Oakwood Homes, Collins & Aikman higher in quiet session; Allegiance slips slightly

By Carlise Newman

Chicago, Nov. 26 - Oakwood Homes Corp. was still in the limelight Wednesday in a very quiet holiday-shortened session. The company's bonds had improved in recent days on news that it is to be acquired out of Chapter 11 by Clayton Homes Inc., a subsidiary of Berkshire Hathaway Inc., for $373 million.

The purchase is subject to the approval of an amended reorganization plan by the company's creditors and the bankruptcy court. The transaction is expected to close by March 31, 2004.

The Greensboro, N.C.-based home builder has been informed that the sale has the support of the Oakwood's official committee of unsecured creditors.

Oakwood's 7 7/8% notes due 2004 and 8 1/8% notes due 2009 were 1 point higher at 48 bid, 50 offered. After the news Tuesday, Oakwood paper got as high as 51 bid and then fell back to close at 47 bid. The notes had most recently been around 42 bid.

Elsewhere, Collins & Aikman Corp. was slightly higher. The company's 10¾% senior notes due 2011 were 1 point better at 91 bid/92 offered, according to a trader. The bonds had been trading in the mid- to high 80s for the last few weeks, and were last seen at 88 bid on Monday.

"There's no major reason for the gains. There was no fresh news," a trader said.

In mid-November, the Troy, Mich.-based auto parts supplier reported a narrower third-quarter loss on lower expenses and reaffirmed its 2003 guidance, excluding restructuring and impairment charges.

The company said its third-quarter loss was $32.1 million, or 38 cents a share, compared with a loss of $45.2 million, or 54 cents a share, last year.

The third quarter included impairment and restructuring charges totaling $16 million, or 19 cents a share. The restructuring charge was related to costs associated with reducing the company's salaried workforce by 750, or 14%.

Meanwhile, Allegiance Telecom Inc. bonds continued to slow down after several days of gains on a news report that Qwest Communications Inc. is offering to buy the company for $350 million.

"It's lucky that there was news out there this week, or today would have just been bust," a trader said.

The value of Qwest's bid for Allegiance, a Dallas-based telephone and data company which filed for Chapter 11 bankruptcy protection in May, would include cash and assumed debt.

Qwest is still far away from completing a deal and that at least two other bidders other than Qwest have expressed strong interest in Allegiance, news reports said.

Allegiance's 11¾% notes due 2008 fell ¼ of a point to 40½ bid. The bonds had been as high as 42 bid on Monday and fell slightly on Tuesday to end the session at 40¾ bid. On Friday, the bonds jumped 5 points across the board after the news was released.

Elsewhere, Air Canada bonds were "a little better" after the airline received notice of an unsolicited revised investment proposal from Cerberus Capital Management LP on Friday.

Cerberus' proposal came after Air Canada had completed its formal bidding process which resulted in its board of directors selecting Trinity Time Investments, a corporation controlled by Victor T. K. Li, over Cerberus. The agreement with Li includes a C$450 million equity investment, which would represent 31% of the common equity in restructured Air Canada.

Air Canada's 10¼% notes were seen up 1 point to 51 bid, according to a trader. The bonds were seen in the mid-40s last week before rising 3 points Friday after the news of Cerberus' bide , and 1.5 points Tuesday.

However Air Canada has requested the court approve its selection of Trinity Time Investments.

Air Canada's request for approval is supported by the court-appointed monitor for the company's proceedings under the Companies' Creditors Arrangement Act, Ernst & Young.

Ernst & Young said in a report that Air Canada and its legal and financial advisors believe "there would be a substantial risk" to the company and its stakeholders if Cerberus could not meet the regulatory requirements.

If Cerberus could not obtain the necessary approvals, Air Canada's emergence from bankruptcy could be delayed, which could "materially prejudice" recovery for stakeholders, Ernst & Young said.

In other news, Loral Space & Communication Inc.'s 10% notes due 2006 were down a point at 73 bid, 75 offered, according to a trader.

"Loral paper has been everywhere. It's up, it's down, usually not by much," he said.

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