other post-employment benefits are accounted for could cause shareholders' equity in GM's year-end 2006 financial statements to be negative, which could affect its ability to pledge assets for a loan.

Moody's Investors Service assigned a Ba3 rating to GM's proposed secured loan, saying that it will need considerable liquidity to fund its own employee buyouts, resolve the reorganization of its bankrupt former parts unit Delphi Corp. and cover operating losses while its own restructuring takes hold.

Delphi longer paper better

Meanwhile, a trader saw Delphi's shorter-dated paper "about the same," but saw definite gains in the Troy, Mich.-based company's longer-dated issues.

He quoted Delphi's 6.55% notes that were to have matured this year "still" at 105.5 bid, 106.5 offered. He saw its 6½% notes due 2013 at 103 bid, 104 offered and its 7 1/8% notes due 2029 at 102 bid, 103 offered, each up 1½ points on the session.

Calpine continues to gain

Calpine bonds were seen firmer for a second straight session, riding the crest of Friday's momentum, generated after the company's report of its first quarterly profit in two years.

A trader saw its 8½% notes due 2011 up a point at 55.5 bid,. 56.5 offered, while its 10½% notes that were to have come due this year at 78 bid, 79 offered, up a point on the day.

Calpine "was up pretty good," another trader observed, pegging its 8½% notes due 2008 - which rose 3 points on Friday to 69 bid, 71 offered - up another 3 points at 72 bid, 74 offered, while its 7¾% notes due 2009, which were up 2 points Friday at 75 bid, 77 offered, were up another 4 points on Monday to 79 bid, 81 offered.

Calpine, which sought Chapter 11 protection last year, reported third-quarter net income of $1.7 million, or nil per share, compared with a net loss of $216.7 million, or 45 cents per share, a year ago. Calpine cited spark-spread improvement in the face of unseasonably warmer temperatures, which spurred demand for power to run air conditioners.

Iridium bonds gain altitude

A trader saw Iridium's bonds better, quoting its 13% notes that were to have matured last year at 27 bid, 28 offered, which he called a gain of 3 points since last week.

The trader said that he had neither seen nor heard any concrete news that might explain the boost.

Iridium bondholders are suing the satellite telecom venture's erstwhile main backer and former 40% owner, Motorola, for $4 billion, alleging breach of contract and other financial misdeeds connected with the 1999 collapse of the once high-flying company.

The Schaumburg, Ill.-based electronics giant has denied any wrongdoing, pointing to its own substantial losses from the Iridium collapse, which totaled several billion dollars.

Iridium's bonds, once considered nearly worthless, nearly doubled in price between the spring of 2005 and this past spring, and then continued to rise on investor expectations that the court case, being heard before the U.S. Bankruptcy Court in New York, might produce a sizable settlement for Iridium's bondholders and other unsecured creditors, should Motorola decide to settle the suit for less than the $4 billion that it would cost should it defend the lawsuit and lose in court.

The trader suggested that the bonds might have firmed on investor hopes of such settlement talks - but acknowledged that he had nothing concrete on which to base that theory.

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