Dana Credit jumps on forbearance talks news; Collins & Aikman bank debt better

By Paul Deckelman and Sara Rosenberg

New York, Aug. 4 - Dana Credit Corp.'s bonds, which were getting whipsawed around all this past week, rose smartly Friday, traders said, after the financing arm of the bankrupt Toledo, Ohio-based automotive components maker Dana Corp. was reported in a regulatory filing to be in talks with its bondholders on a forbearance agreement.

Also in the distressed auto sector, Dura Operating Corp.'s bonds - which had been rising steadily earlier in the week from previously oversold level - were traveling in the breakdown lane on Friday, moving lower for a second straight session.

Collins & Aikman Corp.'s bank debt meantime saw some upward movement on Friday for the first time since the week began - but again, no public information was seen sparking the paper's performance, according to a trader.

The bankrupt Troy, Mich.-based automotive interior components maker's bank debt closed out the day quoted at 73 bid, 75 offered, up from previous closing levels of 70 bid, 72 offered. That reduced the total losses the bank debt had seen over the course of the week to the area of 12 to 13 points from the 15 to 16 point range that was reported at the end of the day on Thursday.

The company's 10¾% junk bonds due 2011, which have been moving pretty much in tandem with the bank paper, were also a little better on Friday, moving up a point to 15 bid, 17 offered. That is still only about half the level that the bonds held at the beginning of July, when there was widespread speculation that firm bids for the company's domestic assets - it already sold its European operations - might appear. When those rumored bids did not surface, the bonds and the bank paper began their retreat.

The company's 12 7/8% notes due 2012 continue to languish in the low single-digit price range.

Elsewhere, a trader in distressed notes said that Dana Credit "was the name of the game today," while another said that the Dana Corp. subsidiary's 8 3/8% notes due 2007 "definitely felt better." He saw those bonds jump to 89 bid "and looking for offers" from 82 bid, 84 offered on Thursday. "They went up big time."

Yet another trader said the movements in the credit were "pretty wacky," noting that the bonds had been as high as 96.5 bid, 97.5 offered when the week opened, and then "traded off every day." After opening Friday's trading at 82.5 bid, 83.5 offered, by noon ET, he said, they had fallen to 79 bid, 80 offered, before bouncing back to end at 90 bid, 91 offered.

One of the other traders pegged the turning point somewhere between 1 p.m. ET - when the bonds hovered at 82 bid - and 2 p.m. ET, by which time they had hit the 90 level.

Those bonds took off after parent Dana. said in an SEC filing that Dana Credit - which in April had reached an agreement with an ad hoc noteholders committee to work with Dana Credit toward a global consensual restructuring of the notes and to forbear from exercising rights and remedies should there be an event of default under the Dana Credit notes - was in talks with the noteholders committee again, aiming at reaching a similar agreement, since the original agreement had expired in May.

Dana said that the proposed August forbearance agreement would, among other things, allow Dana Credit to market, sell and thereby monetize the value of its lease and other portfolio assets, and then to use the proceeds of such asset sales to make payments to certain noteholders (See related story elsewhere in this issue).

Parent Dana's 6½% notes due 2008 were meantime up ½ point at 85.25 bid, 86.25 offered, while its 5.85% notes due 2015 were unchanged at 74.5 bid, 75.5 offered.

Delphi, Tower gain

Among other bankrupt automotive suppliers, Troy, Mich.-based former General Motors Corp. parts unit Delphi Corp.'s 8½% notes due 2009 were ¾ point better on the day at 85.5 bid, 86.5 offered. Its 7 1/8% notes due 2029 were ¾ point better at 78.75 bid, 79,25 offered.

Novi, Mich.-based vehicular frames maker Tower Automotive Corp.'s 12% notes due 2013 were seen up a point, a trader said, at 54.5 bid, 55.5 offered, "but nothing much was said on it."

Visteon rises further

Among the supplier names not in bankruptcy, a trader saw Visteon Corp.'s bonds up another point or so on the session, on top of Thursday's solid gains, He quoted the Van Buren, Mich.-based parts maker's 8¼% notes due 2010 at 96.75 bid, 97.75 offered.

Those bonds had risen about 2 to 3 points Thursday on news reports that the problem-plagued former Ford Motor Co. subsidiary had hired J.P. Morgan Chase & Co. to explore strategic options, possibly including the sale of the entire company. Some of the reports also indicated that Visteon had also retained Citigroup. Visteon was said to have actually received a first round of bids.

Dura down again

An auto name which failed to keep its upside momentum was Dura, which retreated for a second consecutive session. A trader saw its 9% notes due 2009, which around midweek had reached highs of 30 bid, was down 2½ points Friday to end at 24.5 bid, 25.5 offered. Its 6 5/8% notes due 2011 were off ¾ point at 78.75 bid, 79.25 offered.

Northwest up on pension bill

Outside of the automotive area, a trader saw Northwest Airlines Corp.'s bonds as much as 3 points better, pushed up by Senate passage of a pension reform bill that gives troubled airline carriers like Eagan, Minn.-based Northwest up to 17 years to straighten out their underfunded pension programs, a provision that executives of bankrupt Northwest, the Number-Four U.S. carrier, and Atlanta-based Number-Three carrier Delta Air Lines Inc. had lobbied intensely for .

Northwest's 8 7/8% notes due 2006 moved up to 51 bid, 53 offered from 47 bid, 49 offered. Its other bonds were up 3 points across the board. Delta's bonds, like its 8.30 % notes, were a point better at 26.5 bid, 27.5 offered.

Delta on Friday filed a formal request with the bankruptcy court overseeing its reorganization to terminate its pilots' pension plan.

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