Sea Containers bonds lower; bankrupt autos mostly quiet

By Paul Deckelman and Sara Rosenberg

New York, Oct. 31 - Sea Containers Ltd.'s bonds were seen down several points Tuesday, possibly in response to a warning by British pension regulators that the bankrupt Bermuda-based railroad and maritime transportation company may be liable for certain pension payments.

Movie Gallery Inc.'s bonds were seen better, although there was no news out on the troubled Dothan, Ala.-based movie rental chain operator.

Elsewhere, Visteon Corp. bonds were off, despite the Van Buren Township, Mich.-based parts producer having posted a narrower loss than a year-ago. Not much else was taking place among automotive sector names like Dura Automotive Systems Inc. and Dana Corp., which had been active with some degree of volatility in Monday's dealings

Sea Containers' pension warning

A trader saw Sea Container's 7 7/8% notes due 2008 down 2 points on the session at 63.5 bid, 65 offered. He said there was "low volume, and no news that I could see."

Another trader pegged the company's 10¾% notes, which were to have matured on Oct. 15, at 67 bid, 69 offered, "down a couple" of points.

Sea Containers said in a Securities and Exchange Commission filing Monday that the United Kingdom government pensions regulator issued notices to the company on Oct. 19 warning that the regulator is considering exercising its powers to issue what are known as financial support directions, or FSDs, to Sea Containers, directing it to pay pension obligations.

The plans involved are the Sea Containers 1983 Pension Scheme and the Sea Containers 1990 Pension Scheme - the multi-employer defined-benefit pension plans of Sea Containers Services Ltd., a U.K. subsidiary.

The trustees of the pension schemes or their actuary have advised Sea Containers that their current estimates of the cost of winding up the schemes, including the cost of purchasing annuities to pay projected benefit obligations to scheme participants, would be approximately £107 million ($201 million) for the 1983 scheme, after giving effect to the withdrawal of a GE SeaCo SRL subsidiary from the plan, and approximately £27 million ($51 million) for the 1990 scheme. Because the schemes are multi-employer plans, the liabilities under them are shared among the participating companies.

Sea Containers said that these estimated costs have not been agreed by the company, and that no FSDs have been issued. It is considering its reply to the regulator's warning notices and does not accept that it is "reasonable or appropriate" for the regulator to issue FSDs.

Sea Containers sought bankruptcy protection after it was unable to pay the $115 million of 10¾% notes when they came due on Oct. 15.

Movie Gallery up

Elsewhere, Movie Gallery's 11% notes due 2012 were seen having moved up 2 points to 62 bid, 64 offered.

No news was seen out on the company, which is struggling to compete with larger rental operator Blockbuster Inc. and the internet-based Netflix Inc. rental operator, among other rivals.

Visteon hurt by loss

Visteon's bonds, a trader said, were bouncing around at lower levels after the company reported a $177 million ($1.38 per share) loss, which represented something of an improvement from the year-earlier red ink of $207 million ($1.64 per share).

He said that the 7% bonds due 2014 had ended at 88 bid, 89 offered on Monday, and first traded down to 86 bid, 86.75 offered on Tuesday on news of the loss. Then, he said, they went back up to 87.25 bid, 87.5 offered, buoyed by the realization that the loss had narrowed from a year ago.

However, he said, still hanging over the market was the ominous specter of new output cuts by Visteon's former corporate parent and still single biggest customer, Ford Motor Co., as well as the production cutbacks at the other domestic automakers, to whom it also sells.

"They recovered some," he said, "but net-net" the Visteon bonds were down a point from Monday.

He also saw the Visteon 8¼% notes due 2010 at 95 bid, 95.75 offered, down from 96 bid, 97 offered on Monday.

Other autos quiet

Traders said that Visteon seemed to be the only name really moving in the auto sector, which had been active and volatile on Monday as Dura Automotive filed for Chapter 11 status and Dana announced that its Dana Credit Corp. unit was in forbearance talks with its bondholders, which caused the Dana Credit bonds to rise, but the company's own bonds to retreat several points.

However, on Tuesday, one said, Dura "was just hanging out" around where the troubled Rochester Hills, Mich.-based automotive components supplier's notes had ended on Monday after the bankruptcy filing. Its 8 5/8% notes due 2012 were still at 30 bid, 31 offered, and its 9% notes due 2009 at 6 bid, 7 offered. The company's second-lien bank debt hovered at 85 bid, 86 offered.

As for bankrupt Toledo, Ohio-based Dana, the trader saw the company's 6½% notes due 2008, which fell 3 points Monday, down another ½ point at 72.5 bid, 73.5 offered, while the Dana Credit 8 3/8% notes due 2007 were unchanged at 101.75 bid, 102.75 offered.

Charter gyrates on loss, liquidity warning

Charter Communications Inc. bonds initially moved higher, a trader said, even as the St. Louis-based cable company reported that it lost $133 million (41 cents per share) in the third quarter ended Sept. 30 versus a year-earlier profit of $75 million (24 cents per basic share, 9 cents per diluted share).

He saw its 11% notes due 2015 initially jump to 97.25 bid, from 96.25 bid, 96.5 offered.

While the debt-laden company did post the loss, the third period results represented a sequential improvement over the company's second-quarter red ink of $382 million ($1.20 per share). And in other measures besides net gain or loss, Charter did show year-over-year improvement in the latest period - revenues of $1.388 billion represented a year-over-year increase of 9.7%, while operating income from continuing operations increased by $12 million year-over year to $66 million. Revenue growth exceeded operating costs and expense growth during the period by $26 million.

But those early gains faded, the trader said, amid "concerns over liquidity." While Charter noted that it had cut debt and had extended the maturities on much of its bond obligations during the quarter, and while company officials on the quarterly conference call declared that Charter's liquidity should be sufficient to fund its operations and meet its obligations through 2007, it warned in its filing with the Securities and Exchange Commission that its "cash flows from operating activities and amounts available under the company's credit facilities may not be sufficient to fund the company's operations and satisfy its interest and principal repayment obligations in 2008, and will not be sufficient to fund such needs in 2009 and beyond."

The company did not publicize that warning during the conference call and the analysts on the call apparently had not yet seen it, as there was no discussion of it during the question-and-answer portion of the proceedings (see related story elsewhere in this issue).

After that, the trader said, as people began to realize the potential liquidity problems, the bonds gave back their initial gains to end around the same 96.25 bid, 96.375 offered level at which they had begun.

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