Delphi's bonds dropped five points across the board on erroneous rumblings that the troubled auto parts maker had filed for bankruptcy. Its 7.12% '29 bonds were down 5 points to 65, while its 6.55% '06 bonds fell to 76 from 81. Its bank loans were also down a few points.
Delphi's revolving credit was trading at a low 94, down two points from last week. Between $50-75 million of bond debt traded on the rumor of the bankruptcy filing, but the company had not filed. A Delphi spokeswoman said the rumor was untrue.
Investors have been increasingly jittery since a rumor surfaced two weeks ago that talks between Delphi, its union and General Motors regarding the restructuring of its North American operations had broken down.
That chatter caused Delphi's 6.55% '06 bonds to fall 11 points. Last week's rumor that the company had actually filed for bankruptcy added to investors' concerns.
"It is increasingly more likely that they will file for bankruptcy, especially given where fuel prices are right now," said one trader. "The pressure that auto suppliers are under is more apparent."
Delphi has said that if it does not manage to restructure by Oct. 17, 2005, it would consider judicial reorganization under federal bankruptcy laws. It is in talks with UAW, its largest union, and General Motors, its former parent, about cutting its high employee pension and healthcare costs.