Fedders edges up; Movie Gallery gains; Hayes, Milacron 'overvalued'; Autos better

By Stephanie N. Rotondo

Portland, Ore., Feb. 21 - Fedders Corp. saw its debt on more solid footing Wednesday, as investors reacted positively to the company's search for refinancing.

The company announced late Tuesday it had amended its term loan, after a previous week of default rumors. The rumors stirred up the company's notes, taking them on a downward spiral.

But as news of the amendment and potential refinancing came out, investors perked up, increasing the value of the company's debt.

In other refinancing news, Movie Gallery Inc. is continuing to gain in its bonds since the company launched its new $900 million five-year credit facility. Traders also pointed to a credit ratings upgrade that may be spurring investments in the company.

As value of distressed paper gravitates closer to par, traders are worried that some debt may be too high - most notably Hayes Lemmerz International Inc. and Milacron Inc.

According to one trader, Hayes Lemmerz is trading above par, a happening he says "doesn't make sense." The trader also noted that Milacron, which will announce its fourth-quarter earnings Friday, is trading close to par, despite recent slowdowns in the plastics industry.

Overall, struggling automotive parts paper was seen mostly better on the day, though some traders labeled the notes "unchanged."

A distressed trader noted it was "more of yesterday" during another quiet day of trading.

"It's definitely a ski vacation week," another trader said.

Fedders firms

Fedders firmed yet again after facing a "desperate" time last week, as one trader coined. Another distressed trader said the 9 7/8% notes due 2014 were "locked" at 62.

"Seems to be a little bit better," he said.

On Tuesday, a trader compared the struggling Liberty Corner, N.J.-based air quality solutions producer to Movie Gallery. Earlier this year, that company was faced with a possible default, but a refinancing deal helped the company stay afloat. As Fedders looks for refinancing options, it seems that it could be following the same track.

Movie Gallery gains

Dothan, Ala.-based Movie Gallery saw another day of active trading in its bonds as investors continue to react to the launch of the company's new refinancing deal.

A trader called the 11% notes due 2012 up a point at 89.5 bid, 90.5 offered, pointing to the company's upgrade from Standard & Poor's. At another desk, a trader pegged the notes at 89 bid, 91 offered, still calling them a point up.

The company's credit rating was boosted to B- from CCC+, with a stable outlook, S&P said. The upgrade was based on the additional financial flexibility and liquidity received from the refinancing of the movie rental chain's credit facility.

Hayes up 'too high'

In the distressed autosphere, Hayes Lemmerz was said to be "trading too fast" by one trader, who believes that the bonds are trading too high.

The Northville, Mich.-based producer of wheels and brake components saw its 10½% notes due 2010 at 103 during the trading day - a worrisome number, according to the trader.

"To be in a lot of trouble [trading] in the 80s and now they are trading happily at 103? That doesn't make any sense," he said.

The company announced on Feb. 15 it had completed the sale of its suspension businesses in Bristol, Ind., and Montague, Mich., to Diversified Machine, Inc. The sale was originally announced Feb. 2.

Autos better

In other distressed automotive names, a trader said that he saw Dana Corp.'s bonds "up a point across the board," with its 6½% notes due 2008 a point better at 78 bid, 79 offered.

Dana, another trader agreed, "was up a point or two right out of the gate - they started trading higher and kept going." The second trader saw the '08 bonds up 2 points at that same 78 bid, 79 level. Neither trader saw any fresh news out on the bankrupt Toledo, Ohio-based parts manufacturer that might explain the rise.

Delphi Corp. bonds were meantime seen mostly unchanged, apparently little moved by the late-Tuesday announcement that the bankrupt Troy, Mich.-based automotive components company had agreed to sell its interiors business to billionaire investor Ira Rennert's Renco Group for undisclosed terms.

One trader suggested that Delphi was "up maybe half a point," with its 6½% notes due 2009 at 111 bid, 112 offered. However, other traders called Delphi unchanged on the day, with its 6.55% notes due 2006 continuing to hover around 111.375 bid, 111.875 offered. Delphi's 8¼% notes due 2033 came in at 123 bid, 125 offered.

Also seen not moving was Collins & Aikman Corp., despite the news that the bankrupt Troy, Mich.-based interiors maker had filed its plan of reorganization and accompanying disclosure statement.

"Three-four, close the door," one trader put it in describing the levels at which the company's 10¾% senior notes due 2011 were languishing.

The trader did see some movement in Remy International Inc.'s bonds, although he did not know why the Anderson, Ind.-based maker of automotive electrical components was up.

The trader saw the 8 5/8% senior notes due 2007 up 2 points at 81 bid, 82 offered, and its junior notes also improved, the 11% notes due 2004 and 9 3/8% notes due 2012 each up a point, at 30 bid, 32 offered and 27 bid, 29 offered, respectively.

Milacron value worries traders

Milacron, a struggling supplier of plastics-making technology, announced Wednesday morning - just two days before its fourth-quarter earnings conference call - furloughs and temporary pay cuts for most of the 950 employees at its plants in Batavia and Mount Orab, Ohio.

The company has not been profitable for several years, and traders have speculated on the company's imminent demise.

"We predicted this," one trader said of the slowdown. "[The company] meant to turn its business around and they just haven't."

As the company's 11½% notes due 2011 are trading around 98.5, the trader said he believes the notes to be overvalued. He placed the bonds' value in the low 80s.

The trader also noted that the present value of the bond could be due to short covering, adding the notes have not traded since last week.

Paul Deckelman contributed to this article.

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