Intermet bonds and bank debt continue post-Chapter 11 gain; Dan River rolls along

By Paul Deckelman and Sara Rosenberg

New York, Oct. 4 - Intermet Corp.'s bank debt and bonds continued their recent firming trend - a trend which became noticeable after the Troy, Mich.-based automotive components maker's Chapter 11 filing last week.

Elsewhere, textile maker Dan River Inc.'s bonds were seen having pushed back over the 20 bid level, well up from their recent levels in the teens.

Intermet's 9¾% notes due 2009 were seen by some market participants Monday to have risen back above the 40 bid mark over the course of several sessions, after having languished in the lower-to-mid 30s last week before the company's bankruptcy filing, which was announced Thursday morning.

Ever since they filed and have been trading flat, they've bounced up nicely," a trader said. He saw the bonds "kinda unchanged," at 39.5 bid, 40.5 offered, "hanging in there" after having risen from around 34 bid, 35 offered a week ago, before the Chapter 11 declaration. It should be noted, however, that once the company sought the protection of the courts, the bonds began trading flat, or without their accrued interest - essentially amounting to the loss of several additional points, pretty much offsetting the nominal gain in the securities' price.

Another trader saw the bonds at 39 bid, 40 offered, "or maybe even at 40-41," having risen from 34 bid, 36 offered over the past few sessions.

A market source saw the bonds as having firmed to 40 bid from previous levels around 38

Bank debt traders meantime reported that the company's loan paper jumped to 93 bid, 95 offered Monday, or 93.5 bid, 94.5 offered, depending on which trader was asked - up from the high 80s- low 90s context seen late last week, with levels said to have been ticking higher on a daily basis since the Chapter 11 filing.

The company filed for bankruptcy protection in the U.S. Bankruptcy Court in the Eastern District of Michigan, citing a drastic rise in raw-material costs in North America and Europe.

Before that filing, Intermet's bonds had taken a pounding, sinking all the way down to the lower 30s from the mid-70s after the company - which makes powertrain, chassis/suspension and structural components for the automotive industry - warned that it will post a loss of between $19 million and $24 million for the third quarter, and that such a loss will leave it in violation of financial covenants in its credit facility. Its bank debt and shares were equally battered by investor reaction to the news.

On Monday, Intermet announced that it has obtained a commitment for a 12-month secured debtor-in-possession revolving credit facility of up to $60 million, with $20 million of availability upon bankruptcy court approval. The remaining $40 million of availability under the DIP is subject to various conditions, including due diligence, approval by the lender of a budget prepared by the company and final approval by the Court.

"We are pleased that we have been able to quickly secure a DIP-financing commitment and approval of our first-day motions so that we can move forward with our restructuring efforts. We are particularly encouraged to have received a commitment for up to $60 million, which is $10 million more than we initially anticipated receiving. The orders entered by the bankruptcy court, coupled with our anticipated DIP financing, will provide us with needed liquidity as we design and implement our restructuring plan," said Gary F. Ruff, chairman and chief executive officer, in a company news release.

Dan River rises

Apart from Intermet, a trader asked rhetorically "you know what's been better in the land of the distressed? Dan River."

He saw the bankrupt Danville, Va.-based textile maker's 12¾% notes due 2009 as having gone as low as the mid-teens recently, before coming off those lows to end trading Monday around 20 bid.

He said he had seen no fresh news out that might explain the rise, although he noted that another bankrupt textile operator, WestPoint Stevens Inc., announced closure of one of its factories, thus taking some capacity out of an industry which already has way too much capacity and not enough total sales to support it.

West Point, Ga.-based WestPoint Stevens - which sought Chapter 11 protection in June 2003 and whose bonds have languished in the low singe-digit range for months - said last week that it would close its Longview Plant, Hickory, N.C., at year-end. The Longview plant fabricates bedding accessory products and employs about 300 people. Company president and chief executive officer Chip Fontenot said in a statement that the closing was necessary "for WestPoint Stevens to successfully compete in today's global economy. We must follow a strategic plan to balance our domestic manufacturing and sourced products."

Besides the WestPoint Stevens news, the trader also pointed out that retailing juggernaut Wal-Mart Stores Inc. "said that bedding sales have been the strongest segment of their business - potentially good news for a company like Dan River, which makes and sells sheets, blankets and other bedding linens as a major part of its business."

At another desk, a trader quoted the Dan River bonds Monday at 19 bid, 21 offered, up from Friday's finish at 17 bid and well up from levels around 14 bid, 16 offered before that.

"Something is going on," he said, although he acknowledged that he didn't know what it might be.

Dan River - which sought chapter 11 protection in March in a filing with the U.S. Bankruptcy Court of the Northern District of Georgia, reported a $5.69 million loss for the reporting period that included most of the month of August (see related story elsewhere in this issue).

It was the second straight month that Dan River had reported sharply lower losses, in the $5 million range, versus the double-digit red ink it was wallowing in earlier in the summer.

Last month, the company said that it had monthly losses of $5.1 million between July 4 and Aug. 7, a considerable improvement from the net losses of $18.6 million it reported for the period between June 6 and July 3.

Sales for the 35-day period were $41 million, although the cost of those sales and the company's general and administrative expenses exceeded that total by $2.9 million. The company spent a little more than $1 million on reorganization expenses, reducing its losses excluding the bankruptcy to $4 million.

As of the end of the reporting period, Dan River posted total assets of $393.5 million, down $7.1 million from the July 3 total.

However, its cash position improved slightly, rising from $1.6 million on July 3 to $1.9 million as of Aug. 7.

Delta ascends

A trader saw Delta Air Lines Inc.'s bonds a little better, even as the troubled Atlanta-based air carrier's shares headed skyward by 30 cents (8.70%) to $3.75 on the New York Stock Exchange, perhaps helped by a minor moderating trend in oil prices, which backed off the more-than $50 per barrel mark seen at Friday's close of trading. A barrel of light crude closed Monday at $49.91, down 21 cents, on the New York Mercantile Exchange.

"I don't know if it's the oil, or what - it's tough to tell, because there was just such thin trading going on," he said, quoted Delta's 8.30% notes due 2029 as having firmed half a point on the day to 24 bid, 25 offered from 23.5 bid, 24.5 offered.

However, another trader saw Delta "languishing," its benchmark 7.70% notes due 2005 easing to 42 bid, 44 offered from 44 bid, 45 offered previously, while the 8.30s, he said were "about the same," at 22 bid, 24 offered.

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