Dan River sustains slump from disappointing earnings; Collins & Aikman unchanged to higher

By Carlise Newman

Chicago, Nov. 12 - Dan River Inc. bonds were still sinking Wednesday, weighted by the third-quarter loss that was released 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% 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 fell 1 point to 23 bid from 24 bid, according to one trader. The bonds had fallen 2 points after the earnings news, released late Monday.

That issue had dropped several points 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. Asked whether the plan would include restructuring information, the company said the advisor was hired to do background work and would not speculate on whether the plan would include restructuring.

"It wasn't as big a drop as it could have been," one trader said. "The company did a pretty good job of trying to reassure investors."

Elsewhere Collins & Aikman Corp. paper was unchanged to rising modestly, one day ahead of the release of the company's third-quarter earnings report.

Its 10¾% notes due 2011 firmed to 84 bid, 86 offered from 83½ bid, one trader said. Another pegged the bonds unchanged at 84½ bid. The bonds had dropped about 3 points last week on news that DaimlerChrysler AG had dropped two of the company's contracts. Then the paper slowly rebounded as news reports quoted analysts saying the troubled auto parts supplier would weather the loss.

Collins & Aikman issued a press release last Thursday, saying it "fully accommodated" Chrysler's desire to give the mid-size vehicle work to another supplier. Collins & Aikman said it agreed to do so because that work no longer fits into its strategy for new business.

The lost work on the mid-size vehicles wouldn't produce revenue until mid-2006 at the earliest, Collins & Aikman said in its release. The company estimated that the work would require a front-end investment of more than $50 million, plus significant givebacks on current business.

Meanwhile, HealthSouth Corp. paper skidded lower after moving up to higher levels earlier in the week.

HealthSouth's bonds were 1 point lower. The 7 5/8% notes due 2012 were quoted at 87 bid, 88 offered. The bonds had risen 1 point Monday and another point Tuesday to land at 89 bid, 90 offered.

"There didn't seem to be any reason for it. This is one issue that tends to be all over the place," the trader said.

The bonds dropped about 4 points one week ago after 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.

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.

In other news, Finova Group Inc. paper was higher after company's 10-Q said it bought back $100 million principal amount of bonds during the quarter. A trader said investors "got all excited" and took the bonds up to 52 bid, 53 offered, up from 50 bid, 51 offered previously. The bonds ended the session at 51¼ bid, 52¼ offered.

WorldCom Inc.'s 8% notes due 2006 were up 2 points to 37 bid, according to a trader. The bonds have been rising a point or so each day since the telephone company's reorganization plan was confirmed Oct. 31.

Revlon Inc.'s 8 5/8% due 2008 were up 2 points to 56 bid, 57 offered, one trader said. Revlon bonds have varied in price for the last few weeks since the company reported a wider-than-expected third-quarter loss.

(Paul Deckelman contributed to this report)

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.