Federal-Mogul bonds gain; Tower Auto off; Home Products falls on filing; Delta easier, Northwest up

By Ronda Fears

Memphis, Dec. 20 - There was plenty of news flow Wednesday in distressed names but not a great deal of traffic insofar as dealings go. High-profile names were not even big contributors, traders said, with surprisingly thin volume in Calpine Corp. bonds while Delphi Corp. activity was described as fairly quiet and Delta Air Lines Inc. was said to have good volume but nothing great.

Moreover, what trades that printed were described as mostly moves downward, traders said.

Calpine players are still waiting for the company's five-year business plan, which the San Jose, Calif.-based independent power producer has promised to file before year-end, although it has gotten a six-month extension to file its reorganization plan, and were watching as Calpine Power Income Fund in Canada received a hostile buyout bid from Harbinger Capital Partners.

Meanwhile, Calpine bonds were described as weaker Wednesday - the anniversary of its bankruptcy filing - with little activity. The senior paper was seen in the 95 bid, 97 offered context and the junior paper in the 79.5 bid, 81.5 offered area. Buyside sources, though, said the luster of Calpine paper has worn off with its recent rise. (See full story elsewhere in this edition.)

Elsewhere, bankrupt auto parts supplier Tower Automotive Inc. filed a restructuring term sheet that included a commitment from three significant bondholders to underwrite a $250 million equity rights offering that will form the basis of a reorganization plan.

A new bankruptcy filing by Chicago housewares maker Home Products International Inc., which the company said was triggered by its inability to make a $5.6 million coupon payment on its $116 million of bonds despite an attempt to restructure the issue last month, sent those bonds tumbling nearly 40 points.

Federal-Mogul gains

The big mover in distressed dealings was Federal-Mogul Corp., moving higher. While there was no fresh news, traders suggested that investors were encouraged by the Southfield, Mich.-based auto parts maker's progress in emerging from Chapter 11 sometime soon.

Traders pegged Federal-Mogul paper in the 73 bid, 74 offered area, or perhaps a point or so higher, up from around 69.5 bid, 70.5 offered on Tuesday.

"They're getting close to resolving this whole mess," one trader said.

Federal-Mogul's bankruptcy, filed Oct. 1, 2001, has been mired and drawn out by a mound of asbestos claims, past and future. On Nov. 20, the company filed its fourth joint amended plan of reorganization, which incorporates new provisions for the settlement of claims filed against debtor affiliates in the United Kingdom.

The bankruptcy court hearing is scheduled for Feb. 2 on the new and latest plan. Objections are to be filed by Jan. 10.

Tower bonds off 2 points

Tower Automotive Inc. on Wednesday filed a restructuring term sheet and commitment letter in which three significant bondholders have agreed to underwrite a $250 million equity rights offering that will form the basis of a reorganization plan.

That sent the bonds of parent R.J. Tower Corp. lower by about 2 points to 16.5, traders said.

Strategic Value Partners, LLC, Wayzata Investment Partners LLC and Stark Investments, which collectively own in excess of $225 million of unsecured claims in the Tower Auto bankruptcy, have agreed to backstop a rights offering to unsecured creditors.

Under the term sheet, the senior secured debt would be refinanced and paid in full and all allowed administrative and priority claims would be paid in full. Unsecured creditors as a group would be entitled to certain cash and warrants, plus have a chance to participate in the rights offering.

In connection with the restructuring, Tower Auto and exit plan backers are in discussions with debtor-in-possession lenders on reworking the maturity of its current DIP facility, which expires Feb. 2.

During the bankruptcy process, Tower Auto pointed out that it has undertaken a dramatic transformation of its North American operations, closing almost half its U.S. plants, driving significant manufacturing productivity improvements, successfully negotiating settlements with all 10 U.S.-based labor unions and winning more than $170 million of new business awards.

"As challenging as this journey has been, the restructuring process has allowed us to accelerate improvements needed to emerge a much healthier, leaner and stronger company," said Tower Auto chief executive Kathleen Ligocki.

The Novi, Mich.-based vehicle-frame maker, a major supplier to Ford Motor Co., filed for Chapter 11 in February 2005.

Home Products files pre-pack

In a new filing, Chicago-based Home Products International Inc., a maker of housewares such as ironing boards and storage containers, filed a prepackaged bankruptcy saying it will restructure $116 million in bonds after it could not make the $5.6 million coupon payment on the 9 5/8% issue that matures in 2008.

The bonds, of course, began trading flat and the bids fell nearly 40 points to 20, while the bonds were still being offered at 50, versus a trading level of 57 on Tuesday, traders said.

The bankruptcy reorganization essentially mirrors an agreement the company announced on Nov. 16 with a majority of the bond holders.

Under the plan, all noteholders and old stockholders will be eligible to participate in a rights offering for new Home Products International common stock, with clients of Third Avenue Management LLC backstopping 85% of the rights offering and stockholder SAC backstopping the remaining 15%.

Under the plan, holders of old notes and contingent debt will have their debt cancelled and will receive 95% of the new common stock in the reorganized company and holders of old stock will receive 5% of the new common stock in the reorganized company if they vote to accept the plan.

These creditors will have the option to receive cash instead of new stock, with the total cash paid under the cash-out option not to exceed $10 million.

Last week, the company also announced that it will centralize its plastics manufacturing and distribution operations to its facility in Chicago and close its EI Paso, Texas, plant effective Feb. 28. As part of that realignment, the company said it planned to expand and upgrade the Chicago plant to accommodate a 45% increase in molding capacity production.

Delta off, Northwest better

In the bankrupt airline carriers, Delta Air Lines bonds were lower with traders citing the rise in oil prices and overall weakness in transportation-sector equities after FedEx Corp.'s lackluster earnings forecast. Yet, Northwest Airlines bonds were described as better on the day.

Delta's 8.30s were quoted off about a point at 66 bid, 67 offered, while Northwest's bonds were described as 1.5 points better across the board with the 8 7/8s at 91.5 bid, 92.5 offered and the 10s at 94.5 bid, 95.5 offered.

Crude oil futures settled Wednesday at $63.72 a barrel, up $0.26 from the previous day, the highest closing quote since mid-September on the New York Mercantile Exchange.

In the wake of Delta filing its preliminary reorganization plan as a standalone entity, spurning the $8 billion hostile takeover bid from US Airways Group Inc., there continued to be considerable debate about whether it would fly with a majority of credits and whether US Airways would continue the pursuit.

"With unions on the side of management's plan I don't see how US Air can win," said one buysider.

Furthermore, he added, "What I found interesting in the Delta CEO's comments was his statement that US Air was not the RIGHT merger partner. Then, the question is WHO IS? I guess they figure it would make more sense to merge with an airline with a Boeing fleet so you have synergies in maintenance, training, staff. However, the unions still get pissed off with how to integrate seniority."

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.