Tower Auto bank debt seen up; Delta bonds firmer

By Paul Deckelman and Sara Rosenberg

New York, Feb. 3 - Tower Automotive Inc.'s second-lien bank debt was quoted at stronger levels on Thursday in muted trading as bank loan players evaluated the impact of the company's Chapter 11 filing on Wednesday.

In distressed bond trading, the company's RJ Tower Corp. notes, which had been gyrating wildly since late January as Tower's financial situation deteriorated, were seen fairly steady. And the bonds of struggling airline operator Delta Air Lines Inc. were being quoted at better levels.

Tower's second-lien term loan was seen at 103.75 bid by day's end, a trader said. On Wednesday, that paper had been seen at 103 bid, 104 offered, up about a point on the day, according to a different trader.

Tower's first-lien term loan was basically unchanged on the day at par bid, 100.25 offered, the first trader added.

RJ Tower's 12% notes due 2013 were being quoted on Thursday essentially little changed on the session, although a trader in distressed notes said that he had seen those bonds quoted as high as 62 bid, 63 offered, before going out at 58 bid, 60 offered, with the bonds now trading flat, or without their accrued interest. Another market source also saw those bonds unchanged at 58 on Thursday.

Tower's bonds had begun skidding wildly out of control on January 20, when the Novi, Mich.,-based maker of automotive frames and other assemblies warned that longer-than-expected holiday-time plant closings by many of its carmaker customers would adversely affect its first-quarter liquidity by up to $40 million, forcing its to dip into its cash reserves to keep operating normally.

That caused its bonds to tumble from levels around 80 bid all the way down to the high 60s, and the bonds kept heading south over the next two weeks, losing a few points here and a few more points there - at one point falling all the way down into the lower 50s - as speculation mounted that the company would have to file for bankruptcy, probably sooner rather than later.

After market speculation earlier this week - which proved to be well-grounded - that Tower would not make a scheduled Feb. 1 coupon payment on its issue of euro-denominated notes, the bonds began trading flat, which had the effect of nominally pushing them up several points, although the loss of the accrued interest effectively offset the nominal price gain. The credit rating agencies cut its bonds and other debt to default levels.

On Wednesday, Tower made official what many others had been speculating - that it had sought protection from its junk bond holders and other creditors in a Chapter 11 filing with the U.S. Bankruptcy Court for the Southern District of New York, listing $787.9 million of assets and $1.31 billion in debts.

Delta gains

Elsewhere, Delta Air Lines' bonds were seen trading at better levels, with a market source quoting the Atlanta-based air carrier's benchmark 7.70% notes due 2005 as having firmed to 88 bid from 87.5 previously, and its 7.90% notes due 2009 as having moved up to 52 bid from 51. Among the longer-maturity issues, Delta's 9¾% notes due 2021 advanced to 41 bid from 39.5, while its 8.30% notes due 2029 were seen a point better at 40.5.

A trader at another shop saw Delta's bonds "all up a point to two points," with the 8.30s at 41 bid, 42 offered, the 7.90s at 50 bid, 52 offered, its 10% notes due 2008 at 60 bid, 62 offered, and the 7.70s at 88 bid, 90 offered.

Delta reported Thursday that traffic rose 12.3% in January on increased capacity, as revenue passenger miles - defined as one paying passenger flying one mile - rose to 8.68 billion from 7.73 billion last year on a 5.2% increase in capacity. Delta also said that its said January system load factor, - the percentage of seats filled with passengers - was up 4.5 points to 71.8%. The airline boarded 8.6 million passengers in January, up 9.4% from a year-earlier.

However, what effect the increases will have on the company's revenues and its bottom line remain to be seen, since Delta recently instituted a wide-ranging overhaul of its fare system that involved cutting out a number of fares, mostly those at the top end of the scale. In its recent conference call, though, Delta said that it was convinced that the simplified and now less expensive fare structure would yield more traffic, since it had increased passenger travel on flights into and out of its hub in Cincinnati during a four-month test period last year.

Adelphia strong

Adelphia Communications Corp.'s debt "went out firm," a trader said, in the aftermath of the formal closing of the bidding process on its asset-sale auction earlier in the week. He quoted the bankrupt Greenwood Village, Colo.-based cable operator's 10¼% notes due 2006 up half a point at 88 bid, 89 offered, and its 10¼% notes due 2011 a point better at 93 bid, 94 offered.

At another desk, the 10 ¼ 2011s were seen half a point better at 92.5, while it 10 7/8% notes due 2010 advanced to 89.5 bid from 88, and its 9 7/8% notes due later this year inched up to 87 bid from 86.5. Its 9 7/8% notes due 2007 were likewise half a point better at 88.5.

However, the 8 7/8% notes due 2007 of its Century Communications unit were seen having fallen to 107 bid, down three points from prior levels. A trader said that "Century's post-petition claims were seen weaker," and he also quoted the unit's 9 ½% notes due later this year as having fallen to 109.5 bid, 110.5 offered from previous levels at 111.5 bid, 112.5 offered.

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