Foamex bonds dive on widened loss; aaiPharma little changed despite missed coupon

By Paul Deckelman and Sara Rosenberg

New York, April 4 - Foamex International Inc. bonds were lower Monday on investor disappointment over the wider fourth-quarter loss reported by the Linwood, Pa.-based maker of foam rubber products, although they did come off their lows for the day to end not quite as bad as they had been earlier in the session.

Investors in aaiPharma Inc.'s bonds shrugged off the news that the Wilmington, N.C.-based pharmaceutical maker had failed to make the coupon on its 11% notes due 2010 and its repeat warning that a Chapter 11 filing was likely, dismissing the developments as essentially already priced into the bonds' levels.

In the bank loan market, Mirant Corp.'s 2003 and 2004 paper felt a bit softer on Monday, although there was no fresh news out on the bankrupt Atlanta-based energy company.

Foamex's 9 7/8% subordinated notes due 2007 were quoted by a market source as having dropped three points on the session to 48 bid, while its 10¾% notes due 2009 were likewise down a trey at 86 bid.

A trader at another desk said that the Foamex bonds had gyrated around at lower levels, before settling in.

He saw the 9 7/8s as having fallen as low as 46.5 bid from Friday's levels at 55.5 bid, 56.5 offered on investor disappointment with the numbers, but said that the company's conference call following the release of the results "must have been OK," because post-call levels crept back up to 51.5 bid, 52.5 offered at the close.

"They were still four or five points down on the day," he said, "but it was a pretty impressive comeback" from the earlier 10 point deficit.

He also saw Foamex's 10¾% senior notes due 2009 as having bounced off their lows for the day, although there the whipsawing was much less pronounced, with the bonds falling to 85 bid, 86 offered from Friday's close at 88.5 bid, 89.5 offered, and then coming back up to close at 87 bid, 88 offered, only down 1½ points.

The trader also saw the company's 13½% notes scheduled to mature Aug. 15 as last seen offered recently around 92, but no activity was seen in the issue, which is only a small remainder of a previously larger issue.

Foamex's Nasdaq-traded shares nosedived 33 cents (17.93%) to end at $1.51 on volume of 375,000, more than triple the usual handle.

Foamex announced a wider fourth-quarter net loss from a year ago of $15 million (61 cents per diluted share), substantially wider than the year-earlier deficit of $3.5 million (14 cents per share), primarily due to weakness in its automotive-related operations.

On top of those somber numbers, the company also said that it was restating its 2004 third-quarter financial statements to correct an error in recording the valuation allowance established in that period against its deferred income tax assets.

On the conference call, company executives detailed amendments to Foamex's credit facility aimed at giving the company more financial flexibility and said they had a "viable" plan in place for addressing the upcoming maturity of its 13½% notes due Aug. 15 (see related story elsewhere in this issue).

Collins & Aikman gains

Little was shaking otherwise in the battered automotive components sector, with Collins & Aikman Corp. - whose bonds have been perhaps the most prominent victim of investor angst over the health of the sector in the wake of declining auto sales - having actually managed a rare rise, its 10¾% senior notes due 2011 pushing up to 83 bid, 84 offered, and its 12 7/8% subordinated notes due 2012 rising to 47 bid, 48 offered, both up 1½ points on the session.

The rise followed the Troy, Mich.-based automotive interior and exterior components supplier's Friday disclosure in a Securities and Exchange Commission filing that it had received waivers from its lenders through June 15 of the timely reporting requirement in the covenants of its loan agreements.

Collins & Aikman had warned on March 17 that it would have to delay the filing of its 10-K annual report with the SEC due to its discovery of certain accounting problems, and further cautioned that even with the automatic 15-day extension upon the filing of its notice of delay with the Commission, it still might not have the report completed by that extended deadline.

After the market had mostly closed for the day, Collins & Aikman announced that it had obtained a new $75 million credit facility via Credit Suisse First Boston. A trader observed that "I'm sure people had a clue. The bonds will probably go higher [Tuesday]."

aaiPharma steady

Elsewhere, aaiPharma's 11% notes due 2010 were seen essentially unchanged at 48.5 bid, 50.5 offered, trading flat, or without their accrued interest, holding steady despite the company's announcement that it had not made the roughly $10 million coupon payment due April 1 on its $175 million of outstanding bonds, and its repeat of its previous warning that it is highly likely that it will seek Chapter 11 bankruptcy protection, dismissing the events as old news.

The company had announced last month that it would likely not make the April 1 coupon payment, and would also probably restructure through the courts, so, in the words of a trader, the bad news was "already baked in."

aaiPharma further said Monday that it has entered into an agreement that provides a three-week exclusivity period to a third party that is considering a purchase of certain assets of aaiPharma's pharmaceutical products division.

Owens Corning steady at lower levels

Owens Corning, whose bonds fell into the upper 50s Friday from prior levels in the mid-60s, was seen holding steady at those lower levels Monday.

The bonds tumbled as the bankruptcy court overseeing the Toledo, Ohio-based insulation maker's asbestos-driven reorganization set a value of $7 billion on claims from parties alleging asbestos-related medical problem due to exposure to its products.

In bank debt dealing, Mirant's '03 and '04 paper held levels estimated to be around 74 bid, 75 offered, compared to 74.75 bid, 75.75 offered on Friday, according to a trader.

"It seemed like it was weaker than Friday but it's hard to tell because nothing really traded today," he said. "It was just really quiet today."

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