Collins & Aikman bonds firmer, but only moderately so; Mirant winning streak continues

By Paul Deckelman and Sara Rosenberg

New York, March 3- Collins & Aikman Products Co. notes looked like they were going to pick up Thursday right where they had left off Wednesday and continue strongly rebounding from the recent bout of overselling that the Troy, Mich.-based automotive component supplier's bonds had seen. But the early momentum did not last, and the bonds gave up much of their early gains after a Standard & Poor's ratings downgrade, and ended only moderately higher.

In bank loan trading, Mirant Corp. continued to defy gravity, as the bankrupt Atlanta-based energy company's paper put together its fourth straight advance.

Collins & Aikman bonds - which had been getting killed over the previous four sessions or so before the sudden burst of strength in Wednesday's late dealings lifted the bonds - opened trading Thursday on a strong note, with the company's 12 7/8% subordinated notes due 2012 seen trading as high as around 70 bid, a four-point rise, and its 10¾% senior notes due 2011 seen up more than a point, as high as 94 bid.

"But they settled back down," a trader in distressed issues said, quoting the 12 7/8s going home at 68 bid, 69 offered, up two points on the day instead of the earlier four. The 103/4s meantime backed off their peak levels to close around the same 92 bid level they had been seen in late Wednesday

"They started relatively strong," a second trader said, "but then the downgrade [by Standard & Poor's, one notch to B] took the wind out of their sails" and caused the bonds to surrender some of their early gains and end only modestly higher.

He saw the 12 7/8% notes finishing the day at 68.75 bid, 69.75 offered, "still up a legitimate three points on the day," while the 10 7/8s backed off from their 94ish context at 92 bid, 93 offered, which he called "essentially unchanged."

Besides lowering the corporate credit rating on Products' corporate parent Collins & Aikman Corp. to B from B+ and putting the rating on CreditWatch negative - meaning another downgrade is possible, S&P also lowered the company's senior secured rating to B from B+, its senior unsecured to CCC+ from B- and subordinated debt from B- to CCC+. S&P said the rating actions reflect increased concerns about the company's liquidity and financial flexibility amid an increasingly difficult operating environment for automotive suppliers.

Industry conditions for automotive suppliers have deteriorated in recent months because of reduced vehicle production, higher raw material costs and more constrained liquidity, according to S&P.

The fadeout of Collins & Aikman's rebound was echoed in the downturn seen in some other issues in the vulnerable sector, which is still reeling from the one-two punch of higher raw materials costs for plastics, derived from oil, and steel, as well as announced production cutbacks by Ford Motor Co. and General Motors Corp.

Tower Automotive Inc.'s 12% RJ Tower Corp. notes due 2013 were hanging in around the same 60 bid, 61 offered level that the bankrupt Novi, Mich.-based automotive frame maker's bonds had enjoyed earlier in the week.

However, the bankrupt Troy, Mich.-based automotive metal stamping and casting company Intermet Corp.'s 6 7/8% notes due 2009 moved up to 66.25 bid from 65 previously.

Mirant loans up some more

Mirant's 2003 and 2004 paper gained another point on Thursday, bringing total gains so far this week to about four points, according to a bank debt trader.

He saw the company's '03 and '04 paper close out the session with levels of 77.5 bid, 78 offered, up from 76.5 bid, 77 offered on Wednesday.

The rise seen in levels over the course of the week has been mostly attributed to market technicals. However, a report that was released earlier in the week on Mirant may have helped bring some attention to the name.

"Somebody put out a research piece earlier in the week saying EBITDA is understated, so that may have caught peoples' eyes," the trader said. "[Also], people still think it's cheap versus its comparables."

Mirant bonds have also been beneficiaries of the firming trend, with the company's 2½% convertible notes a point better at 79 bid, 80 offered and its 5¾% convert advancing to 82 bid, 83 offered. A trader quoted the company's 7.40% notes due 2004 and its 7.90% notes due 2009 hanging in at the same 83 bid, 84 offered level at which they ended on Wednesday.

At another desk, a source saw the 7.40s and 7.90s both trading at 84.5 bid.

The company's Mirant Americas Generating (MAGI) bonds, like its 8 ½% notes due 2021, were seen unchanged at 109.75

Adelphia Communications Corp.'s 10 7/8% notes due 2010 were a point firmer at 91, while its 10¼% notes due 2011 sere seen also up a point at 94. Its 10¼% notes due 2006 were at 88, unchanged on the day.

And asbestos-related bonds were seen easier, as momentum for a quick Capitol Hill agreement on an asbestos claims payment mechanism seems to have stalled.

Owens Corning's notes were quoted down 1¼ points at 63.5 bid, while Armstrong World Industries dropped to 68 bid from 70 bid previously.

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