Movie Gallery gains; Charter chairman's words boost cabler's bonds

By Paul Deckelman and Sara Rosenberg

New York, Aug. 30- Movie Gallery Inc.'s bonds and shares were better Wednesday, even as traders said they had seen no news out about the Dothan, Ala.-based Number-Two home video rental chain in the United States. But renewed takeover rumors circulating in some quarters of the financial markets were a possible catalyst, as was short-covering.

Elsewhere, the bonds of bankrupt Delta Air Lines Inc. and Northwest Airlines Corp. were better, with traders noting that the airlines probably gained altitude from market relief that oil prices have been softening lately - even though crude levels actually firmed up on Wednesday.

Back on solid ground, Charter Communications Inc.'s bonds gained on Wednesday, helped upward, traders said, by news of the massively debt-laden St. Louis-based cable operator's extended private bond exchange offer, as well as by supportive comments about the company from Charter's enigmatic principal owner, tech billionaire Paul G. Allen.

And traders saw auto parts names looking better, particularly in morning trading, helped by the recent moderating trend in oil prices, as well as the rumors and speculation about big internal restructuring moves that have that have swirled around the embattled Ford Motor Co. for most of the past week.

In the bank debt market, sources said very little trading of distressed paper was going on, as market participants mostly wound down operations ahead of the upcoming Labor Day holiday break, which will see the debt markets close early on Friday (The Bond Market Association has recommended a 2 p.m. ET shutdown) and close altogether on Monday.

Movie Gallery moves

Back in the bond market, Movie Gallery was up a point, a trader said, "though on no news." The company's 11% notes due 2012 rose to 67 bid, 68 offered.

Movie Gallery's New York Stock Exchange-traded shares rose 12 cents (5.26%) to $2.40 on volume of 4.2 million shares, nearly double the usual turnover.

While there was no firm news out about the company - which has been struggling all year and trying to trim its operations to get itself on a better financial footing - there was all kinds of speculation going on in the market and on investment-oriented internet bulletin boards.

Among the rumors on the grapevine - strictly unproven and unconfirmed - were takeover rumblings. One name being mentioned was a possible accumulator of Movie Gallery stock was billionaire media mogul Mark Cuban, who has figured in such usually unfounded speculation before. Bears on the boards meantime scoffed at the notion that the Dallas tycoon would come to the company's rescue, and chalked up the stock rise to a pump-and-dump scheme.

Airline bonds head skyward

Among the airlines, Atlanta-based Delta and Eagan, Minn.-based Northwest, both now restructuring in Chapter 11, were "stronger on recent lower oil prices," a trader said, while noting that crude prices - which had nosed below $70 per barrel earlier in the week for the first time in months - edged back up Wednesday on supply concerns. Light sweet crude for October delivery rose 32 cents to settle at $70.03 a barrel on the New York Mercantile Exchange after trading as low as $68.65 earlier in the day. That was almost $10 below the record high of $78.40 a barrel reached July 14.

Crude prices are seen as an indicator of possible future price trends for jet fuel, the rising cost of which helped to force both Northwest and Delta to make emergency landings last fall in the bankruptcy courts.

The trader saw Delta's 8.30% notes due 2029 a point better at 24.75 bid, 25.75 offered, while Northwest's 7 7/8% notes due 2008 were also up a point, at 48 bid, 49 offered.

Chairman cherishes Charter

Charter bonds were climbing, pushed up, a trader said, by "[Paul] Allen reinforcing his commitment to the company," followed by the company's announcement Tuesday night of plans to amend and extend its previously announced offer to exchange new debt for its existing notes with maturities from 2009 to 2012.

"It looks like they're re-opening the exchange," the trader said, noting that the company's short-dated unsecured bonds were "up significantly. For instance, one of the issues covered in the exchange offer, Charter's 11 1/8% notes due 2011, jumped to 78 bid, from prior levels around 74.

Another trader likewise saw Charter's unsecured short debt up 3 to 4 points, quoting its 8 5/8% notes due 2009 as having risen to 91 bid, 92 offered.

"So the unsecured bonds are up," the first trader said, "and Paul Allen says he still loves the company."

Allen, the chairman of the company, spoke at Charter's annual shareholders' meeting on Tuesday in Seattle - not far from where the Microsoft Corp. co-founder lives - touting Charter's prospects and praising the job that company chief executive officer Neil Smit has done in his first year as Charter's hands-on boss.

"With Neil at the helm, Charter has made significant progress across its entire business," the communications tycoon enthused.

Referring to changes Smit has made in the company's top executive ranks, its rollout of telephone service, which allows Charter to better compete with traditional phone companies trying to muscle in on its cable business, and Smit's efforts to whittle down Charter's $19.5 billion debt, Allen said that "as a direct result of the financial and strategic actions we've taken, Charter today is a more solid company with growing potential."

Among the debt-related moves have been a refinancing of some $6 billion of debt and the sale of non-strategic systems that have raised $1 billion of cash to help pay down debt. Charter's debt burden, however, is still the heaviest of any company its size in the industry.

Allen is both the company's controlling shareholder and its biggest bondowner as well, and his continued financial support of Charter is seen as key to the company's fortunes. Charter's bonds and shares have on occasion risen temporarily on market talk that the billionaire might be increasing his stake, although he has made no recent moves to do so.

Other Charter investors have still been heartened, though, by Allen's cheerleading for the company, even in tough financial times.

"I am pleased with the results Charter is delivering and believe we are well positioned to pursue growing success," Allen added at the shareholders' meeting.

Auto names up additionally

In the autosphere, a trader saw the partsmakers "stronger today," even though Ford's bonds were little changed. On Wednesday, Ford's 7.45% notes due 2031 hung in at 78.5 bid.

Ford, and the bonds of its Ford Motor Credit Co. financial arm, had been firming over the last few sessions on market speculation, fueled by media reports, that Ford might consider selling some of the valuable credit unit to raise as much as $6 billion and position it for a credit ratings boost and resulting lower borrowing costs.

While Ford itself was flat, relative to Tuesday's levels, the credit arm's 7% notes due 2013 - after briefly pushing as high as the 95 area - came off those peak levels to finish just under 93, up from its 92 finish Tuesday, though unchanged from its opening levels Wednesday.

The trader saw former Ford unit Visteon Corp.'s 7% notes due 2014 "up a couple of points" at 89.5 bid, 90.5 offered, while ArvinMeritor's 8¾% notes due 2012 were up a point at 97.5 bid, 98.5 offered, and Goodyear Tire &Rubber Co.'s 9% notes due 2015 were ½ point better at par bid, 101 offered.

Another trader saw Van Buren Township, Mich.-based parts maker Visteon's 8¼% notes due 2010 a point better at 97.5 bid, 98.5 offered, while Akron, Ohio-based tire giant Goodyear's 7.857% notes due 2011 were ½ point better at 97.

A trader in distressed notes saw the 10¾% notes due 2012 of bankrupt Troy, Mich.-based auto interior components maker Collins & Aikman Corp. at 7 bid, 8 offered, up perhaps ½ point.

He saw Collins & Aikman's Troy neighbor, bankrupt parts maker Delphi Corp.'s 6½% notes due 2009 "maybe a little better" at 88.5 bid, 90 offered, and its 7 1/8% notes due 2029 at 80 bid, 82 offered. He likewise saw bankrupt Toledo, Ohio-based partsmaker Dana Corp.'s 6½% notes due 2008 a little higher at 79 bid, 81 offered.

However, Metaldyne Corp.'s 11% notes due 2012 - which had benefited from a late rebound on Tuesday to closing levels above 80 bid - fell back on Wednesday to 79.25. The Plymouth, Mich.-based metal parts maker's bonds had been boosted over the previous several sessions by merger and acquisition speculation sparked by a report last week that a buyer might soon emerge.

A trader saw the company's 10% notes due 2013 unchanged at 94 bid, 95 offered.

Overall, a trader said, "the distressed market was boring - but it is what it is at the end of August."

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