Foamex bonds bounce; GM bank debt gains, but bonds muddled on Delphi worker buyout plan

By Paul Deckelman and Sara Rosenberg

New York, March 22- Bonds of Foamex International Inc. bounced around crazily at higher levels Wednesday - particularly the company's very distressed subordinated notes - in the wake of favorable monthly operating results.

General Motors Corp.'s revolving loan paper headed higher in active trading as a labor agreement was finally reached between the company, its bankrupt former subsidiary Delphi Corp. and the United Auto Workers union - a development which would seem to make it less likely that Delphi workers will go out on strike, a potential work stoppage that could seriously disrupt GM's production. However, GM's bonds gave up their initial gains and were seen by most traders ending unchanged to perhaps a little lower.

Also in the automotive sphere, the bonds of Dana Corp. were once again accelerating upward, and strongly, after having spent the previous couple of sessions idling by the side of the road.

A trader saw Foamex's 10¾% secured notes due 2009 as having jumped to 102 bid, 104 offered from prior levels around 96 bid, 98 offered, and saw the bankrupt Linwood, Pa.-based foam rubber products maker's 9 7/8% senior subordinated notes due 2007 - which had previously been languishing around 22 bid, 24 offered - zoom up to a very wide 40 bid, 50 offered.

Another trader also noted the bonds' gyrations, although he had no ready explanation for them. He pegged the 103/4s at 101.75 bid, 102.75 offered, up about ¾ on the session but up substantially more from levels around 95.5 bid, 997.5 offered on Tuesday morning.

And he saw the 9 7/8s jump from 22 bid, 24 offered on Tuesday morning to 32 bid, 34 offered at the close Tuesday and from there to 49 bid, 50 offered by Wednesday's close.

"The monthly numbers were much better than expected," said yet another trader in explaining the five point rise in the 103/4s over the past two sessions; at that shop the bonds went out at 102 bid, 103 offered.

Foamex, which sought protection from its junk bond holders and other creditors via a Chapter 11 filing with the U.S. Bankruptcy Court in Wilmington, Del., in September, said Tuesday that it had $11.14 million in operating income in February on sales of $114.64 million.

Net income for the month was $4.48 million, while cash on hand at the end of the month was $192.85 million.

Charter little changed after sale

Elsewhere, Charter Communications Inc. announced plans to sell some systems in Nevada, Colorado, New Mexico and Utah for an undisclosed price.

Its bonds were seen mostly little changed, with one trader seeing its 11% secured notes due 2015 steady at 83.5 bid, 84.5 offered, although its 8 5/8% notes were up a bout a point at 66 bid,

Another trader saw Charter's 11 1/8% notes due 2014 and 8¾% notes due 2013 each "active all day but unchanged" at 52.5 bid, 53.5 offered and 97.5 bid, 98 offered, respectively.

The heavily levered St. Louis-based cable operator, which is trying to unload non-core operations and bring down its debt levels, said that it was disposing of certain cable television systems serving a total of approximately 69,400 revenue generating units, including 43,700 analog video customers, 12,300 digital video and 13,400 high-speed internet customers.

Charter said that proceeds from this sale will also enhance liquidity and will be used to pay down amounts outstanding under Charter's revolver.

GM revolver higher, Delphi loans down

In the auto world, GM's revolver debt was seen better in the wake of the Delphi announcement - but Delphi's pre-petition bank debt had the exact opposite reaction, falling off in trading as investors got nervous that the agreement could lead to a faster-than-expected Chapter 11 emergence, which would cut down on yield, a trader in the bank loan market explained.

GM's revolver closed out the day quoted at 84 bid, 84.5 offered, up close to a point on the bid side from Tuesday's levels of 83.25 bid, 84.25 offered.

Delphi's pre-petition revolver closed out the day at 102.75 bid, 103.25 offered and its pre-petition term loan closed out the day quoted at 104 bid, 104.5 offered, with both tranches lower by about a point on a day-over-day basis, the trader said.

GM, Delphi bonds gain, GM falls back

In the junk bond market, meanwhile, GM's bonds, and Delphi's, initially strengthened on the news, which had been expected by many in the market for some days - but then they came off those highs, with GM seen ending little changed, and Delphi up only modestly.

GM's bonds and Delphi's initially firmed on the news that the world's largest automaker and its former subsidiary Delphi - still its single biggest parts supplier - had jointly announced their agreement on offering buyouts to many Delphi and GM workers. That agreement was reached with the UAW, which represents most of Delphi's 34,000 unionized hourly workers and most of GM's more than 100,000 hourly employees.

The two companies are also in the process of negotiating similar deals with smaller unions who represent part of their respective work forces.

Under the terms of the sweeping agreement, Delphi will offer early retirement to some 13,000 workers, with lump-sum payments of up to $35,000 as inducement to leave the company. GM will fund those lump-sum payments, and will also take up to an additional 5,000 Delphi workers, who will be allowed to "flow back", or transfer back to GM, which will assume some post-retirement benefits for those Delphi employees who go back to work for GM.

GM will meantime offer its own UAW-represented workers early retirement, with payouts of between $35,000 and $140,000, depending on an employee's length of service, as an inducement.

A trader said that GM's bonds traded up in the early going, with the benchmark 8 3/8% notes due 2033 firming to 76 bid from Tuesday's closing levels around 74 bid, 75 offered, "but then [people in the market] decided they didn't care for the news," and the bonds came back down to close around the same 74 bid, 75 offered level at which they had started.

He saw Delphi's bonds, all trading on top of one another, as having improved a point on the day, to 66 bid, 68 offered.

At another desk, a trader saw the GM bonds improved by perhaps ¼ point on the session at the most, at 74.25 bid, 74.75 offered, and saw Delphi registering a one-point gain at 66.5 bid, 67.5 offered.

Yet another trader actually saw the GM bonds losing a point when all was said and done, seeing the 8 3/8s opening at 75 bid, trading up a point but then falling back to end down a point at 74 bid, 75 offered.

Delphi's long bonds, the 7 1/8% notes due 2029, "traded up a couple of points" to peak levels at 69 bid, 70 offered, the trader said, but then dropped back to close at 67 bid, 68 offered, which at that desk was considered to be unchanged.

Delphi's shorter paper, like the 6.55% notes slated to mature this year, were seen to have gotten as good as 68 bid, 69 offered, but also ended unchanged, at 65 bid, 66 offered.

Another trader, who also saw GM a loser on the day, explained that he had seen "right out of the gate, there was a little bit of selling on the news," because over the previous session or so, the bonds of both companies "had moved up on speculation that something was going to get done."

He saw the GM 8 3/8s as good as 75.75 bid, 76.75 offered early in the morning, but then "they slowly faded and drifted down to where they are now," at 74 bid, 74.5 offered, which he called a 1½ point loss on the day on the news.

Delphi's '06s were as good as 67.75 bid early on, "but then that bid got popped and they did the same kind of move - roll over and play dead - that GM did," ending pretty much unchanged around 66 bid, 67 offered.

The trader noted that Moody's Investors Service said it was continuing to eye GM for yet another downgrade.

"The accelerated attrition agreement is viewed [by Moody's and others in the market] as constructive," he said - "but it's not going to contribute much in the way of savings, obviously this year," with GM's already strained finances having to absorb the cost of Delphi's employee buyouts and its own. "Moody's said that down the road it's going to help - but this is one piece in a huge puzzle that they have to put together.

"At the end of the day it quantifies what they [GM] are on the hook for with Delphi. Down the road it can potentially save them money," but for now the actual cash benefits won't be immediately seen, he said.

Delphi, which was spun off by GM in 1999, has long complained that its labor costs are way too high for a parts-supplier company, since it inherited the kind of contracts that carmaker GM was paying.

After filing for Chapter 11 protection from its junk bond holders and other creditors in early October, Delphi began insisting that GM and the UAW give it some breathing room on its labor costs, which it estimates at $75 per hour in wages and benefits. It has several times threatened to ask the bankruptcy court to allow it to junk the current union contracts, but has each time relented and extended the deadline by which it said it had to have an agreement so the three parties can keep talking. Currently, they are running against a March 31 deadline. Should that deadline pass without extension and Delphi go to court and try to void the contracts, its various unions have threatened a strike. That's a scenario GM wants to avoid at all costs, since a strike shutting down Delphi would badly disrupt the steady flow of parts it needs from the company to keep its own assembly lines operating.

A spokesman for Delphi confirmed for Prospect News that the Troy, Mich.-based automotive electronics manufacturer might be able to shed more than half of its 34,000 hourly employees under the new deal - 13,000 through the buyouts and up to 5,000 going back to GM - and he added that further headcount reductions could come about if Delphi negotiates similar buyout deals with the International Union of Electronic Workers and the United Steel Workers union. "The big bang was today - but there's still a decent chunk left" of about 9,000 to 10,000 employees, "that we still have to have some discussions on."

Over at GM, which also seeks to cut its labor costs by cutting headcount, and which has already outlined plans for reducing its hourly work force by about 30,000 by the end of 2008, a company spokesman, Dan Flores, said that the carmaker was offering all of its nearly 100,000 UAW-represented workers the buyout option - which could unexpectedly leave the carmaker in a pickle if too many of its rank-and-file decided workforce to take the company up on its offer.

"Theoretically, every GM UAW hourly employee is eligible for some portion of this program - but certainly we do not expect or even anticipate that anything close to all of our employees would participate in the program," the spokesman said.

In the unlikely event that "there's a plant where there's heavy participation and there's an issue of manpower shortage, there are provisions within this agreement that will allow us to handle it."

He said that "we certainly hope this program allows us to take a big step toward reaching that [30,000] number - but we don't have a target number that we're working toward or how many people we think will take the [buyout] program."

With no idea at this point how many employees will take advantage of the buyout - and what percentage may be older, more senior workers who would get the bigger lump-sum payments - GM is for now making no estimate at what the buyout plan might cost, or how much the buyouts may save the company over time.

Elsewhere in the automotive sector, bonds of GM's financing arm, General Motors Acceptance Corp., were unchanged on the day, in line with the lack of real price movement in the parents' bonds. GMAC's 8% notes due 2031 were being quoted at 92.25 bid, 93.25 offered.

A trader saw GM arch-rival Ford Motor Co.'s benchmark 7.45% notes due 2031 little changed at 74 bid, 74.5 offered, and saw the latter's Ford Motor Credit Co. financing subsidiary's 7% notes due 2013 at 88.5 bid, 89 offered, up ¼ point on the day.

Dana strong after earnings

The big winner among the auto-related bonds Wednesday was Dana, whose bonds jumped several points, resuming an upside ride that began with the Toledo, Ohio-based components maker's March 3 Chapter 11 filing and continued for almost two weeks after that, before stalling out of the previous several sessions.

But Dana was back with a vengeance Wednesday, a trader seeing its 6½% notes due 2008 pushing all the way up to 82.5 bid, 83.5 offered from 79 bid, 81 offered. He saw the company's other bonds also having firmed smartly, with its 6½% notes due 2009 at 82 bid, 83 offered, its 10 1/8% notes due 2010 at 82 bid, 84 offered, its 5.85% notes due 2015 at 78 bid, 80 offered, and its 7% notes due 2028 and 2029 at 79 bid, 81 offered, all up more than two points on the day across the board.

Another trader, who saw the 2009 bonds at 81.25 bid, 82.25 offered, noted that he had seen those bonds go home Tuesday at 78.5 bid, 80.5 offered.

He called their rise Wednesday "incredible," saying that they had firmed to about 80 bid, 81 offered by lunchtime, and then continued to gain until trading was done.

"They didn't do 'the GM flop', going up and then coming back down. They just went up and stayed there."

Since its bankruptcy filing, Dana bonds have firmed some 15 to 20 points across the board from pre-filing levels in the low-to-mid 60s. Some of the rise is attributable to technical factors - a demand for Dana bonds to satisfy settlement requirements on some credit default swaps contracts on Dana debt that holders bought to protect themselves against the possibility of a default - while some in the market have opined that Dana has a lot of assets whose liquidation, if need be, would assure its bondholders of getting a substantial recovery.

During Wednesday's session, Dana released preliminary 2005 fourth-quarter and full-year results. The company said that sales for the latest were $2.046 billion, up from $1.988 billion during the same period in 2004. The company expects to report a net loss of $376 million for the quarter, including a loss from continuing operations of $231 million - wider than the net loss of $136 million in the fourth quarter of 2004, which included a loss from continuing operations of $72 million. The loss more than doubled from a year ago on restructuring costs, the company said.

Dana also said that it will not file its annual report with the SEC by the extended deadline of March 31, but now expects to file the report by April 30.

Dana further declared that it will focus on growing its four core businesses, and expects a net new business increase of at least $900 million by 2008 (see related story elsewhere in this issue).

InterGen loans gain

Back in the bank debt market, InterGen power project debt was stronger on Wednesday, with the Magnolia paper quoted at 61 bid and the Cottonwood paper quoted at 88 bid, according to a trader.

By comparison, on Tuesday the Magnolia paper was trading in the high 50s and on Monday the Cottonwood paper was trading in the mid to high 80s, the trader said.

The Burlington, Mass.-based power company's project financing bank debt has been on the rise because two "really big" auction blocks for the paper were cleared this week, the trader explained.

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