Collins & Aikman travels the low road; Atkins bank debt on crash diet

By Paul Deckelman and Sara Rosenberg

New York, March 18 - Collins & Aikman Products Co.'s bonds looked to be on the road to oblivion Friday, with the Troy, Mich.-based automotive components supplier's already badly beaten subordinated bonds seen plummeting down into the 40s, off at least five or six points on the session.

In bank debt dealings, Atkins Nutritionals Inc.'s paper continued to waste away Friday, apparently in the wake of a poorly received lender call.

Collins & Aikman's 12 7/8% subordinated notes due 2012 were seen by one market source to have fallen to 47.5 bid, off from a 52 close on Thursday, while its 10¾% senior notes due 2011 were seen down half a point on the day at a bid level of 84.5.

At another shop, a trader observed that the bonds "got whacked," with the 103/4s two points lower on the session at 84 bid, 85 offered, while "the subs got hit a lot harder," with the 12 7/8s swooning as low as 43 bid from Thursday's already depressed closing level of 54 bid, 55 offered, although the bonds did bounce off those lows to finish at 48.5 bid, 49.5 offered, still down about 5½ points on the day.

It was the latest in a string of big losses for Collins & Aikman, whose bonds - which recently had seemed to be recovering from beatings they took earlier in the month - began heading south Tuesday when the company postponed its scheduled release of 2004 fourth-quarter and full-year earnings and the accompanying conference call, pushing those back to Thursday from Tuesday.

When Thursday finally rolled around, the company held its conference call - only to announce that it was not able to file its annual report with the Securities and Exchange Commission as scheduled on Wednesday and had filed for an automatic 15-day extension. But Collins cautioned that even that might not be enough time.

The company also revealed an accounting problem which will certainly cause a restatement of its results for the first nine months of last year and which may make a restatement of its 2003 results necessary as well.

Collins hardly needed more bad news - it has been staggering for weeks on negative investor perceptions about the company's fortunes, owing to the double whammy of escalating costs of raw materials such as steel and plastics - derived from petrochemicals - as well as a slowdown of orders to the whole automotive supply sector by their bread-and- butter customers, Detroit's Big Three.

Their dependence on the fortunes of the major carmakers was driven home to sector investors Wednesday when General Motors Corp.'s warned that it will likely post a first quarter loss of as much as $150 million - everyone had been expecting GM to at least break even - and that its 2005 earnings will be down sharply from previous guidance. That caused both Moody's Investors Service and Standard & Poor's to put the auto giant's bonds and other debt under scrutiny for a possible downgrade to junk status.

The ripple effect was felt throughout the supplier sector, and not just by Collins & Aikman.

Tower, Foamex lower

Traders saw the 12% bonds due 2013 of bankrupt Novi, Mich.-based vehicle frames maker R.J. Tower Corp, for instance, fall to 54.75 on Friday from 56 previously.

Foamex International Inc.'s 13% senior notes due 2005 dropped to 90 bid from 94 previously, and its 10 ¾% notes due 2009 lost half a point, to 86.75. The 9 7/8% subordinated notes due 2007 of the Linwood, Pa.-based maker of foam rubber products for automotive and other applications plunged to 52 bid from 56 on Thursday.

However, bankrupt Troy, Mich.-based automotive metal stamping company Intermet Corp.'s 9¾% notes due 2009 were seen by one trader unchanged around the same 63-65 context they have recently held, and another trader actually saw them firm to 66 bid from 64.5.

aaiPharma continues slide

Apart from the auto sector, aaiPaharma Inc.'s 11% notes due 2010 were seen by one trader a few points lower, quoted at a wide 55 bid, 58 offered, and trading flat. The troubled Wilmington, N.C. -based pharmaceutical company's bonds stopped trading with accrued interest earlier in the week after it said in a filing with the SEC that it would likely not have the money to make a $10 million interest payment on the bonds due April 1 and that a restructuring via Chapter 11 was a distinct possibility.

Atkins loans down

In bank debt action, Atkins Nutrition's first-lien term loan paper has fallen sharply of late, and is now estimated to be in the 60s while the second-lien term loan of the Ronkonkoma, N.Y.-based provider of food, nutritional and information products for controlled carbohydrate lifestyles was looking positively anorexic, down in the 20s, according to a trader.

The free fall began on Thursday after the company held a private lender call. Although information about what was said in the call is unavailable, it was obviously bad news, as the market reacted immediately by dropping the first-lien debt by more than 10 points and dropping the second-lien bank debt by close to an astonishing 20 points.

By close Thursday, the first-lien bank debt was quoted somewhere in the mid-70s, well down from previous levels of 87 bid, 89 offered and the second-lien bank debt was quoted somewhere in the low 50s, down from levels in the high 60s.

The carnage did not stop there, as both tranches continued to plummet Friday, to the 60s for the first-lien paper and the 20s for the second-lien instrument, respectively.

Elsewhere, Mirant Corp.'s '03 and '04 bank debt fell off by about a point in Friday's market to 75 bid, 76 offered, according to a trader.

"It's just down with the market. Went out heavy yesterday and was quiet today," the trader explained, in viewing the easing in the bankrupt Atlanta-based energy company's paper.

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