Remy notes steady after Friday decline; Dana, Dura dip; Lear drops

By Stephanie N. Rotondo

Portland, Ore., Feb. 12 - It was a big day for automotive parts suppliers Monday as Remy International Inc.'s notes saw a tighter spread but remained at their reduced Friday levels. News that the company had drawn down its revolving credit facility more than planned knocked the debt down on Friday by up to 6 points.

In another struggling automotive name, Dana Corp. dipped about a point during the trading day. It was reported that the company's unions were objecting to the sale of some of its assets, as the buyer was unwilling to honor some benefits.

Meanwhile, Dura Automotive Systems Inc. also weakened, though traders could not explain why.

Profit-takers prompted a drop in Lear Corp.'s debt as investors were concerned that the buyer of the company would increase debt to finance the buyout.

Delphi Corp. saw slightly better numbers amid reports the company is in talks with a buyer interested in its vehicle interiors business.

Outside of the autos, Adelphia Communications Corp.'s bonds were seen down a point, its 10¼% notes due 2011 at 105 bid, 106 offered and its 10¼% notes due 2006 at par bid, 102 offered. A federal bankruptcy court overseeing the Greenwood Village, Colo.-based former cable operator's reorganization declared its plan to be effective, nearly five years after the company was driven into Chapter 11. The plan goes into effect Tuesday.

As the coupon payment for Ziff Davis Holdings Inc. came due Monday on the company's 12% notes due 2009, traders were still expecting a default. Calls to the company have not been returned over the last two weeks.

In other news, one trader remarked that the Winn-Dixie Stores Inc. buyout rumor is just that - rumor. He said the company has been searching for a buyer, but no far, his sources tell him no one is interested.

Separately, a distressed trader said Tembec Inc. saw its debt unchanged during trading, while another stated that Doral Financial Corp.'s preferred notes "did not trade at all."

Le-Nature's Inc.'s performance over the last few weeks was all one market participant could talk about. He thought it was "crazy" that the company's bonds were coming in at 35 bid, when just three weeks ago, the notes came in at 14 bid. He said there has been no news on the company to cause movement in the notes.

Overall, traders saw very little activity on Monday. Some speculated that the upcoming holiday - Presidents Day falls on Feb. 19 - could be the reason for the quiet day. A market insider indicated there were "conversations, but not a lot of markets."

"It felt like Christmas today," one trader said. "Christmas, but no presents."

"There weren't really any movers, or nothing real active," another trader noted.

At another desk, a trader said investors could be "waiting for a crack in the market."

"Everything's so rosy," he said. He added it has been a long bull market, and many investors are looking for the next equity correction. Once that occurs, high-yield and distressed markets should follow suit.

The trader also pointed to a recent Bloomberg report that showed risks in corporate bonds had fallen to record lows. The report included a statement from Standard & Poor's, which said the global bond default rate fell to 0.44% in December from 0.56% a year earlier.

Remy tightens spread

Remy International tightened its spread on its 8 5/8% notes due 2007 but remained relatively unchanged from Friday's market close. A trader remarked that the bonds traded, but it was "nothing substantial."

The trader placed the 8 5/8% bonds at 83 bid, 84 offered. Another distressed trader placed the bonds unchanged at 82 bid, 84 offered, while another market participant saw the notes at 84 bid, 85 offered. The latter said the notes traded as high as 84.5 during the day, with the last trade coming in at 82.5 bid, 83 offered.

The 8 5/8s were seen closing Friday at 82 bid, 84 offered.

A trader saw Remy's junior notes unchanged on the day - its 9 3/8% notes due 2012 at 30 bid, 32 offered and its 11% notes due 2009 at 33 bid, 35 offered.

The Anderson, Ind.-based automotive electrical systems manufacturer announced Friday it had drawn down its revolver by more than originally had been expected. The news caused the notes to plummet on Friday by as much as 6 points, according to one trader, during the trading day. At another desk, a trader placed the bonds down just 3 points on Friday.

Dana, Dura down

In other distressed automotive parts paper, a distressed trader noted that Dana Corp.' 5.85% bonds due 2015 traded in "mini-lots," losing about a point from the previous week at 73 bid, 74 offered. A trader placed the 6½% notes due 2008 at 76.75 bid, 77.75 offered.

Last week, unions representing the company's workers asked a bankruptcy judge to put the skids on the sale of Dana's engine hard-parts business because the buyer will not honor retiree benefits.

In December, Dana said it had agreed to sell the business to Stuttgart, Germany-based supplier Mahle GmbH for $157 million. Under the deal, Mahle would pay $98 million in cash and assume certain liabilities for various Dana production sites that make up the engine business.

But the objection, filed last week by the United Auto Workers and the United Steelworkers of America unions, asked the bankruptcy judge to withhold approval of the sale until talks are held with Mahle regarding the continuation of health benefits for Dana retirees.

A trader also placed Dura Automotive's bonds down a point. The 8 5/8% senior notes were slotted at 30.5 bid, 31.25 offered. The debt began trading around 32.5 in the morning.

The trader could not explain the movement, saying, "I don't know what's going on there."

Lear drops

Among the automotive supplier names, the biggest mover was Lear, whose bonds had not really moved much on Friday, when it was announced that the Southfield, Mich.-based automotive seating and interior components maker had agreed to be acquired by an affiliate of billionaire investor Carl Icahn for about $5.3 billion - $2.8 billion for the company's shares, plus the assumption of $2.5 billion of Lear debt.

However, after having had a weekend to mull things over, the company's bondholders - fearful of the prospect that Icahn will load Lear up with new debt to finance the buyout - showed their disapproval by taking the company's bonds lower, with a source at one desk quoting its 5¾% notes due 2014 as low as 86.25, down more than 3 points on the session.

Delphi better

A trader saw Delphi's bonds better, with its 6.55% notes due 2006 up 1¼ points at 111.5 bid, 112.5 offered, likely in reaction to news reports indicating that billionaire industrialist Ira Rennert is in talks to buy the $1.3 billion vehicle interiors business of the bankrupt Troy, Mich.-based company.

The auto industry trade paper Automotive News - attributing its information to "a source with direct knowledge of the talks," - also reported that the tycoon's Renco Group Inc. and Delphi senior managers were also considering other joint acquisitions, possibly including some assets of the bankrupt interiors manufacturer Collins & Aikman Corp.

Delphi and Collins & Aikman both declined comment on the story.

Paul Deckelman contributed to this article.

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