Delphi bonds boosted by news; Blockbuster notes steady; Doral debt, preferreds better

By Stephanie N. Rotondo

Portland, Ore., July 18 - In a market that was deemed generally lower Wednesday, Delphi Corp.'s bonds seemed to be one of few names actually firming during the session.

Delphi's bonds got a boost after the company announced a new investment agreement with an Appaloosa Management LP-led equity group. Under the plan, the company stands to receive up to $2.55 billion and hopes to exit bankruptcy by the end of the year.

Meanwhile, Blockbuster Inc. officially announced that it had amended its credit facility, reducing its revolver by $50 million, among other things. The company announced in late June that it would seek the amendments, which caused many market players to be disappointed at the turn of events, thereby knocking the bonds around.

However, as the amendment was completed Friday, it seems that the market had already prepared for the news, leaving the bonds relatively unchanged on the day.

Doral Financial Corp. announced late Tuesday that about 95% of its shareholders approved a Bear Stearns-led buyout proposal. The news helped the bonds edge closer to par, though a trader speculated that activity in that issue will die down, as the notes come due Friday.

The trader then said that the focus would likely shift to the preferred issues, which were also up on the news.

A trader said that the market seemed generally weaker, mostly on continued subprime mortgage concerns.

"The market just cannot shrug off concerns from the subprime market," he said, noting that those issues permeate other sectors as well.

Another trader said the morning started off rather active, but by the afternoon trading had slowed significantly.

Delphi gains

Delphi's bonds moved up as the company announced it had accepted a new $2.55 billion investment bid from an Appaloosa Management LP-led investor group.

A trader saw the 6.55% notes that were to have come due last year up 4 points at 122 bid, 123 offered. He said the bonds opened the morning at 118.75 bid, 119.5 offered.

At another desk, a trader pegged the notes at 122.5 bid, 123 offered, adding that the Troy, Mich.-based company's other bond issues did not see significant trades.

Under the new investment plan, the equity group will purchase $800 million convertible preferred shares as well as $175 million in common stock. The investment group will also buy any shares not sold in a $1.6 billion rights offering for existing shareholders.

The company said it will seek an expedited hearing to approve the agreement, with the hopes of filing its reorganization plan before the end of the third quarter and then emerging from bankruptcy by the end of the year.

Blockbuster steady

A trader said that Blockbuster's bonds were relatively unchanged as the company announced that it had amended its credit facility.

"The market must have gotten wind of it beforehand," he said, noting that the 9% bonds due 2012 had gained a couple days ago.

He said he saw the bonds moving around 89, with trades as high as 90 during the session. He said the bonds closed the previous day in the high-80s.

In an 8-K filing with the Securities and Exchange Commission Wednesday - though the amendment was actually completed Friday - the Dallas-based movie rental chain said it had reduced its revolving credit facility to $450 million from $500 million and revised consolidated EBITDA requirements, among other things.

The amendment also waives any default resulting from the company's failure to comply with the EBITA requirements as of July 1.

In other distressed entertainment names, Blockbuster rival Movie Gallery Inc. saw its bonds begin to soften after three straight sessions of gains.

A trader quoted the 11% notes due 2012 at 35 bid, 37 offered, while another trader saw the bonds at 36 bid, 37 offered.

Doral bonds, preferreds up

Doral's notes and preferred issues moved higher after shareholders approved a $610 million buyout by a Bear Stearns-led private equity group.

The floating-rate notes, which come due Friday, gained about a point, a trader said, to 99.875 bid, 100 offered. Another trader pegged them at 99.5, while yet another market source saw the bonds at 99.875, which he said traded up into the offer.

"Game over," the first trader said. "They will probably never trade [again] because they are getting par in two days. Only the shorts might care."

The second trader said that the question now is where will the preferred issues trade?

"I don't think holders want to see them trade where they probably will," he said of the 4¾% preferred paper, which he quoted as currently around 140. "My guess is [they will move] to 120."

Another trader said that issue, which has a $250 face value, was moving at around 130.

"Why would anybody take this out?" he asked. "It's a sleeper, this one."

The trader said he also saw the 7% preferreds with a $50 face up 3 points at 37 bid, 39 offered.

According to the buyout proposal, the equity group will purchase a 90% stake in the Puerto Rico-based bank. That comes out to about 63 cents per share - almost half of where the stock closed Wednesday at $1.18, up 3 cents, or 2.61%.

Proceeds from the buyout will be used to pay the company's coupon Friday. The deal is expected to close Thursday.

Broad market lower

A trader saw Ply Gem Industries Inc.'s 9% notes due 2012 "getting hit" at 84 bid.

The trader said he also saw Tembec Inc.'s 8½% notes due 2011 trading into the bid at 51, which he called off 1.5 points.

A market source said Hines Horticulture Inc.'s 10¼% notes due 2011 traded at 72.5, which he called "down a little." He said there was nothing new reported on the nursery supplier.

Meanwhile, Technical Olympic USA Inc.'s 9% senior notes due 2010 were deemed half a point lower at 89 bid, 89.75 offered.

Linens n'Things floating-rate notes were also quoted lower at 70 bid, 70.25, according to the source. He said he saw the bonds close the previous day at 71 bid, 72 offered.

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