Fedders debt drops on default rumors; Remy down; Delphi notes unmoved on loss

By Stephanie N. Rotondo

Portland, Ore., Feb. 13 - Default rumors caused Fedders Corp.'s debt to drop on Tuesday as some traders wondered where the rumor came from.

The possible default on its term loan and upcoming coupon payment was "the big news of the day," one trader said. Another desk noted the rumor seemed out of place, as the company has plenty of liquidity.

Meanwhile, Remy International Inc. continued to fall as investors are still reacting to the draw down of the company's revolving credit facility. The draw was a concern to one trader, who said, "they're burning through their cash faster than anticipated."

Among other auto names, Delphi Corp. released its third-quarter results, which showed a wider loss than the previous quarter. Despite the news, traders saw little movement in the bonds.

Elsewhere, Le-Nature's Inc. finally found its offer. On Monday, the developer, producer and marketer of all-natural fully pasteurized beverages came in at 35 bid, but no offers. Tuesday brought along an offer of 40, but a market insider said he was unsure if a bid was found.

As rumors of default by Ziff Davis Holdings Inc. continue to circulate, another rumor has emerged. One trader reported he had heard of an asset sale in the media company's future. The sale would help offset the coupon payment that came due on Monday.

Traders were more excited about the day's happenings Tuesday, as several market participants noted a more active day.

But, one trader said, equity got a boost during the trading day, while debt started to slide.

"Junk felt weak today, heavy," he said. "Things are for sale."

Fedders drops

It was widely speculated that Fedders, a manufacturer of air quality products, might default on its term loan and coupon payment. The 9 7/8% notes due 2014 have a scheduled payment for March 1.

Amid the buzz, Fedders saw its bonds dip as a distressed trader placed the offer at 68.5, while another saw the markets at 68 bid, 69 offered.

The rumor was "enough to get the markets moving," a trader said. "That's a big one."

Another trader was confused by the rumor.

"I don't understand why they would default," he said. "They have enough liquidity for the year, definitely to cover the coupon payment."

The whole structure came down, according to the trader. On the equity side, the Liberty Corner, N.J.-based company saw its stocks slide 6 cents, or 6.32%, to close at $0.89.

Still, the trader noted it could be all rumor and no fact.

"We could all be listening to the same person rumor mongering," he said.

"I bet the news is they haven't been able to sell its indoor air quality business," he added. The company is trying to sell some of its assets, the trader said.

In early January, the company reported it had sold 182 acres of undeveloped land in Frederick, Md., to a Maryland-based investor group for $4.5 million. The group also agreed to purchase a building and about 28 acres for $6 million. The sale is subject to a study period, which ends March 31.

The company could not be reached for comment on Tuesday.

Remy down

Remy International is "continually hurting," according to one trader. The Anderson, Ind.-based automotive electrical systems manufacturer saw its 8 5/8% notes due 2007 fall to 78.5 bid, 79.5 offered, according to the trader. Another market insider placed the notes at 79 bid, 79.25 offered, while yet another trader placed the notes at 78 bid, 79 offered.

The company's 11% notes due 2009 came in at 27 bid, 28 offered, and its 9 3/8% notes due 2012 at 23 bid, 25 offered. Another trader saw the 11s down a full 7 points at 26 bid, 28 offered, and its 9 3/8s 6 points lower, at 25 bid, 26 offered.

One trader said it was probably due to short covering that the notes did not lose more. "They probably would have been weaker," he said.

The losses over the last two days have been attributed to news that the company had drawn down its bank revolver more than originally had been expected.

Another distressed auto name, Hayes Lemmerz International Inc., had a better trading day, coming in at par bid.

Also among the auto names, a trader saw Dura Automotive Systems Inc.'s 8 5/8% notes due 2012 at 30 bid, 31 offered, down 3 points. Dana Corp.'s 6½% notes due 2008 dipped 1.5 points to 75.25 bid, 76.25 offered.

However, he saw no movement in the recently robust bonds of Federal-Mogul Corp., which had moved up over the previous several sessions after a bankruptcy judge overseeing its restructuring set a final hearing in the company's case for early May, after which it is expected to finally come out of Chapter 11 after having been there since late 2001.

Delphi static

Elsewhere in the auto sphere, despite there being no shortage of news about Delphi, several traders did not see very much movement in the bonds of the bankrupt Troy, Mich.-based automotive components manufacturer. On Monday, the company's 6.55% notes due 2006 had firmed about 1.5 points, to 111.25 bid, 112.25 offered, in probable reaction to news reports indicating that billionaire industrialist Ira Rennert is in talks to buy its $1.3 billion vehicle interiors business.

However, on Tuesday traders said they did not see Delphi trading around - despite the news that Delphi reported a fiscal third-quarter loss of some $2 billion, or $3.51 per share - more than double its year-earlier red ink of $788 million, or $1.40 per share. Delphi attributed much of the wider loss to the approximately $1 billion it spent on efforts to shrink its workforce through employee buyouts.

For the first nine months of its fiscal year, Delphi lost $4.6 billion - more than triple the year-earlier $1.5 billion nine-month loss.

Also not seeming to have much effect were news stories indicating the French automotive parts company Valeo SA is still looking at Delphi assets, as well as those of Visteon Corp., but has no interest in buying either U.S. parts maker whole.

Its executive chairman, Thierry Morin, declared in a published report, "we are not interested in buying one of the U.S. rivals in its entirety. But Visteon or Delphi could put assets on the market and we will look at that."

He added that he expects "a disintegration of Delphi one way or another. I think it will be split up into two to three new companies."

Visteon's bonds were meantime also unchanged, its 8¼% notes hovering at 101 bid, 103 offered, its 7% notes due 2014 at 88 bid, 90 offered. The Van Buren Township, Mich.-based automotive parts producer announced Tuesday that chief financial officer James F. Palmer had resigned, effective March 9. Palmer is leaving Visteon to accept an appointment as CFO of Los Angeles-based defense and technology company Northrop Grumman Corp. William G. Quigley III, who will retain his current post as chief accounting officer, will replace him.

Adelphia dips

A trader saw Adelphia Communications Corp. bonds ease by 2 points on the day that the Greenwood Village, Colo.-based former cable operator's reorganization plan became effective. He saw its 10¼% notes due 2011 ease to 103 bid, 105 offered and its 10¼% notes due 2006 also down a deuce at 98 bid, par offered.

As Adelphia's plan went into effect, Time Warner Cable Inc. officially became a public company. The when-issued shares were trading off on the valuation that Adelphia's plan used to estimate distribution.

A considerable number of Adelphia bondholders have sold their Time Warner Cable shares during this period, a trader said, which "seems to look pretty smart right now." He said trading in the when-issued stock has been hampered by a requirement to have a position in the bonds, although Adelphia stockholders also are expected to own 16% of Time Warner Cable once the distribution is made.

Last July, Time Warner Inc. and Comcast Corp. bought the cable systems of Adelphia in a $17 billion deal, with Time Warner paying $8.9 billion in cash plus 16% of equity in the new company, Time Warner Cable. The 16% equity - which is the subject of the distribution - amounts to 156 million shares of Time Warner Cable.

Paul Deckelman and Ronda Fears contributed to this article.

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