HealthSouth firmer across the board; Foster Wheeler better on earnings; Collins & Aikman higher

By Carlise Newman

Chicago, Nov. 10 - HealthSouth Corp. paper had a good run Monday in big volume after several sessions of sliding downward from negative news on the company, including a notice of default from its bondholders.

HealthSouth's bonds were about 2 points higher across the board. The 7 5/8% notes due 2012 were quoted at 88 bid, 89 offered, up from 86 bid, 88 offered on Friday. The 7% notes due 2008 were seen at 88 bid, 90 offered, up from 87½ bid, 88 offered, one trader said.

Those two issues had dropped about 4 points last Tuesday after the default news was out, and continued to slide 1 or 2 points each day until Friday, when they rose ½ point.

"Everything was higher. The bonds were really hot today. It was pretty much all we did," he said.

The bonds began their descent when HealthSouth received a notice of technical default from holders of some of its senior notes and senior subordinated notes.

The notes provide for a cure period, following which the noteholders would have the right to accelerate payment of the outstanding amount on the notes.

The Birmingham, Ala.-based healthcare provider said in a news release that it is current on all interest payments due to its bank and noteholders. The company also reiterated it intention to remain current on all upcoming interest payments.

Meanwhile late Sunday, former HealthSouth chief executive Richard Scrushy, who was indicted last week, named a new legal team to defend him against the Federal Government's charges that he deliberately inflated the company's earnings.

Elsewhere, Foster Wheeler Ltd. debt improved slightly after the company said it narrowed its third-quarter loss, based on a swing to profitability in its energy, engineering and construction units. Foster Wheeler also said it believes it has adequate liquidity through the end of 2004.

In a press release Monday, the holding company posted a third-quarter loss of $26.9 million, or 65 cents a share, including a $26.1 million pretax charge. In the year-ago period, the company posted a net loss of $151 million, or $ 3.69 a share, including pretax charges of $146.7 million.

Foster Wheeler's 6¾% notes due 2005 were seen rising a point to 55½ bid, 57 offered, one trader said, after getting to levels as high as 58 bid early in the morning.

"The earnings were out before the bell so the shine was gone by the end of the session," he added.

The Hamilton, Bermuda-based company said total revenue for the third quarter rose to $896.2 million from $814.2 million last year and the company posted earnings before interest, taxes, depreciation and amortization of $13.2 million in the quarter, compared with an EBITDA loss of $97.8 million in the year-earlier period.

Elsewhere, Collins & Aikman Corp. paper continued its modest rise Monday from Friday after being slammed earlier last week when it confirmed that it would not supply interior trim for future DaimlerChrysler AG midsize sedans.

News reports had said Chrysler was considering dropping the company as a supplier a few weeks ago.

Collins & Aikman said that the Chrysler D-segment business did not meet higher hurdles for returns on investment that it adopted after obtaining the interior trim contract in April. The company said the business would not produce revenue until mid-2006 or later, while requiring an initial investment of more than $50 million plus significant price givebacks on current business.

The 10¾% senior notes were up 1 point to 84 bid, 86 offered, after dropping about 2 points Thursday, according to a trader. The bonds were at levels near 84 bid, 86 offered at the beginning of the week.

"They're pretty much back to the levels they'd been holding steady at for a few weeks before the Chrysler news. It looks like this won't hurt them as much as originally thought," he said.

Collins & Aikman said in a news release that it has accommodated Chrysler's effort to transition the D-Segment to another supplier.

In other news, Denny's Corp.'s 11¼% notes due 2008 were seen at 65 bid, down ½ point. The Spartanburg, N.C.-based restaurant chain operator had reported dismal earnings one week ago, dropping nearly 5 points after the report was out. The paper brightened, rising 3 points, when it reported better same-store sales the following day. Last week, the bonds were relatively dormant.

Revlon Corp.'s 8 5/8% notes due 2008 were seen up 4 points to 53 bid, according to a trader, "for no particular reason." The cosmetics company also recently reported earnings a week ago that missed the mark, which forced its paper down 3 points. The bonds were marginally lower last week, dropping 1 point on Friday.

Telewest Communications plc's 9 5/8% notes due 2006 were up 1 point at 56½ bid, according to a trader. The bonds have been slowly creeping higher each day, but shot up 3 points last Thursday after positive earnings news.

Telewest said its earnings and exceptional items for the third quarter to Sep. 30 was £114 million compared with £97 million for the same period last year.

(Paul Deckelman contributed to this report)

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