Collins & Aikman bonds continue retreat; Elan bonds nosedive on drug news

By Paul Deckelman and Sara Rosenberg

New York, Feb. 28 - There was no respite in sight for the battered bonds of Collins & Aikman Corp. as they were heard to have moved lower for a third consecutive session.

But the big loser was Elan Corp, whose heretofore above-par level bonds plummeted sharply after the company announced the suspension of shipments of a multiple sclerosis drug it had developed with another company after one patient using it died and another became gravely ill.

On the bank loan front, Mirant Corp. debt was heard to have firmed.

Collins & Aikman Products Co.'s 10¾% notes due 2011 were quoted by one trader in distressed bonds as having dropped two points on the session to 94 bid, while its subordinated 12 7/8% notes dipped to 69 bid from 72 on Friday.

There was no fresh news out on the Troy, Mich.-based automotive components maker, whose junior bonds were hammered down about six points last week, while its seniors lost three points, amid concerns in the media and expressed by analysts as to what rising petroleum prices would do to the company's raw materials costs, since it is a heavy user of plastics in making its automotive interior and exterior parts.

On Friday, the Detroit Free Press commented on the recent slide in the company's New York Stock Exchange traded shares and attributed the retreat to financial market fears that rising plastic prices "will make it even harder for the financially challenged Troy [Mich.] -based auto parts company to make money."

It said that "It appears Wall Street doubts" assertions by Collins & Aikman's CEO, former Reagan administration budget director David Stockman, that his company has had better success than most at passing along higher resin costs to customers and that plastics pricing would not have much material impact on the bottom line.

In line with the continued fall in the junk bonds, Collins & Aikman's shares continued their parallel fall, falling another 38 cents (16.03%) to $1.99.

Elan plunges

But the disaster du jour was Elan, whose 7¼% notes due 2008 dropped as low as 86 bid, 88 offered from Friday's going-home level of 104.25 right after the news about the voluntary recall of Tysabri by the Irish-based pharmaceuticals maker by Elan and its partner, Biogen Idec Inc., hit the tape.

Elan and Biogen said that they had suspended supplying and marketing the drug after consultation with the Food and Drug Administration, advising doctors to suspend prescribing the medication and suspending all clinical trial use of it.

The decision to withdraw the drug came after recent reports of two cases of serious effects among patients who used it along with an earlier Biogen Idec MS drug, called Avonex, in clinical trials.

One patient died and a second developed a suspected case of progressive multifocal leukoencephalopathy, a rare and frequently fatal disease of the central nervous system.

A trader at one shop said he had seen a high 70s print for the Elan bonds, "which was just a pickoff," he noted. However, the bulk of the trading went on in the high 80s, "bouncing around there for a while" before "slowly" moving up from their lows to finish at 92 bid.

He said there were "a lot of bonds being traded, a big volume on Trace," the Nasdaq bond tracking system. "It's a huge issue, $650 million, pretty liquid," he said. "We saw many tens of millions of these bonds being traded around."

At another desk, a market source looking at the fall in Elan's 7¾% notes due 2011 exclaimed "Whoa!" as he saw that the bonds nosedived to 87.5 bid from prior levels at 106, while the company's floating-rate notes due 2011 bottomed out at 85.5 bid, nearly 20 points below Friday's 104.5 price.

Elan shares sank $18.37, or more than 68%, to $8.53 on the New York Stock Exchange on Monday - the lowest the stock has been in more than a year, since 2003.

The first trader saw the reaction to the drug news as "knee-jerk." He said that Elan has "a lot of cash on the balance sheet. I don't think they have any immediate liquidity issues at all."

He allowed that Tysabri is an important produce for Elan, as well as for Biogen, and its loss could pose big problems for the company - which has spent tens of millions of dollars developing it - "medium to long-term. But in the short run, there aren't any worries about liquidity issues" connected to the drug's problems.

"And there's always the chance that they could market the drug somewhere down the road."

Mirant loans higher

Bank loan traders reported that Mirant Corp.'s 2003 paper traded up by about a point during Monday's otherwise subdued session, with the strengthening attributed to market technicals.

The bankrupt Atlanta-based energy company's bank debt was quoted at 74.5 bid, 75 offered by the end of the day, a trader said.

Back among the bonds, Mirant's notes were being quoted up a point across the board, despite a lack of fresh news.

A trader saw Mirant's 2½% and 5¾% busted convertibles up a point at 76 bid, 77 offered, while its 7.40% notes due 2004 and 7.90% notes due 2009 each moved up to 81 bid, 82 offered from 79 earlier.

Charter better

A trader saw Charter Communications Inc's bonds "up a skosh," on bullish commentary in Monday's Wall Street Journal. He said the Journal was predicting that the debt-laden St. Louis cable company "may surprise" market players by posting EBITDA of over $500,000 when it reports quarterly earnings on Tuesday morning.

He saw Charter's 8 5/8% notes half a point better at 82 bid, 83 offered, while its 11 1/8% notes due 2011 were likewise better At 86 bid, 87 offered.

At another desk, Charter's 10¼% notes due 2010 were seen a point better at 84.5 offered, but one source said that "most were ¼ to ½ better on the day.

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