Collins & Aikman bonds continue rebound; Allegheny Energy bank debt active

By Paul Deckelman and Sara Rosenberg

New York, Sept. 30 - Collins & Aikman Products Co. bonds continued to improve Tuesday from recently depressed levels amid more trading-pit chatter that the auto parts supplier was going to be lining up some bank financing somewhere in the near future, although nothing seems actually imminent.

Bank loan traders meanwhile busied themselves with the debt of Allegheny Energy Inc., which on Friday indicated on a conference call that it does not have enough cash to pay bank debt coming due next year, and so will seek to refinance nearly a billion-and-a-half dollars of bank debt maturing next year and in 2005.

With not much else seen going on in the market for distressed-company bank debt, market participants were heard starting to react positively to last week's financial filing by the Hagerstown, Md.-based energy company.

Allegheny's second-lien tranche was quoted at 97.5 bid, 98.25 offered by the end of the day, a trader said, having firmed from opening levels of 97 bid, 97.5 offered.

Another trader said that "things are looking good. People are happy with the fact that they're publishing their financials. It opens the door for people who have the money to spend."

However, he acknowledged, "it picked up because there are no sellers. Basically it's bid higher, but hasn't actually traded."

On the bond side of the ledger, a trader quoted Allegheny's 8¼% notes at 88 bid, 89.5 offered, "easier by maybe a point - but that's no real change."

An observer elsewhere saw Allegheny's 7.80% notes due 2011 a point better, at 84 bid.

Last week, Allegheny filed its 2002 annual report after a delay due to an accounting probe and said it anticipates filing its delayed quarterly results for 2003 by the end of the year. The company also said in its conference call that it will not have enough cash to pay $350 million in bank debt due next year and that it would refinance $1.45 billion in bank debt due in 2004 and 2005.

Following the call, the company's second-lien term loan was quoted lower at 96.75 bid, 97.75 offered, despite the company's assertion that it would be able to raise funds in the public debt and equity markets once it is up-to-date with its financial filings.

Included in the annual report was a "going concern" qualification from Allegheny's auditors, due to the non-current reporting causing non-compliance with covenants. That in turn caused $3.7 billion of long-term debt to be reclassified as short-term debt on the balance sheet.

Bond traders said Collins & Aikman bonds seemed to be catching a bid, propelled by no more than market speculation that the Troy, Mich.-based supplier of automotive components would be putting together some kind of bank financing - even though people more familiar with the bank debt market indicated that nothing was on the radar screen at this time.

"There's some rumors of a bank deal going through," a bond trader said, "and the bonds were up pretty significantly. They were in a short squeeze anyway and now it's been exacerbated. Guys who got short that issue are now scrambling, because now there are rumors of a bank deal."

He quoted the company's 11½% subordinated notes due 2006, which had recently retreated as low as the 69-70 area, as having jumped to 77.5 bid, 78.5 offered Tuesday from Monday's close at 71.5 bid, 72.5 offered, "a pretty significant move" in the credit.

He saw its 10¾% senior notes due 2011 trade as high as 88 bid before coming off that peak level to close at 86.5 bid, 87.5 offered, essentially unchanged.

Another trader agreed that all of the bank debt deal talk - however unfounded the rumors may appear right now - had given the company's bonds, particularly the subordinated notes, a solid boost over the past two sessions.

"That's a good move," he said, "definitely moving today."

He saw the 111/2s having firmed to 77 bid, 77.75 offered from 70.5 bid.72.5 offered several days ago, "so that was the big mover." The move in the senior bonds, he said, "wasn't so dramatic, because they're higher in the capital structure. He said those bonds had moved up to 86.5 bid, 87.5 offered Tuesday from 85 bid, 87 offered two days ago.

Collins & Aikman stock, which on Monday had jumped more than 11% in New York Stock Exchange dealings three times its usual turnover, did not share for a second straight session in the bond market's euphoria about the company; its shares were down three cents (0.88%) to $3.38 on volume of about 635,000, still more than double the usual activity level.

Elsewhere, a distressed-debt trader said, "it was actually pretty slow today."

He saw Air Canada Inc.'s bonds down three to four points on the session, quoting the reorganizing Canadian national air carrier's bonds as cheap as 37 bid, down from 41 recently.

Also among troubled airline credits, Atlas Air WorldWide Holdings Inc. bonds were quoted around 41 bid, 42 offered, little changed following Monday's Standard & Poor's downgrade of the Purchase, N.Y.-based air cargo carrier's enhanced equipment trust certificates on Monday.

The trader saw World Com Inc.'s bonds continuing to "hang out" in the same 33 bid context they've recently held, and noted how West Point Stevens Inc.'s 7 7/8% notes due 2005 and 2008 recently "had popped up to 23-24 from 17-19 - but now, they're right back down there around 20-22."

At another desk, a market source pegged WorldCom at 33 bid while the bonds of its MCI long-distance unit held steady at 78.5 bid.

A trader quoted Oakwood Homes Inc. bonds at 39 bid, 41 offered, down from recent levels around 40 bid.

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