GM, Delphi move up, Sirius rebounds; Kerzner sets deal size; funds see $346 million outflow

By Paul Deckelman and Paul A. Harris

New York, May 25 - General Motors Corp. bonds and those of the giant carmaker's bankrupt former subsidiary, Delphi Corp., were seen up solidly on Thursday, apparently aided by news reports that some 20,000 of GM's more than 100,000 hourly employees will take advantage of the company's recent buyout offer and leave their jobs.

Elsewhere, Sirius Satellite Radio Inc.'s bonds - which had fallen Wednesday on sector sympathy along with XM Satellite Radio Holdings Inc.'s paper, following the latter's downsized full-year revenue and subscriber guidance - were seen having bounced back and recovered most, if not all, of their losses Wednesday. XM's bonds were also seen better, though not quite as positively as those of its rival.

MedQuest Associates' bonds were seen up a point or two, probably helped by optimistic projections by company executives at an investors' meeting.

In the new-deal arena, Libbey Glass Inc.'s scheduled pricing of a $400 million issue of senior notes remained bottled up Thursday, and was pushed into next week with the possibility of a different structure being considered too. Elsewhere, gaming operator Kerzner International Ltd. set the size for its planned offering of senior subordinated notes, which will be used to fund a management-led leveraged buyout.

Overall sources said that the broad high-yield market traded with a firmer tone on Thursday, with one source adding that the CDX closed at 100.625 bid, up nine sixteenths on the session.

As trading was wrapping up for the day, market participants familiar with the weekly high yield mutual fund flow numbers compiled by AMG Data Services of Arcata, Calif., told Prospect News that in the week ended Wednesday $345.6 million more left the funds than came into them.

It was the seventh consecutive weekly outflow, including the $134.8 million decline seen in the previous week, ended May 17. Over that seven-week period, outflows have totaled about $988 million, according to a Prospect News analysis of the AMG figures.

Outflows have now also been seen in 14 weeks out of the last 16, dating back to early February, during which time some $1.87 billion more has left the funds than has come into them, according to the Prospect News analysis.

Outflows have now also been seen in 17 weeks out of the 21 since the start of the year, against only four inflows, according to the Prospect News analysis.

One source said that the outflow takes the year-to-date fund flows to negative $2.248 billion for funds that report on a weekly basis. However, the source added, among funds that report on a monthly basis year-to-date flows remain in the black at $1.776 billion.

Hence year-to-date aggregate flows, tabulating both the weekly and monthly reporters to AMG, ended the most recent week at negative $473 million, according to the market source.

The flow of money into and out of the junk bond funds is seen as a generally reliable market barometer of overall high yield market liquidity trends - although they only comprise between 10% and 15% of the total monies floating around the high yield universe, far less than they used to - because there is no reporting mechanism to track the movements of other, larger sources of junk market cash, such as insurance companies, pension funds and hedge funds.

Except as noted, the figures exclude distributions and count only those funds that report on a weekly basis.

GM, Delphi higher on buyout

With not much happening primary-wise, junk participants turned their eyes to the secondary - and saw better levels for GM's notes and those of Delphi, the bankrupt Troy, Mich.-based parts supplier that was spun off by the Detroit giant in 1999 and which has struggled ever since, hurt by costly labor obligations and the troubles of GM - its largest single customer - and those of the domestic automotive industry in general.

A trader said he saw GM "going up," with the carmaker's benchmark 8 3/8% notes due 2033 moving up to 74.5 bid, 75.5 offered, a gain of 1½ points. He also saw the 8% notes due 2031 of GM's financing arm, General Motors Acceptance Corp., up a point at 93.5 bid, 94.5 offered.

Delphi, the trader said, was up even more, with its 6.55% notes slated to come due this year at 80 bid, 81 offered, a 3 point gain, and its 6½% notes due 2009 also up a trey, at 79 bid, 80 offered. He saw Delphi's 7 1/8% notes due 2029 a point better at 77 bid, 78 offered. He said that the rise might be linked to short covering, or in reaction to any fresh news about the company's battle with its unions over Delphi's efforts to lower its pay scales.

Another trader saw the Delphi's "up a lot," with the 7 1/8s up 2¼ points at 78.25 bid, 79.25 offered, while GM's 8 3/8s were at 75.5 bid, 76 offered, up 1½ points on the day. GMAC's 8% notes were a point better at 93.75 bid, 94.25 offered.

GM's New York Stock Exchange-traded shares were seen up $1.39 (5.24%) in Thursday's dealings to $27.90 on volume of 28.5 million - about double the norm. Delphi's Pink Sheets-traded shares jumped 16 cents (13.22%) to $1.37. Volume of 9.6 million shares was about average.

GM shot up in apparent reaction to news reports - chiefly one in the auto giant's hometown paper, the Detroit News, which said that more than 20,000 of its hourly workers had accepted buyout offers made under a plan announced in March to offer buyouts or early-retirement incentives to all 113,000 of its hourly employees.

The paper's report attributed its information to unidentified sources. GM would not confirm the report, beyond saying that it is "very pleased with the employee participation rate."

If the 20,000 figure is accurate - and the offer still has a month to run - it would go a long way toward giving GM the 30,000 headcount cuts that it said previously that it hopes to have in place by 2008.

Delphi investors are carefully watching GM, hoping for further help from their company's one-time corporate parent. GM has already offered to pay for buyouts for 13,000 of Delphi's 34,000 hourly employees, and to take another 5,000 Delphi hourly workers on as GM employees. GM is hoping Delphi can avert a potentially costly strike by its employees, which would badly disrupt GM's production.

Keystone Auto gains on pact

Elsewhere among the automotive names, Keystone Automotive Operations Inc.'s 9¾% notes due 2013 were being quoted higher, at 94.5 bid, up around three points from prior levels after the Pomona, Calif.-based marketer and distributor of new and remanufactured collision repair parts like car bumpers, body panels, radiators and auto glass announced plans for a partnership with United Recyclers Group LLC, a major supplier of used auto parts to the collision-repair industry.

Another trader said that the bonds had made their move on Wednesday and were little changed Thursday.

The strategic affiliation between Keystone and United Recyclers is seen widening the range of choices other than original-equipment-manufacturer parts (i.e. those produced by carmakers like GM or Ford Motor Co.) that body shops and other repair venues have when repairing customers' vehicles.

Keystone's vice president for sales and marketing, Christopher Northup, said in a statement Wednesday announcing the alliance with United Recyclers that "consumers, and their insurers, want their cars repaired in a high quality manner, but cost effectively too. Now two of the most respected names in the business are working together in order to make that happen."

Northrup also said that Keystone hopes that United Recyclers - which is actually a partnership of over 330 auto recyclers - will become a source for raw parts that Keystone itself remanufactures, such as plastic bumpers and aluminum wheels.

Keystone recently reported results for the 2006 fiscal first quarter ended April 1. While sales were up 32% year over year to $158.2 million from $119.9 million a year ago, and operating earnings were up 11.6% to $9.2 million from $8.2 million previously, net income fell to $500,000 from $1.1 million due to what the company called "challenging conditions" within the parts-distribution industry. The company had cash and equivalents of $10 million, while net debt stood at $348 million.

Sirius recovers

Outside of the autosphere, a trader saw Sirius' 9 5/8% notes due 2013 at 93.5 bid, up 1½ points on the day, recouping nearly all of the ground that the New York-based satellite broadcaster lost on Wednesday, when it fell in tandem with rival XM Satellite's bonds. Those bonds dropped after Washington D.C.-based satellite broadcaster XM warned that it now only expects to have 8.5 million customers signed up by the end of the year, down from earlier estimates of 9 million. It also foretold a drop in revenues, citing a "challenging" market. That caused XM's 9¾% notes due 2014 to lose three points on the day Wednesday, down to about the 93 level.

On Thursday, a trader said, those bonds were offered at 93.5, but with no bids seen. "They were trading pretty actively," he said, adding "I wouldn't say they were up - but they seemed firmer.

MedQuest higher

Traders saw MedQuest's 11 7/8% senior subordinated notes due 2012 up two points, at 89.5 bid, "a nice little run up." He said that it appeared to be credit specific, with other imaging names little changed, such as Dallas-based Radiologix Inc. , whose bonds ended at 88.5 bid, 90 offered, unchanged.

Alpharetta, Ga.-based imaging provider MedQuest may have benefited from investor response to a meeting it had with a number of them in Atlanta. At that meeting, company executives said MedQuest was sticking to its strategy - and has ample liquidity and plenty of time to refinance debt (see related story elsewhere in this issue).

Libbey eyes new structure

No issues priced during the Thursday primary market session.

The one deal that was expected to price before the end of the pre-Memorial Day week, Libbey Glass Inc.'s $400 million offering via JP Morgan Securities and Bear Stearns & Co., has now been moved to next week's business, according to a market source.

The source added that the company, which had been in the market with a single tranche of eight-year senior notes (B), is heard to be contemplating a different structure.

The company is now thought to be considering offering $300 million of second-lien secured notes, and $100 million unsecured PIK notes, both of which would be issued at the operating company level.

The Toledo, Ohio, glass tableware manufacturer has come to the high-yield market to finance its purchase the 51% equity interest it does not already own in its Mexican joint venture Crisa with Vitro SA de CV, and to repay debt.

Kerzner sets deal size

The only other news bearing upon the primary market on Thursday came from Kerzner International Ltd.

The Bahamas-based developer and operator of destination resorts, luxury resort hotels and gaming properties announced in an SEC filing that it plans to make a $400 million private placement of unsecured senior subordinated discount notes as part of the financing for its leveraged buyout by a management-led investor group.

The LBO is expected to close in mid-2006.

As a back up for the bonds, which will be issued at the operating company level, the company has obtained a commitment for a $400 million senior subordinated bridge loan from Deutsche Bank and Goldman Sachs.

June primary expected to ramp up

On Wednesday a sell-side official told Prospect News that the quiet which has pervaded the market during the run up to Memorial Day is likely to linger through next week.

On Thursday, however, a sell-sider hearing this color professed the expectation that the month of June will not be a quiet one in the primary market.

"Next week well be a little slow because it's a short week," the source said, alluding to the fact that the Bond Market Association recommends that the high-yield market close on Monday to observe the holiday.

"But I think, though, you're soon going to see a little bit of a ramp up," the source said.

"June is likely to be fairly busy."

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