Inland Fiber bonds jump on restructuring deal; Resorts term loan gains

By Paul Deckelman and Sara Rosenberg

New York, March 1 - Inland Fiber Group LLC's bonds were seen up smartly on Wednesday, on the news that the Klamath Falls, Ore.-based forest products company and the trustee for its 9 5/8% senior notes due 2007 had settled all outstanding disputes between the parties, with Inland Fiber to restructure its debt via a prepackaged Chapter 11 filing.

Dana Corp.'s bonds began trading flat, or without their accrued interest, after the troubled Toledo, Ohio-based automotive components maker failed to make the scheduled March 1 interest payment on two series of bonds, instead invoking the 30-day grace period.

In the bank debt market, Resorts International Holdings LLC's second-lien term loan strengthened as rumors began to circulate that the company's covenant negotiations may result in higher spreads for lenders.

A trader saw Inland Fiber's 9 5/8s jump nine points to 63 bid, 66 offered, citing "the finalizing of talks about taking out the bonds in the high 60s."

Under the terms of the agreement reached between the company and the trustee for the bonds, the company or its nominee would purchase all of the outstanding notes at 69 cents on the dollar through a pre-negotiated plan of reorganization. The settlement would include the alleged existing defaults, the termination of all pending litigation and a release of all the parties.

Inland Fiber said that completion of the settlement would be subject to a number of conditions, including raising financing. It said that it has agreements in principle for the funding, subject to definitive documentation and due diligence by the lenders.

The agreement would also need a commitment to support the pre-negotiated plan of reorganization by a sufficient number of noteholders.

Inland expects to finalize its financing arrangements within the next several weeks.

Resorts rises

Resorts International's second-lien term loan closed out the day quoted at 96.5 bid, 98 offered, up from a previous trading level of around 96, a bank debt trader said.

"There are rumors that they're bumping up the coupon, particularly on the second [lien] but people think it might happen on the first [lien] also," the trader explained. "They've been in negotiations for about a week now with the bank group about covenants. They were in violation once before, around a month ago, and pricing got bumped when they resolved it. They got downgraded when that happened. I think they might be close again [to non-compliance]."

Based on these rumors, the company's first-lien term loan debt was also higher on the day, with the paper closing out the session at par bid, 100.75 offered, up from previous levels of 99.5 bid, par offered, the trader said.

Early on in February, the gaming company's first-lien term loan and revolver was downgraded to Caa1 from B2 and the second-lien term loan was cut to Caa2 from B3 by Moody's Investors Service, with a negative outlook, because of the company's inability to comply with quarterly leverage covenants.

The non-compliance, which was based on the company's Dec. 31, 2005 results, came on the heels of bank loan amendments in late 2005 that addressed previous covenant violations, Moody's had said.

Furthermore, on Jan. 20, Resorts International was downgraded by Standard & Poor's, at which time the revolver and first-lien term loan were dropped to CCC+ from B and the second-lien term loan was cut to CCC- from CCC+. S&P also assigned a negative outlook to the ratings.

At the time of the downgrade, S&P attributed the move to the deterioration of operating performance based on publicly available information through December at the company's Atlantic City, N.J. casino property and through November at its Indiana-based property, serving metropolitan Chicago, which the ratings agency said signified management's continued inability to stabilize the business since it took over operations in April.

Besides the New Jersey and Chicago-area operations, Resorts also operates in the growing Tunica, Miss., gaming market.

Armstrong rises

Elsewhere, traders saw the bonds of bankrupt Lancaster, Pa.-based floorcovering maker Armstrong World Industries up about three points to 66 bid, 67 offered, although they could cite no news about the company. Another asbestos-challenged company's bonds - those of bankrupt Toledo, Ohio-based insulation maker Owens Corning - were seen up perhaps half a point at 77.5 bid, 79 offered.

Movie Gallery steady

Movie Gallery Inc.'s 11% notes due 2012, which had been gyrating around last week and earlier this week, on speculation that the Dothan, Ala.-based movie rental chain operator might be the subject of merger and acquisition interest, were unchanged Wednesday, at 65 bid, 66 offered, a trader said.

Dana gains, then trades flat

In the automotive sphere, Dana "was all over the map today [Wednesday]," a trader said, pegging the company's 6½% notes due 2008 at 65.5 bid, 66.5 offered, up 1½ points on the session, while its 5.85% notes due 2015 were two points better at 62.75 bid, 63.75 offered, and its 7% notes due 2029 were at 64 bid, 65 offered, up from 61.5 bid, 62.5 offered on Tuesday.

At another desk, traders were also quoting the bonds at those higher levels - but they said that the bonds were trading flat, or without their accrued interest, on late-day news headlines - later confirmed by a company statement - to the effect that Dana had not made the scheduled March 1 coupon interest payment on its 6½% notes due 2009 and its 7% 2029 notes. About $21 million in interest payments was due. Dana noted that it has a 30-day grace period in which to make the interest payments.

It noted in its statement that a failure to make the interest payments by March 31 would constitute an event of default under the notes' indentures that would permit the indenture trustee or holders of 25% or more of the notes to accelerate their maturity by demanding immediate payment. That, in turn, would result in a cross-acceleration of the company's other debt.

After the company announcement about the non-payment of the interest, a trader saw the two issues of 6½% notes - the '08s and the '09s - each trading flat at the same 64 bid, 65 offered, even though "one has three points of accrued interest and the other has none." Likewise, he saw both issues of the 7% notes - the '28s and the '29s - trading flat at 63 bid, 65 offered, despite the fact that one has accrued interest and the other doesn't. Its 5.85 bonds were at 62 bid, 64 offered and trading flat.

Delphi strong

Among other suppliers, Delphi Corp.'s 6.55% notes due 2006 were a point better at 55.25 bid, 56.25 offered, while its 7 1/8% notes due 2029 were likewise a point better at 56 bid, 57 offered.

The bonds were apparently helped by comments by General Motors Corp. chief executive officer Rick Wagoner, who said that "intensive" talks regarding GM's liabilities for pensions at Delphi, which was formerly part of GM, were continuing, although nothing has been resolved yet. Besides GM and its bankrupt, Troy, Mich. -based former subsidiary, those talks also involve the United Auto Workers union, which represents most of Delphi's roughly 34,000 unionized hourly workers.

They are trying to reach an agreement on cutting Delphi's bloated labor costs before a March 31 deadline self-imposed by Delphi, which has threatened to ask the judge overseeing its reorganization to void its union contracts by that date if no agreement with GM and the UAW has been reached by then. Such a move could provoke a costly strike by the Delphi workers - although the company might also extend the deadline again, which it has already done several times.

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