Tower Auto bonds, bank debt seen active after Chapter 11 filing

By Paul Deckelman and Sara Rosenberg

New York, Feb. 2 - Tower Automotive Inc.'s bank debt saw a flurry of activity at stronger levels on Wednesday morning after the company announced that it filed for Chapter 11.

That paralleled an early rise in the company's RJ Tower Corp. 12% notes due 2013, which surged as high as 60.5 bid "right out of the box" in the morning," a trader said; however, by the end of the day, those bonds had fallen back to around the 57.5-58.5 level they had traded at on Tuesday. Those bonds are trading flat, or without their accrued interest.

A trader saw the company's 5¾% convertible notes due 2024 at 13 bid, 15 offered, down from previous levels, although he said "we really didn't see a lot of activity in the converts." But he characterized the converts and its preferred shares as "heading for zero."

Almost all of the activity, he said, had come in the morning.

Another trader saw the 5¾% convertible bonds fall to the 13 bid, 14 offered by the end of the session, after opening with a bid at 13.5 and an offer at 15, which deteriorated during the day. The 6¾% preferreds fell in a big selloff, ending down by 1.15 to 1.55.

The Tower converts were "trading in a controlled manner, no panic," one sellside trader said, as the news was already factored into predictions. Yet, even in the teens the converts are probably trading at an optimistic level, according to one analyst.

Earlier in the week, Tower's bonds popped on short covering, and one convertible holder said the impact was not so bad for convert holders on swap.

"Fortunately, we only have a few million, and we're 10% hedged, so the most we can lose is about 12 points," he said. "I think the bonds will be worth something though for nuisance value in the bankruptcy."

Tower's first-lien term loan meantime was quoted at par bid, 100.25 offered, up about an eighth on the day, and the second-lien term loan was quoted at 103 bid, 104 offered, up about a point on the day, according to a trader.

When asked why the second-lien debt traded up so much, the trader responded, "I think there's some private information pushing it up."

Tower's bonds had slid into the 50s from levels above 80 after the company warned on Jan. 20 that its liquidity this quarter would be adversely affected - perhaps by as much as $40 million - by the longer-than-anticipated holiday-time shutdowns by its carmaker customers of many of their plants.

Analyst Joseph J. Farricielli of Imperial Capital LLC in Los Angeles said that even with the bankruptcy filing the company's 12% dollar notes and 9¼% euro notes are still a good buy at current levels in the upper 50s, since he projects likely recoveries for those obligations in the mid-70s, or even "potentially higher."

However, he cautioned that resolution would not come quickly predicting that the bankruptcy would take 1½ to two years to fully work itself out. And outside of the regular junk bonds, he warned, "the converts and the preferreds I don't see recovering anything."

A trader agreed with that assessment, declaring that the holders of the preferreds would get "nothing." The converts, he said, might see "a sliver" of a return - but not much beyond that.

Tower Automotive said in its bankruptcy announcement that it filed its petition with the bankruptcy court in New York to address its liquidity needs and facilitate a debt restructuring.

"Over the past 12 months, we have been focused on launching our significant new business backlog while taking the actions necessary to improve profitability and restore long-term financial strength to Tower so that we can continue to grow and meet our customers' needs," said Kathleen Ligocki, president and chief executive officer, in a company news release.

Like many companies in the automotive sector, Tower has been affected by lower production volumes on key auto maker platforms and increased steel prices. Additionally, the recent termination of early pay programs at certain auto makers has adversely affected its liquidity.

In connection with its bankruptcy filing, the Novi, Mich.,-based maker of automotive assemblies has arranged commitments for up to $725 million in debtor-in-possession financing from JPMorgan.

Mirant loans trade

In other bank debt trading news, Mirant Corp.'s '03 paper traded around a bit, moving up to 72 .5 bid, 73.5 offered during the first half of the session, but settling back down to unchanged levels of 72¼ bid, 73¼ offered by the end of the day, according to a trader.

No specific news sparked the activity and movement in the Atlanta energy company's bank debt, the trader added.

Adelphia bonds gain

Adelphia Communications bonds were "slightly better," a trader said, noting that "happiness is two bidders," for the whole country, with one of them being Time Warner Inc. and Comcast Corp. and the other being a team led by Kohlberg Kravis Roberts.

They were reported to have bid in the neighborhood of $17 billion for the assets.

The trader also mentioned the prospect that even though the formal deadline for qualified bidders to submit their bids for the Greenwood Village, Colo.-based cable company's assets came and went on Monday night, it might still be possible for them to refine or correct their bids, probably upwards.

Adelphia's 10¼% notes due 2011 were seen at 92 bid, 93 offered, pretty much unchanged on the session, while its 101/4s due 2006 were at 88 bid, 89 offered, also unchanged.

However, a trader saw Adelphia's Century Communications unit's 9½% notes due 2005 at 109.5 bid, 110.5 offered off about two points on the day.

Adelphia - which slid into bankruptcy in 2002 amid allegations that company founder John J. Rigas and sons and other members of his family in senior management positions had systematically looted Adelphia of hundreds of millions of dollars - is pursuing a two-track strategy, soliciting bids from current cable operators and/or financial backers, while at the same time reserving the right to reject the bids and continue to reorganize in hopes of emerging from bankruptcy as an independent company three years after it first sought Chapter 11 protection.

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