Collins & Aikman travels the low road - again; Mirant bank debt down

By Paul Deckelman and Sara Rosenberg

New York, May 16 - Collins & Aikman Corp.'s bank debt and the bonds issued by its Collins & Aikman Products Co. subsidiary were driving a familiar route Monday - heading downward - as the loan and junk markets continue to digest the trunkful of bad news that the Troy, Mich.-based automotive components company announced last week. Other automotive names were also being towed lower.

Outside of the vehicular sphere, Mirant Corp.'s bank debt was seen down more than a point, pulled down by a general feeling of market weakness.

Collins & Aikman's bank debt felt slightly weaker Monday, with levels of 88.5 bid, 90 offered seen closing out the day, down a bit from levels of 89 bid, 91 offered on Friday, a trader said.

That bank debt began its downward spiral last Thursday from previous levels of 96 bid, 98 offered - around the same time that the company's two junk bond issues, its 10¾% senior notes due 2011 and its 12 7/8% subordinated notes due 2012, also began a sharp slide.

Over the three sessions - Thursday, Friday and Monday - the senior bonds slid in stages from around 66 at Thursday's open, to 46 by the close, then to 38 going home Friday, and then to bid levels around 33-34 at the end of Monday's session.

The subordinated bonds - which had already fallen sharply to around the mid-20s - collapsed down to around 8-to-10 on Thursday, to about 6 bid on Friday and to 4 bid on Monday.

The debacle was sparked by the company's disclosure that it is facing liquidity challenges, the resignation of its chief executive officer, as well as the need to seek loan waivers.

Downgrades by Standard & Poor's on Thursday and by Moody's Investors Service on Friday didn't help the situation, either.

On Thursday, the company said that it would be seeking a waiver under its credit facility of the consolidated leverage ratio covenant because it anticipates being unable to comply with this requirement based on estimated first-quarter 2005 performance.

Collins & Aikman went on to say that it continues to face significant near-term liquidity challenges. Its credit facility is fully drawn so it must rely fully on timely access to its receivables facility, foreign receivables factoring arrangement and fast pay financing programs to fund ongoing operations.

The company said it is looking at ways to improve results and enhance liquidity. It is transitioning its fast-pay program for major customer General Motors Corp., currently administered by GE Commercial Capital, to one administered by GM's own financing unit, GMAC, that will provide a commitment to October. Also, it is continuing to work with its largest customers and suppliers to enhance commercial terms to improve operating results, cost recovery and liquidity.

However, as of May 11, Collins & Aikman had cash and availability under its financing arrangements of $13.4 million. It faces major cash demands over the next 90 days of a $26.875 million interest payment June 30 on its $500 million of outstanding 10¾% notes, and another $26.71 million coupon payment on its $415 million of outstanding 12 7/8s on Aug. 15.

Last week, S&P lowered its corporate credit rating on Collins & Aikman to CCC- from CCC+, and downgraded Collins & Aikman Products Co.'s senior secured debt to CCC- from CCC+. In addition, Moody's downgraded Collins & Aikman Products' senior secured credit facility to Caa2 from B3.

Foamex down as well

Bond traders said that the Collins & Aikman collapse continues to drag the entire automotive sector lower. Among the names particularly on the downside Monday was Foamex International Inc. - partly because of its participation in the sector as a manufacturer of foam rubber products for vehicle interiors, among other uses, as well as the Linwood, Pa.-based company's own unfavorable quarterly earnings news.

Foamex's 10¾% senior notes due 2009 were seen by a distressed-bond trader to have fallen to a wide 75 bid, 80 offered from prior levels at 83 bid, 85 offered, while its 9 7/8% subordinated notes due 2007 swooned to an equally wide 44 bid, 49 offered from 53 bid, 55 offered.

The company posted a wider first-quarter loss - $10.9 million (44 cents per share), versus $2.1 million (nine cents per share) a year earlier - citing increased raw material costs and lower margins.

It did post a gain in new sales of 6% to $332.7 million from $313.6 million in 2004, as sales of foam products grew 16% to $156.2 million from $134.4 million in 2004, due to higher selling prices.

The company's Nasdaq-traded shares jumped 22 cents (17.89%) to $1.45. Volume was nearly normal at 138,000 shares.

Dura lower

Dura Operating Corp. was another auto name dragged down by the Collins & Aikman-induced sector angst. A trader saw the Rochester Hills, Mich.-based automotive systems maker's 9% notes due 2009 down a point at 58.5 bid, 59.5 offered.

Another market source pegged the bonds about 60 - but noted that only recently they had been as high as the mid 60s.

Mirant loans, bonds sink

Apart from the autos, Mirant's bank debt moved down to 67 bid, 69 offered by day's end, down a point to 1½ points, as the market in general felt a lot weaker, according to a trader.

There was no specific news for the Atlanta-based power company seen as pushing the paper lower.

A bond trader saw Mirant's 7.40% notes that were to have come due in 2004 fall back to 72 bid, 74 offered from 75 bid, 77 offered previously.

And he saw the company's 5¾% notes dip to 69 bid, 71 offered, from 72 bid, 74 offered previously, while its 2½% busted convert slid to 68 bid, 70 offered from 71 bid, 73 offered.

Calpine declines

Also in the power generating sphere, Calpine Corp.'s second-lien term loan was softer on Monday, with levels closing out the session down about two to three points at 69 bid, 72 offered, according to a trader, who attributed this move to an overall weaker secondary market as well.

Its 8½% notes due 2008 were seen falling back to 46 bid, 48 offered, from prior levels at 50 bid, 52 offered, while its 8¾% notes due 2007 were down a point at 56 bid.

As was the case with Collins & Aikman, the slide in Calpine was a continuation of the drop seen last week, when the notes and second-lien bank debt had a tumultuous time after the company issued a liquidity warning in its 10-Q filing, admitting that it faces several challenges in satisfying debt obligations, and funding anticipated capital expenditures and working capital requirements over the next twelve months. Calpine explained that that these cash requirements are expected to exceed unrestricted cash on hand and cash from operations.

The San Jose, Calif.-based energy company does have a liquidity-enhancing program in place, but this program depends heavily on possible sales or monetizations of certain assets - a prospect that is not entirely favorable to lenders.

Calpine separately announced that it would be getting additional bank debt in the form of a new term loan for its Metcalf project.

Delta steady, Salton slips

A distressed-debt trader said that he saw little or no new movement in Delta Air Lines Inc. bonds, seen tethered to the levels at which they had closed on Friday - the benchmark 7.70% notes due 2005 at 71 bid, 72 offered and its 8.30 % notes due 2029 around 22 bid, 23 offered.

He saw more erosion in Salton Inc.'s bonds, amid market worry about the Lake Forest, Ill.-based small appliance maker's potential ability to repay $125 million of 10¾% notes coming due on Dec. 15 - a concern that company executives were unable to put to rest on last week's earnings conference call.

Those notes dropped to 45 bid, 47 offered from 48 bid, 50 offered before, while its 12¼% notes due 2008 ended at 39 bid, 41 offered - down from 43 bid, 45 offered going home Friday.

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