Movie Gallery bank debt easier; Dura '09 bonds continue to get drubbed

By Paul Deckelman and Sara Rosenberg

New York, Aug. 16 - Movie Gallery Inc.'s term loan B softened by about a half a point to a point during Wednesday's market hours simply on market technicals, according to a bank loan trader.

The term loan B closed out the day quoted at 93 bid, 94 offered, down from around 94 bid, 94.5 offered, the trader said.

Traders in the junk bond markets meantime said that the Dothan., Ala.-based video rental company's 11% notes due 2012 were unchanged on the day at 62 bid, 64 offered.

Those bonds had been as high as 80 bid as recently as a week ago, pushed up by expectations that the company would show solid second-quarter earnings - but then collapsed and fell some 20 points over two sessions as Movie Gallery fell into the red during the quarter. However, earlier this week, the bonds had pushed up from those low levels to around 60 to the 62 area

Elsewhere, Dura Automotive Systems Inc.'s subordinated bonds continued to lose ground for yet another session - their third straight decline - as the market continues to evaluate the news that the struggling Rochester Hills, Mich.-based automotive components company plans a debt restructuring and has hired a turnaround specialist to help it evaluate ways of cleaning up its balance sheet.

Its Dura Operating Corp. subordinated 9% notes due 2009 - which have been falling steadily since Monday on the market buzz, later confirmed, about the restructuring firm, stoking investor worries about a possible bankruptcy filing soon - were seen down several additional points on Wednesday.

A trader said "the subs were down another couple of points," quoting those bonds at 17.5 bid, 18.5 offered, down 2 points, while another trader saw them drop as low as 16 before coming off that low point to close at 17 bid, 19 offered, which he called down a point on the day.

However, the company's 8 5/8% senior notes due 2012 continue to hang in in the upper 70s, with investors apparently believing that they will be OK in the event of a restructuring - while the holders of the junior bonds harbor no such illusions.

Dura on Tuesday confirmed news reports indicating the hiring of turnaround specialist Miller Buckfire & Co. LLP. A spokesman for the company said on Tuesday that it would be "premature" to take the hiring of the turnaround firm as a signal of a possible bankruptcy filing down the road - even though it has been involved in a number of high-profile Chapter 11 situations of late, and said the company is in no danger of defaulting on any of its obligations.

He further indicated that Dura is only looking to restructure its financial obligations and that such a restructuring would not include its trade creditors.

Delphi higher again

Elsewhere in the automotive arena, Delphi Corp.'s bonds were seen up about 2 points across the board, continuing to gain even after the bankrupt Troy, Mich.-based automotive component's maker's second-quarter numbers showed a yawning $2.3 billion net loss in the most recent quarter - although it should be noted that most of that loss was due to special one-time items including payments connected with its pending early retirement and buyout offers to its unionized hourly workers.

A trader called Delphi's notes "impossibly high," with its 6½% notes due 2009 at 87.5 bid, 88.5 offered, well up from prior levels at 85.25 bid, 86.25 offered. He saw the company's 7 1/8% notes due 2029 up 1½ points at 80 bid, 81 offered.

Delphi said Tuesday that it lost $2.6 billion in the first half of 2006 - more than three times the $741 million that Delphi lost in the first half of 2005. It lost $232 million in the first quarter, and $2.3 billion in the second quarter.

The company - the nation's largest auto supplier - said the wider deficit was largely due to the cost of employee buyout and early retirement packages that are key to its current Chapter 11 reorganization. That first half red ink included about $1.9 billion in charges related to buyouts and early retirements.

Dana Credit little changed

Dana Credit Corp.'s 8 3/8% notes due 2007 were seen holding steady at 94 bid, 96 offered, after having moved up on Tuesday from prior levels of 91 bid, 92 offered, although traders had still not seen any concrete news on the financing arm of the bankrupt Toledo, Ohio-based auto components maker Dana Corp. The latter entity's 6½% notes due 2008 and 5.85% notes due 2015 were each unchanged, at 83 bid, 84 offered and 73 bid, 74 offered. Dana's 7½% notes due 2029 were ¼ point higher at 76.75 bid, 77.75 offered.

Collins & Aikman notes sink

Collins & Aikman Corp.'s 10¾% senior notes due 2011 passed an ominous milestone - for the first time, those bonds fell below 10, moving down to 9 bid, 11 offered, while the bankrupt Troy-based auto interior components company's 12 7/8% notes due 2012 continue to languish at levels of a fraction of a point.

And bankrupt Novi, Mich.-based vehicle frames maker Tower Automotive's 12% notes due 2013 were 2 points lower at 50 bid, 51 offered.

Apart from the automotive names, a trader in distressed bonds saw Refco Inc.'s 9% notes due 2012 retreat 3 points, to 73 bid, 75 offered, although he did not see any particular market-moving news out on the bankrupt New York-based financial services firm.

Airlines gain as oil drops

He saw airline issues higher as crude oil prices dropped lower, including bankrupt Atlanta-based Number-Three U.S. carrier Delta Air Lines Inc. and bankrupt Eagan, Minn.-based Number Four carrier Northwest Airlines Corp. Delta's 8.30% notes due 2029 were up a point at 25 bid, 26 offered, while its other issues were likewise a point better, at 24 bid, 25 offered. Northwest's 8 7/8% notes meantime rose to 48 bid, 50 offered. Crude oil futures - seen in the junk markets as a reliable barometer of future bond price movements, slipped for the second straight session as tensions in the Middle East continued to cool. A barrel of light crude settled at $71.89, down $1.16, on the New York Mercantile Exchange.

Sea Containers higher

The news that Sea Containers Ltd. plans to present a restructuring proposal to its creditors sometime in the next few weeks helped to push the troubled Bermuda-based maritime and railroad transportation company's bonds - particularly the close-in issues - up by several points.

Its 7 7/8% notes due 2008 were seen rising to 92 bid from 90 7/8, while a trader at another desk saw its nearest maturity, the 10¾% notes slated to come due on Oct. 15, as the biggest winners, with a 3 point gain to 93 bid, 94 offered. "That was the most active, since it's due in two months," the trader said, while also seeing the 7 7/8s better by 1½ points at 92 bid, 94 offered.

Sea Containers said in a filing with the Securities and Exchange Commission that it has determined that its conglomerate is overly complex, costly and cash negative and its capital structure is unsustainable. Sea Containers said a formal restructuring is necessary to optimize the company's value (see related story elsewhere in this issue).

News of the company's intention of presenting a plan to its bondholders and other creditors was a welcome tonic to soothe the nerves of investors who were jolted by its warning several days ago that Sea Containers not pay the principal on the $115 million of maturing 10¾% notes unless it will be able to pay its other notes maturing in 2008, 2009 and 2012 and all other unsecured creditors in full when due, and still also retain sufficient working capital.

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