Elan bonds bounce after last week's fall; Mirant loans weaker

By Paul Deckelman and Sara Rosenberg

New York, March 7 - Elan Corp. was seen on the rebound Monday as buyers apparently reacted to the bonds' badly oversold condition after its bonds and shares were beaten down last week when the Irish pharmaceutical company announced troubles with a new multiple sclerosis drug it had developed with Biogen Idec Inc.

Collins & Aikman Products Co. bonds were also seen bouncing back after having been battered around at lower levels for much of last week.

In bank debt trading news, Mirant Corp.'s 2003 and 2004 paper was seen slightly weaker on Monday, as last week's rally in the bankrupt Atlanta-based energy company's loan instruments has apparently come to an end.

Elan's bonds were seen higher - or at least, its short paper was - with the company's 7¼% notes due 2008 having moved up to 91.5 bid, 92 from prior offered levels around 90.5, "so they were a little bit better," a trader said.

However, he pegged the company's other bonds, such as its 7¾% notes due 2011, as softer on the session at 84.5 bid, 85.5 offered.

Another trader saw those bonds at 85 bid, 87 offered, unchanged on the day, while the senior bonds were up at least a point at 91 bid, 93 offered.

Elan's bonds were on a wild roller coaster ride last week, after the company announced that it and partner Biogen were pulling their multiple sclerosis drug Tysabri off the market after one patient taking it died of a rare condition and a second also came down with symptoms of the same potentially fatal ailment.

Elan and Biogen said a week ago 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. Later in the week, Elan confirmed that the second patient had, indeed, developed the same condition that apparently killed the first one.

Elan's New York Stock Exchange-traded shares, which had been battered along with its bonds by last week's news, were up 73 cents (12.78%) Monday to $6.44. Volume of 54 million shares was about five times the norm.

Mirant loans lower

Mirant's bank loan paper was seen Monday finally turning downward following a week of pure gains, with the debt quoted down about a quarter of a point at 77.25 bid, 77.75 offered, with some trades seen at the 77.625 level during the session, according to a trader.

The lower levels were basically attributed to inactivity in the market, the trader added.

By comparison, all last week the energy operator's paper was on the rise, gaining about a point every day, except for Friday when it only gained about a quarter of a point.

That strengthening had been attributed to market technicals and increased investor focus on the name due to a positive research report on Mirant, traders said.

Meantime, Mirant's bonds were also on the upside all of last week; however, on Monday, they were seen unchanged, with the bankrupt parent company's 7.9% notes due 2009 and its 7.4% notes that were to have matured last year quoted at 84.5 bid.

The company's Mirant Americas Generating Inc. (MAGI) 8 5/8% notes due 2012 were at 110 bid, and its 9 1/8% notes due 2017 were at 115.

Calpine stronger

Also in the energy generation sphere, traders were quoting Calpine Corp. debt about two points better, with its Calpine Canada Energy Finance unit's 8½% notes due 2008 at 79.25 bid, up two points on the session - and those same bonds had been rising on Friday as well. The parent company's 8½% notes due 2011 were up 1½ points to 74 bid.

Also up there were the Calpine 8½% notes due 2011, which a trader estimated were up by as much as 1½ points at 74 bid, 75 offered.

Calpine's 8¾% notes due 2007 were seen half a point better at 85.5 bid.

The San Jose, Calif.-based energy generation company announced last week that it had closed on $503 million of project financing that would allow it to complete the construction of two plants, the 375-megawatt Mankato Energy Center in Blue Earth County, Minn., and the 250-megawatt Freeport Energy Center in Freeport, Texas.

Collins & Aikman recovers

In the automotive sphere, Collins & Aikman's bonds, which had gyrated around at mostly lower levels last week, were seen solidly up on Monday, with a trader quoting its 10¾% senior notes due 2011 up three points at 94 bid, 95 offered, and its 12 7/8% subordinated notes due 2012 at 72 bid, 74 offered, up five or six points on the session.

The bonds, a trader said, "had a nice little bounce, probably on short covering," following their recent battering, which was sparked by reports in the company's hometown newspaper, the Detroit Free Press, and in analysts' reports, that the Troy, Mich.-based automotive component maker would be hurt badly by rising plastic prices, which have escalated along with world oil prices, since most plastics are derived from petrochemicals. Collins & Aikman makes mostly plastic interior and exterior components for The Big 3 and other original equipment manufacturer customers.

Those bonds "were a little oversold," another trader said, "and then somebody stepped in and started buying the seniors, and the juniors were way oversold, relatively. There apparently were people who were selling the subs and buying the seniors and it got really out of whack, by about 20 points or so, and it's come back about 12. The whole capital structure's up several points."

The trader also cited market rumors that "they're getting squeezed by some of their suppliers. The numbers are out next week, so we'll see what happens."

In other automotive names of interest in distressed investment circles, Foamex International Inc.'s bonds were seen having improved, with its 13½% notes a point better at 97 bid, 99 offered, a trader said.

However, a market source at another shop saw Foamex's 9 7/8% notes due 2007 down as much as three points at 62 bid.

There was no new news out on the Linwood, Pa.-based producer of foam rubber products used in such applications as car dashboards and seats.

A distressed-debt trader saw Tower Automtive Inc.'s RJ Tower Corp. 12% notes due 2013 unchanged at 61 bid, 62 offered.

Away from the autos, he saw Winn-Dixie Stores Inc.'s 8 5/8% notes due 2008 gyrate around at higher levels, getting as good as 60 bid, 62 offered, before dropping back to end essentially unchanged at 58 bid, 60 offered.

But he saw the bankrupt Jacksonville, Fla.-based supermarket operator's real-estate secured 7.803% and 8.181% pass-through certificates a point better at 81 bid, 82 offered.

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