Tekni-Plex, Exide bonds head south; Collins & Aikman up after Chapter 11 move

By Paul Deckelman and Sara Rosenberg

New York, May 17 - Bonds of Tekni-Plex Inc. and Exide Technologies were being quoted way lower on Tuesday, after the companies each reported poor earnings - and Exide additionally warned that it would be in breach of its credit agreement financial covenants.

On the upside, the bank debt and bonds of Collins & Aikman were seen having moved up after the essentially anti-climactic news that the Troy, Mich.-based automotive components maker had sought refuge from its creditors via a Chapter 11 filing in Michigan.

Tekni-Plex's bonds were quoted by one trader down five to seven points on the session, with its 8¾% senior notes due 2013 having retreated to 83.5 bid, 85.5 offered, from 88 bid, 89 offered on Monday, while its 12¾% notes due 2010 moved to 65 bid, 66 offered, from offer levels in the lower 70s.

Another trader had seen the bonds fall to those levels from Monday bid levels around 90 on the senior bonds and 73 on the juniors, respectively.

In a 10-Q filing with the Securities and Exchange Commission, the Somerville, N.J. packaging company reported a first-quarter net loss of $9.3 million, a sharp turnaround from $3.2 million in the year-ago quarter. It also reported a deterioration in its EBDIT for the quarter, to $20 million from $35 million a year earlier - and likewise an erosion in its EBDIT/interest coverage ratio to 0.9 times from 1.7 times a year ago.

Exide Technologies's 10½% notes due 2013 were seen bouncing around at sharply lower levels, in the wake of the Lawrenceville, N.J.-based battery maker's announcement late Monday of a wider-than-expected quarterly loss - and a likely violation of its debt covenants.

A trader saw the Exide bonds open at around 70, well down from 84.25 bid, 85.25 offered Monday, before trading back up and going home at 74 bid, 75 offered.

Another trader - who had seen those bonds as high as 83 on Monday, before they traded into an 80 bid later on as the company released its bad news - saw the bonds open Tuesday at a wide 63 bid, 68 offered. After that, he said, "they started to trade up," and got as good as 75 bid, 77 offered, before retreating back to around 73 bid, 75 offered.

He attributed the rise off the lows to probable short-covering.

Exide's Nasdaq-traded shares nosedived $4.27 (38.30%) to $6.88 on very heavy volume of 18.1 million shares - more than 67 times the usual turnover.

The stock and bond slide were triggered after Exide warned on Monday that for the fiscal year ended March 31, it expects to be in violation of the minimum earnings and leverage ratio covenants in its $365 million senior credit facility.

It also reported Monday that its net loss widened to $70.7 million in the quarter from $50.4 million a year earlier.

The first trader, in trying to explain the bonds' swerve upward from their early lows Tuesday, noted that the company had restructured through the bankruptcy courts in late 2003 and early 2004 before emerging from Chapter 11 about a year ago, and theorized that some market players may feel that "it has a relatively clean balance sheet" as a result of having undergone restructuring and having killed off most of its old debt only so recently, and so "is not incredibly highly levered," meaning its prospects for avoiding a return trip to Wilmington are - for the moment-pretty good.

Meanwhile traders said the Exide floating-rate convertible ended the session at 49.5 bid, 51.5 offered, having lost a whopping 28.5 points on the day.

The Exide floater, though, is a small $60 million issue that doesn't trade an awful lot.

Collins & Aikman loans, bonds rise

Collins & Aikman didn't go to Wilmington - but did end up going to the U.S. Bankruptcy Court for the Eastern District of Michigan (see related story elsewhere in this issue).

The filing came as no surprise at all to the financial markets, which had been expecting such a step for quite a while, and on Tuesday, the company's bank debt was somewhat recharged after the announcement of the Chapter 11 case.

Traders saw levels actually moving up by almost two points to 90.5 bid, 91.5 offered from around 88.5 bid, 90 offered on Monday.

"It's up. Not really sure why though. Doesn't make a whole lot of sense to me," one loan trader remarked.

"Usually after a bankruptcy filing these things move up a little bit," another trader added.

The company's two issues of junk bonds - its 10¾% senior notes due 2011 and its 12 7/8% subordinated notes due 2012 - were also seen having moved up in price, at least in nominal terms, although traders said they began trading flat, or without their accrued interest - effectively, about a four-point decline in the bonds' value, partly offsetting some of the price rise.

A trader who had seen the senior bonds going home Monday at 33 bid, 34 offered, trading with accrued interest, saw them opening Tuesday around 35.5 bid, then pushing up to a high of around 45.5 after the bankruptcy news, before coming off that peak to go home at 41 bid, 43 offered, trading flat.

"They filed, the bonds went up about 10 points [from their opening levels] and now are up about six or seven points," he said.

He saw the subordinated bonds go to 7 bid, 9 offered and trading flat, from prior levels of 4 bid, 6 offered, trading with the interest.

Another trader facetiously quipped that the juniors "were on an unstoppable monster rally," nearly doubling in price to 7.75 bid, 8.5 offered at his shop, up from about 4+ the previous evening. He saw the 103/4s go out at 41 bid, 44 offered, with both issues trading flat.

At another desk, the subordinated bonds were seen as high as 8 bid at the end, a gain of three to four points.

As late as a week ago, the 10¾% notes had been hovering around the 66 bid level, while the 12 7/8s were at least still well into double-digits, at around 25 bid, before the company unleashed its barrage of bad news. It announced dire liquidity problems - less than $14 million of cash and available credit left - said that it would violate its financing covenants and would need waivers and amendments from its lenders, and said that chief executive officer David A. Stockman had resigned, although many in the market doubted that he left voluntarily.

That started the bonds and the bank debt on their crazy ride downward, and then, upward on Tuesday, after Collins & Aikman filed its petition, pointing to mounting liquidity issues and the need for immediate cash to fund operations as the drivers behind the move.

The company has received a commitment from JPMorgan Chase for up to $300 million in debtor-in-possession financing, with an interim approval request of $150 million.

Mirant loans better on buying

Also in bank loan news, Mirant Corp.'s 2003 and 2004 bank debt was a bit better bid on Tuesday as "some buyer came in to that one", with levels ending the day at 68 bid, 69 offered, compared to 67 bid, 69 offered on Monday, for the Atlanta-based energy company's paper, according to a trader.

Calpine mixed

Back among the bonds, Calpine Corp.'s bonds were seen mixed, after the San Jose, Calif.-based power generating company said that it was considering what you might call a "gasset" sale - in other words, it is contemplating the sale of its remaining U.S. natural gas supplies, located in Sacramento, Utah, Colorado, south Texas and the Gulf of Mexico.

While sale of the gas fields and use of the proceeds to reduce the company's sizable debt load would clearly be seen as a positive from a debt standpoint, there are negatives - such as the fact that Calpine, which now owns its own gas to supply 73 of its 92 U.S. power plants, would then have to turn to the spot market for its gas supplies, and would be at the mercy of market forces.

That perhaps was an explanation for the mixed showing in the bonds. A trader saw Calpine's 8½% notes due 2008 move up to 47.75 bid, 48.75 offered, up about 1¼ points on the day.

But he also saw its 8½% notes due 2010 fall to 65.5 bid, 66.5 offered from 67.75 bid, 68.75 offered earlier.

The trader had his own explanation - based on the fact that the roughly billion dollars that could be produced from such a sale would only be able to remove a relatively small part of the company's $18 billion of debt, and would thus only really help in the short run.

"The '10s are further out than the '08s," he noted. "If you had to be in this name, you would want to be in the '08s," or other short-range debt.

Some in the marketplace have opined that by considering selling its valuable gas reserves just to keep from being eaten alive by its massive bond debt, Calpine is doing no more than staying just one more day ahead of the grim-reaper.

A convertibles market buyside head trader colorfully quipped that the situation reminded him "of the old cartoons where someone is running over a bridge and it is collapsing behind them just as they take the next step.

"Some make it - and others become Wyle E. Coyote."

Calpine's 6% convertible bonds dropped 1.5 points to 51.5 bid, 52.5 offered, and the 4.75% convertible bonds lost 1.25 points to 43 bid, 44 offered while the 5% convertible preferreds - seen as the next refinance or redemption candidate in the company's capital structure - added 1 point to 38 bid, 39 offered.

Calpine shares closed Tuesday off 2 cents, or 1.1%, to $1.79.

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