Collins & Aikman bank debt continues skid; Calpine gains on court ruling

By Paul Deckelman and Sara Rosenberg

New York, July 28 - Collins & Aikman Corp.'s bank debt continued to slide during Thursday's session, losing about a point and a half on the day to close out at 81.5 bid, 82.5 offered, according to a trader. By comparison, at Wednesday's close the paper was quoted around 83 bid, 84.5 offered after losing about a half a point on the day.

On Wednesday, Troy, Mich.-based automotive components supplier Collins & Aikman had launched its proposed $150 million two-year debtor-in-possession financing facility consisting of a $25 million revolver and a $125 million term loan B, with both tranches talked at Libor plus 300 basis points.

When the company filed for bankruptcy in May, it planned on getting a $300 million DIP consisting of a $200 million revolver at prime plus 150 basis points and a $100 million term loan at prime plus 250 basis points. However, the syndicate opted not to provide the company with the full amount and therefore it is now coming to market at half the size as originally contemplated.

Borrowings under the DIP will be available for working capital and general corporate purposes.

A trader in distressed bonds meantime said that Collins & Aikman's 10¾% senior notes due 2011 lost two points on the session to end at 27 bid, 29 offered.

Also out of the autosphere, the trader said that Foamex International's beleaguered 9 7/8% subordinated notes due 2007 lost another two points, down to 25 bid, 27 offered, although he quoted the 10¾% senior notes due 2009 issued by the Linwood, Pa.-based maker of foam rubber products for the auto industry and other industrial users as hanging in at levels in the upper 80s and showing no signs of deterioration.

He saw little or no movement in the company's 13½% notes slated to mature on Aug., 15, estimating them somewhere in the mid-30s.

Calpine rises

Elsewhere in the bond trading pits, participants reported that Calpine Corp.'s notes were better, citing a favorable court ruling in the Canadian legal system that the San Jose, Calif.-based power generating company had been looking forward to.

A trader saw Calpine Canada Energy Finance's 8½% notes due 2008 "up a little bit" on the news that the Canadian courts had issued an interim ruling allowing the Calpine subsidiary to pay off certain issues of preferred stock using the proceeds from the recent sale of the company's Saltend power generating station. The rest of the money would be put in escrow pending a final ruling.

Some holders of Calpine bonds had challenged the planned use of the roughly $1 billion of proceeds from the Saltend sale.

"It's a positive for the company," the trader said, in quoting the bonds - U.S. dollar denominated, despite their Canadian origin - up a point at 71 bid, 72 offered.

Another trader also saw the bonds up a point, though at 70.5 bid, 71.5 offered.

Other Calpine notes were also seen higher Thursday, with its Calpine Gnerating LLC 11½% notes due 2011 up nearly a full point at 92 bid, while parent Calpine Corp.'s 9 5/8% notes due 2014 were two points better at 104.

Another market source saw the company's 8¾% notes due 2007 half a point better, around the 79 level.

Northwest up again

Northwest Airlines bonds - which had firmed earlier in the week despite having reported a wider quarterly loss - which apparently was not as bad as many in the market had feared - were again flying higher on Thursday.

A trader, who saw the airline's bonds "up pretty big today," quoted the Eagan, Minn.-based Number-Four U.S. air carrier's 10% notes due 2009 three points better at 47.5 bid, 48.25, while seeing its 8 7/8% notes due 2006 two points better at 68 bid.

The trader dismissed short-covering or other technical factors as an explanation for the rise, offering the theory that "people were just buying, because they like it better than Delta [Air Lines Inc.]"

Another trader quoted the 10s as having moved up to 45.5 bid, 47.5 offered, while its 8 7/8% notes due 2006 "motored up" to 69.5 bid from prior levels about 65 bid, 66 offered.

"Beats me if there's any news out about them," he exclaimed. "Some people are talking about them partnering with another airline, while some people are talking about short covering." He said that in his view, it was "all technical."

A source saw Northwest's 7 7/8% notes due 2008 2½ points better, well over the 45 level.

Northwest and Atlanta-based Number-Three U.S. carrier Delta are seen as the most troubled of the old-line legacy carriers who have not yet filed for bankruptcy (two already have - United Airlines and US Airways) - but Northwest's situation is seen not quite so dire as that of Delta, whose chief executive officer again raised fears on Wednesday that the company might have to reluctantly slide into bankruptcy due to sky-high fuel costs, heavy unfunded pension obligations and lots of debt.

That pushed Delta's bonds sharply lower Wednesday, with its 7.70% notes due 2005 seen down as much as seven or eight points to the upper 60s. On Thursday, traders said that Delta's notes, after their steep swoon Wednesday, were relatively inactive Thursday.

However, a trader saw those 7.70s down 1½ additional points to 66 bid, 67 offered, while the other bonds were not seen trading around.

Another trader described Delta as "steady today," while a third said that Delta's 8.30% notes due 2029 were unchanged at 23.25 bid, 24.25 offered, while the 7.70s were a point off at 66. Even so, he said that "Northwest is the only airline moving around."

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