InSight mixed as equity swap nears; Fedders firms; MagnaChip solid despite suit; airlines gain

By Stephanie N. Rotondo

Portland, Ore., Feb. 22 - InSight Health Services Corp.'s bonds had a busy trading day Thursday as a proposed debt-for-equity swap looms.

The company had announced a potential offering last week. Investor reactions to the possibility caused a mixed session in the company's debt Thursday.

Fedders Corp.'s bonds steadied a bit after two days of gains amid its search for refinancing. The rumor mill is once again abuzz that an asset or property sale could be in the company's near future.

The air quality solutions company also had a "bouncy" day in its equity, noted one trader. The company's stock closed firmer from the previous day.

Meanwhile, a lawsuit is doing little to rile MagnaChip Semiconductor Ltd.'s notes. A rival company filed a defamation lawsuit against the company Thursday, which MagnaChip is intending to fight. A trader said the company's bonds were "solid" during trading.

Elsewhere, Northwest Airlines Corp. and Delta Air Lines Inc. saw better numbers in their bond debt, despite no fresh news out on either bankrupt airline.

Earlier this month, traders were speculating that Ziff Davis Holding Inc. would default on its coupon payment that came due this week. The company's chief financial officer said last week that the payment would be fully funded.

Traders were still speculating about how the coupon would be funded and Thursday they got their answer: the company is offering $20 million in new senior secured notes to help offset the costs of servicing outstanding debt securities.

As the weekend draws ever closer, traders were aghast at how quiet the week has been.

"It's just dead," one trader said. "It's worse than Christmas."

"A lot of guys are out this week," he continued. "The other half are taking [Friday] off."

InSight mixed

A trader called InSight Health's bonds "active" during the trading day, as a debt-for-equity swap seems likely.

The trader said the floating rate notes were down 1½ points to 92.5. The 9 7/8% notes due 2011 edged up slightly to 30.75.

The Lake Forest, Calif.-based company announced Feb. 15 a proposal to offer holders of its senior subordinated notes 87% of its common stock in exchange for all the notes. If the proposed offering is successful, it will eliminate about $194.5 million in debt and reduce annual interest expenses by $19 million.

But the trader said a large holder of the notes has indicated he will not vote for the swap.

"In bankruptcy, it will take a lot more time to get your money back," he said.

Insight Health, a nationwide provider of diagnostic imaging services, indicated that in parallel with the equity swap it will also solicit consents for a prepackaged bankruptcy filing as an alternative method of restructuring its debt.

Fedders steady

Fedders got busy, then died in trading Thursday, according to one trader of the distressed bonds.

With a big coupon payment due next week, the 9 7/8% notes due 2014 were seen relatively unchanged at 61.5 bid, 62 offered.

Rumors of a pending asset or property sale could be why the notes have fared better this week, the trader said. The company has been trying to unload its indoor air quality business since July 2006 and sold off some of its unused property early this year. According to the rumor mill, a sale announcement could be sooner than later.

The company's web site did not give any indication whether the rumor was true. The company previously told Prospect News that it is in talks with several interested companies, but declined to name any specific parties. In that same conversation, the company stated it would not comment on rumors.

"The bonds should be higher, but they are not bouncing yet," the trader said.

The Liberty Corner, N.J.-based company did see a bounce in its equity, however. The trader attributed this to the company's management - specifically its chairman - buying up the stock.

"If management is buying equity, you should see a positive outcome," the trader said.

The company's common stock closed up 4 cents, or 4.9383%, to 85 cents.

MagnaChip solid despite lawsuit

MagnaChip bonds remained solid despite a recent lawsuit filed against the Seoul, South Korea company. Pixelplus Co., Ltd. filed the defamation and tortious business interference lawsuit on Thursday.

Pixelplus alleged in a press release that MagnaChip communicated "with the company's clients that the company allegedly engaged and would continue to engage in the claimed infringement of MagnaChip's patents and that the company allegedly is not a reliable or suitable company with whom those clients should maintain or start a business relationship."

Pixelplus is seeking monetary damages, plus interest, against MagnaChip.

MagnaChip issued its own press release in response to the lawsuit, calling the allegations baseless.

Despite the lawsuit, a trader said MagnaChip's notes were steady: its floating-rate notes rounded out the day at 91.5 bid, 92 offered and the 6 7/8% due 2011 notes were pegged at 88 bid, 89 offered. The 8% bonds due 2014 were placed at 73.5 bid, 74.5 offered.

Delta, Northwest up

A trader saw airline bonds a little higher, with Northwest 'paper up a point. The bankrupt Eagan, Minn.-based No. 5 U.S. carrier's parent's 10% notes due 2009 firmed to 101 bid, 103 offered.

At another desk, a source pegged the company's 7 7/8% notes due 2008 up ½ point at 100.5 bid.

The first trader meantime saw Delta's benchmark 8.30% notes due 2029 get as good as 64 bid, 64.5 offered, up a point on the session, before those early gains were halved and the bankrupt Atlanta-based No. 3 carrier's bonds ended up ½ point at 63.5 bid, 64.5 offered.

No fresh news was seen out on either airline.

Le-Nature's down on earnings

Le-Nature's Inc.'s 9% notes due 2013 were seen down 2 points at 32 bid, after the bankrupt Latrobe, Pa.-based juice-drink maker reported a $243,000 net loss for January, before other income and expenses.

Several potential buyers have recently surfaced for the company's bottling plant in Latrobe, including supermarket chain Giant Eagle Inc. and Cadbury Schweppes plc.

Movie Gallery soaring

Movie Gallery's bonds continued to garner applause, firming for a third straight session in the wake of the Dothan, Ala.-based video rental store chain operator's Monday announcement that it would refinance its bank credit line in a $900 million deal.

That news - and the resulting upward outlook revision by Moody's Investors Service on Monday and the ratings upgrade by Standard & Poor's on Tuesday - lifted the bonds smartly, into the upper 80s on Tuesday. They were up another point on Wednesday, and likewise gained a point on the bid side and 2 points on the offered side to end Thursday's session at 90 bid, 92 offered.

Autos steady, better

Among the automotive names, the trader saw little movement in the bonds of the various auto supplier companies - even those that had been active on Wednesday, such as Remy International Inc., whose bonds had been a point or two better then, though on no apparent fresh news.

The Anderson Ind.-based automotive electrical systems maker's 8 5/8% senior notes due 2007 were quoted steady at 81 bid, 82 offered, its 11% subordinated notes due 2009 stayed at 30 bid, 32 offered, and its 9 3/8% subs due 2012 stayed at 27 bid, 29 offered.

Elsewhere in the automotive realm, after several days of firming, Dana Corp.'s bonds were seen little changed Thursday, with its 6½% notes due 2008 at 78 bid, 79 offered.

A trader saw Delphi Corp.'s flagship 6.55% notes due 2006 down ¼ point at 111.25 bid, 112.25 offered - although at another desk, a trader called the bankrupt Troy, Mich.-based parts maker's bonds better, citing the news that Delphi plans to close a money-losing Spanish steering assembly plant. He called is 6½% notes due 2013 "up a little" at 110 bid, 111 offered, while pronouncing its longer-dated issue also a little better, at 111.25 bid, 112 offered.

Tembec weaker

Tembec Inc.'s bonds continued to languish a trader said, down a point on the session across the board, as the Canadian dollar remained above the US$0.86 mark, although it had eased slightly from the seven-week highs the loonie hit in Wednesday's dealings. A stronger Canadian unit hurts companies like Tembec that sell a lot of product in the United States and other foreign markets by making those exports more expensive and hence less desirable.

The trader saw the Montreal-based forest products company's 8½% notes due 2009 dip to 86 bid, 88 offered, while its 8½% notes due 2011 eased to 76 bid, 78 offered and its 7¾% notes due 2012 fell to 72 bid, 74 offered. At another desk, the 8 5/8s eased to 86.25, the 81/2s to 76.5 and the 73/4s to 71.5.

Paul Deckelman contributed to this article.

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