Delphi bonds weaker; Movie Gallery bank loan, notes lower; OSI Restaurant debt dips

By Stephanie N. Rotondo

Portland, Ore., July 20 - Traders reported that Friday's distressed bond market felt heavy, despite decent activity during morning trading.

"The market had a hard leg down in the morning," a trader said, adding that there was a "little bit of a recovery late in the day."

"Anything junky was down," said another trader, who also noted that most investors were "moving toward safer paper."

Still, it has not reached the point of doom and gloom just yet.

"We did have some bottom fishing," he said. "People are trying to buy things cheaply if they can."

That said, the overall market was deemed down about 1½ to 2 points on the session.

Though they had seen gains in the earlier session, Delphi Corp.'s bonds were not immune to market pressure, dipping about 2 to 3 points on the day. But, on top of overall market volatility, traders gave various reasons for the downturn.

Meanwhile, a stronger showing at the beginning of the week did not stop Movie Gallery Inc.'s bonds from losing steam toward the week's close. A trader pointed out that the company's debt fell 7 points during the week, while another speculated that the movie rental chain's days were numbered.

"They are going to go out of business," he said, though he added that the demise was not necessarily imminent.

Just over a month in circulation, OSI Restaurant Partners LLC's bonds have fallen over 10 points, a trader said. The issue, linked with such restaurant chains as Outback Steakhouse, began trading June 15.

Delphi bonds weaker

Delphi's bonds grew heavy at the close of the trading week, in line with the overall general market, though traders gave varied reasons for the decline.

A trader saw the 6½% notes due 2009 at 127.5, down from the previous day's level of 132. At another desk, a trader quoted the 6½% notes due 2013 at 126.5, down from 129, and the 7 1/8% notes due 2029 at 128.5 bid, 129.5 offered, down from 131 bid, 132 offered during the proceeding session.

The bonds had gained in the previous session, as news that the company had not only signed an investment deal with an Appaloosa Management LP-led group, but had received approval on a settlement with its United Auto Workers union.

However, traders speculated that a strike threat from some of the company's other unions could have been a factor in the day's slide. Other reasons given to explain the losses included talk that auto maker Chrysler's recent bank deal was "struggling," according to one trader, while another said profit taking could be the culprit. Yet another trader attributed the 3 point loss to overall market weakness.

Tower amends credit facility

In other distressed automotive parts supplier names, Tower Automotive Inc. made some changes to its credit facility, increasing pricing, adding original issue discounts and revisiting call protection, according to a buyside source.

The $60 million synthetic letter-of-credit facility, the $275 million six-year first-lien term loan and the $235 million euro first-lien term loan are now priced at Libor/Euribor plus 400 bps, up from previous talk of Libor plus 325 bps to 350 bps, the source said.

In addition, the first-lien term loans are now being sold at a discount of 98 1/2, as opposed to at par, and carry 101 soft call protection for one year, the source continued.

Meanwhile, the $75 million seven-year second-lien term loan and the $50 million euro second-lien term loan are now both priced at Libor/Euribor plus 750 bps, up from previous talk of Libor/Euribor plus 625 bps to 650 bps, the source remarked.

Furthermore, the second-lien term loans are now being sold at a discount of 98, as opposed to at par, and call protection was changed to 104 in year one, 102 in year two and 101 in year three from just 102 in year one and 101 in year two, the source added.

Tower Automotive's $895 million credit facility also includes a $200 million five-year asset-based revolver.

The credit agreement contains a net senior leverage test, which was added to the deal earlier on in syndication.

JPMorgan and Goldman Sachs are the lead banks on the deal.

Proceeds will be used to help fund the acquisition of Tower by Cerberus Capital Management LP for about $1 billion.

Tower Automotive is a Novi, Mich.-based auto parts maker.

Movie Gallery structure dips

Movie Gallery's first-lien term loan was lower in sympathy with the entire market, a trader said.

The first-lien term loan B ended the day at 93.5 bid, 94.5 offered, down from 94 bid, 95 offered on Thursday, the trader said.

The Dothan, Ala.-based movie rental chain's bonds also grew heavier. A trader pegged the 11% notes due 2012 at 30 bid, 32 offered, adding that he heard NetFlix Inc. would soon be releasing "weak" news.

A market source said he saw the bonds dip as low as 29 bid, 31 offered just before noon. Another trader said the bonds rallied slightly to close at 31 bid, 32 offered.

Outback bonds slip

A trader said OSI Restaurant Partners, a.k.a. Outback Steakhouse, has seen a 10-point drop in its bonds, just barely over a month since it was issued.

The trader said the 10% notes due 2015 - priced at par - traded as high as 103 in the last month, but closed Friday's session at 0 bid, 91 offered.

"Those people can't be too happy," he said.

The issue was the second time the restaurant chain operator's attempted to enter the high-yield market. A similar deal was cancelled about one month before, as the company said it did not receive enough shareholder support.

Ply Gem, AMH down

Amid continued subprime mortgage woes and a housing slump, debt from companies making housing-related products is softening right along with the overall housing sector.

A trader saw Ply Gem Industries Inc.'s 9% notes due 2012 down a point to 82.25 bid, 83.25 offered. He said that AMH Holdings Inc.'s 0% notes due 2014 were also lower around 69.5.

"The whole housing industry remains weak," he said.

Broad market heavy

A market source said Linens 'n Things' floating-rate notes were at the "lowest I have seen them," closing the day at 68 bid, 68.75 offered.

The source also saw Hines Horticulture Inc.'s 10¼% notes due 2011 at 74 bid, 77 offered, while James River Coal Co.'s 9 3/8% notes due 2012 were seen at 94 offered earlier in the day.

Generac loan lower

Generac Power Systems Inc.'s first-lien term loan was softer with the rest of the loan market in somewhat active trading on Friday, according to a trader.

The first-lien term loan ended the day at 94 bid, 95 offered, down about a point to two points from previous levels, the trader said.

Generac is a Waukesha, Wis., manufacturer of standby power products.

Sara Rosenberg contributed to this article.

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