Ginn Clubs bank debt moves up; Rotech keeps gaining; Delta gyrates

By Paul Deckelman and Sara Rosenberg

New York, Nov. 16- Ginn Clubs & Resorts' first-lien bank debt has been moving higher over the course of the week, loan traders said Thursday. They said investors are feeling better about sales in the company's North Carolina development, based on some private-side information.

A trader said that the privately held Celebration, Fla.-based resort development and management firm's first-lien debt closed out the session quoted at 95.5 bid, 96.5 offered, up a couple of points since the start of the week.

In the junk bond market, Rotech Healthcare Inc.'s bonds made it three in a row, rising solidly for a third straight session, although unlike Tuesday and Wednesday's advances, Thursday's was accompanied by some news that might explain the rise - the absence, for the moment, of any cuts in Medicare or Medicaid reimbursements that might have hurt the Orlando, Fla.-based healthcare products and services provider's business.

Elsewhere, Delta Air Lines Inc.'s bonds rose for a second straight session, propelled by Wednesday's news that US Airways Group Inc. had made an unsolicited $8 billion offer for the bankrupt Number-Three U.S. airline carrier, though Thursday's rise was nowhere nearly as dramatic as Wednesday's more than 20 point jump. However, those bonds retreated from their earlier session highs to close only modestly higher.

On the other hand, the bonds of Delta rival Northwest Airlines Corp. - also currently restructuring under Chapter 11 - held onto most of the gains it notched during the session, finishing with a handsome rise. The Northwest bonds had followed the Delta bonds up on Wednesday, likely driven by speculation that with Delta now "in play" as a possible takeover target, Northwest might also be seen as ripe for acquisition.

Rotech Rally rolls on

Rotech's 9½% senior subordinated notes due 2012 were seen by a trader as having pushed up to 90 bid, 91 offered, well up from their close at 86.5 bid, 87.5 offered on Wednesday.

That 3½ point gain follows a 5 point advance on Wednesday, on top of a 4 point rise seen in those bonds on Tuesday.

Rotech's Nasdaq-traded shares, which had risen 11½% on Wednesday, jumped by 30 cents (23.81%) in Thursday's dealings to close at $1.56, although volume of about 565,000 was only moderately larger than the usual daily handle.

While no news had been seen out on the company on Tuesday or Wednesday that might explain the sharp upside in the bonds and the shares, on Thursday the trader cited a news report to the effect that a cut in Medicare and Medicaid reimbursements that investors feared might be imposed, potentially hurting Rotech's oxygen supply business, will not take place - at least for the moment.

He said that a deadline for moving to impose such a cut of 45 days before the end of a calendar quarter - in this case, Nov. 15 - came and went without any action from the federal body that oversees Medicare and Medicaid matters.

"So basically, Rotech will not be faced with these Medicare reimbursement problems, at least not 'till around Feb. 15," 45 days before the end of the 2007 first quarter. "So they bought some time which precipitated some aggressive legislatively-induced shortcovering."

Delta gyrates at higher levels

There was brisk activity for a second straight day in Delta Air Lines' bonds, although nothing to rival the breathtaking 20 point-plus gain that restructuring Atlanta-based carrier's bonds had notched on Wednesday, when news of US Airways' unsolicited $8 billion takeover offer first hit the market.

A trader saw the bonds go "on a nice ride today [Thursday]," with the company's widely quoted 8.30% notes due 2029 opening at 61 bid, 63 offered, about where they had closed on Wednesday, and then soaring to 68 bid, 69 offered during the session.

However, by the end of the session, he said, those bonds had dropped back to finish at 63 bid, 65 offered, a gain of about a point or two.

On the other hand, he saw Northwest Airlines' bonds gain about 4 points on the day, although those bonds too came off their intraday highs. The Thursday gain followed a rise of about 12 points on Wednesday, sparked by expectations that a wave of airline industry consolidation signaled by interest in a possible Delta deal might also see bids for Eagan, Minn.-based Northwest, the bankrupt Number-Four domestic carrier.

The trader saw Northwest's 8 7/8% notes that were to have come due in June open at 78 bid, 80 offered, get as good as 83 bid, 85 offered, and then go home at 82 bid, 84 offered, up 4 points.

Another trader saw the 8 7/8s end up 5 points at 83 bid, 84 offered - although that was down from peak levels at 86 bid, he said.

While Delta has said that it will consider the US Airways offer, the company has been aiming all along at coming out of Chapter 11 as a leaner, more efficient and debt-free stand-alone operation.

Salton signs exclusivity pact

Also on the merger and acquisitions front, Salton Inc. said that it had entered into an exclusivity agreement with Harbinger Capital Partners Master Fund I, Ltd. which would bar the Lake Forest, Ill.-based small appliance maker from engaging in any kind of acquisition transactions for the next month with anyone other than Harbinger.

However, while the company's 12¼% senior subordinated notes due 2008 were quoted at higher levels - a trader heard them offered at 92, with no bids, versus their last known pre-news trading levels at 83.5 bid, 85.5 offered - market participants saw only a couple of small off-lot trades in the name, hardly representative of any kind of real trend, they said.

Harbinger, a New York-based investment company, is currently in talks with Salton about possibly combining Salton with rival small appliance manufacturer Applica Inc., which last month agreed to be acquired by 40% owner Harbinger. The investment firm said it expects to complete its due diligence on Salton and line up any necessary funding commitments for a transaction by Dec. 15.

Salton, which makes and markets the popular George Foreman line of electric hot dog and hamburger grills, among other appliances, last month formed a special committee of its board of directors and hired Houlihan Lokey Howard & Zukin Capital Inc. to conduct a "strategic review" of its business, with the possible sale of the company being among the potential options under study.

That move followed Harbinger's call for a combination of the two appliance makers. Harbinger agreed on Oct. 19 to acquire the remaining 60% of Miramar, Fla.-based Applica that it does not already own for $6 per share, or $88 million, in a transaction expected to close in the first quarter of 2007, subject to approval by Applica shareholders and regulators.

Besides controlling Applica, Harbinger is also a major Salton investor, with 30,000 shares of Salton's series A voting convertible preferred stock, convertible into more than 15% of the company's common shares.

In a letter to Salton's board and a filing with the Securities and Exchange Commission at that time, Harbinger declared that "[w]e are enthusiastic about the small household appliance market and believe that a combination of Salton and Applica is compelling. . . A combination of Salton and Applica will offer the best outcome for Salton's stockholders." It promised Salton shareholders "an attractive offer for their shares of common stock."

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