Dan River lower on third-quarter loss; HealthSouth modestly rising

By Carlise Newman

Chicago, Nov. 11 - Dan River Inc. bonds dipped lower after the company reported a third-quarter loss compared with a profit a year ago late Monday.

The Danville, Va.-based company posted a net loss of $103.5 million, or $4.70 a share, compared with net income of $4.7 million, or 21 cents a share, a year earlier. Net sales for the quarter ended Sept. 27 were $103.7 million, down nearly 30 percent from $147.4 million a year earlier.

The results, released after the close Monday, included a non-cash write-down of $91.7 million related to goodwill impairment as a result of recent operating performance.

The company's 12¾% notes due 2009 retreated to 24 bid from 26 bid Monday, according to one trader. Another pegged the bonds at 25 bid.

"The bonds got as low as 22 bid right out of the gate and then went back up to 24," he said.

That issue had dropped several points lower a few weeks ago when the company said it would have difficulty meeting covenant requirements. The bonds had begun to recover last week, then on Friday fell 3 points to 26 bid.

Dan River said in its earnings conference call that it has hired a financial advisor at the request of its lenders and plans to file a business plan by Dec. 1 (see story on page one of this issue). Dan River said it hired Conway, DelGenio, Gries & Co. LLC to assist in drafting a business plan in the next month. When asked whether the plan would include restructuring information, the company said Conway was hired to background work and would not speculate on whether the plan would include restructuring.

During the call, Dan River was also asked whether it would be able to make its interest payment due in April.

"That's five months away. We'll worry about our business plan for now," Shea said.

HealthSouth Corp. paper continued to rise modestly after moving up to higher levels Monday.

HealthSouth's bonds were 1 point higher. The 7 5/8% notes due 2012 were quoted at 89 bid, 90 offered. The 7% notes due 2008 were seen at 89 bid, 91 offered, also up 1 point.

The bonds dropped about 4 points one week ago on news that its noteholders had sent a notice of default, and continued to slide 1 or 2 points each day until Friday, when they rose ½ point.

The bonds began their descent when HealthSouth received a notice of technical default from the 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.

"HealthSouth was still active but there wasn't much else going on. A few earnings reports which puts a damper on trading sometimes anyway," a trader said.

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