United, Tower bonds higher; Boston Exelon paper up, Collins & Aikman spins its wheels

By Paul Deckelman and Sara Rosenberg

New York, July 29 - Bonds of the bankrupt United Airlines parent UAL Corp. and Tower Automotive Inc. were seen having pushed higher in Friday's otherwise generally quiet dealings in the distressed precincts, both spurred onward and upward by better operating results reported by the reorganizing companies.

In distressed bank loan trading, Boston Exelon's paper has been on the rise over the past few days, and it closed out Friday at 140 bid, 141 offered, well up from 134.5 bid, 135.5 offered, where it had been seen earlier in the week, according to traders.

"It's up on the fact Northeast Utilities reported on their earnings call the beneficial impact of LICAP," one trader explained, referring to Locational Installed Capacity, an incentive for New England power companies to keep open generators in order to improve supply reliability.

"People are finding value," another trader added.

The Boston Exelon energy project was owned by Exelon Corp. at one point but now it is owned by lenders.

Collins & Aikman bank debt and bonds meantime continued to languish at the lower levels to which they had fallen earlier in the week - the bank debt around 83 bid, 84.5 offered, the 10¾% notes due 2011 at around 27 bid, 29 offered, as new details about the troubled Troy, Mich.-based automotive components maker's tangled finances continued to emerge.

Even as Collins & Aikman launched its launched its proposed $150 million two-year debtor-in-possession financing facility - half the originally planned size - at mid-week, published reports indicated that the company's planned $305 million second DIP, to be provided by its six largest customers, is by no means a done deal and faces opposition from its bondholders and unsecured creditors, who feel it gives the customers way too much say in Collins & Aikman's fate and prevents the company from aggressively seeking better contract terms with them, which the credits say is crucial to Collins & Aikman ever being able to dig itself out of its financial hole.

Collins & Aikman had lined up that customer-provided financing after a bank syndicate led by J.P. Morgan, alarmed at the rate at which the company was burning through money it had provided the company, pulled the plug on the proposed second tranche of the DIP, forcing Collins to scramble in order to continue to have liquidity. It hurriedly arranged for a package of loans and price increases from its six biggest customers - Detroit's "Big Three," plus the three leading Japanese carmakers - and the plan was given interim approval by U.S. bankruptcy judge Stephen W. Rhodes at an emergency hearing in Detroit on July 7. However, according to the reports, Rhodes - while giving final approval to the downsized J.P. Morgan DIP package at a hearing earlier in the week - held off on giving his final OK to the supplementary package offered by the company's lending customers, instead putting off a decision until a scheduled Aug. 9 hearing.

United keeps rising

Elsewhere, United Airlines' bonds - which on Thursday had "continued to thrust higher," a trader said, up half a point to 15¾ bid, 16¼ offered - "continued to gain altitude" on Friday, he said, quoting the notes at 16½ bid, "give or take half a point."

Another trader agreed that the bankrupt Elk Grove Village, Ill.-based airline operator's notes were in a 16-17 bid context, up half a point on the session. He cited the company's strong operating numbers for June having come out and given the bonds a lift.

UAL reported second-quarter operating earnings of $48 million; excluding an impairment charge of $18 million for regional aircraft, operating earnings were $66 million -- $59 million better than the $7 million reported in the same quarter last year. The earnings increase was realized despite $262 million in higher fuel expenses in 2005 than in 2004.

Northwest moves up

Elsewhere among the airlines, a trader saw "a little bit of strength" in the longer-maturity issues of Northwest Airlines Corp., which had pushed higher on Thursday on a combination of short-covering and other technical factors, investor relief that Northwest's latest quarterly numbers, released earlier in the week, weren't as bad as had been feared, and gratitude that Northwest is not in anywhere near as bad straits as larger rival Delta Air Lines Inc.

The trader also suggested that there was some investor relief that the Senate Finance Committee this past week approved a pension reform measure that includes specific relief for the battered airlines, who collectively face billions of dollars of unfunded pension liability costs.

The trader said that had produced a sense of "continued euphoria," which saw Northwest's bonds firm smartly on Thursday and then continue to gain on Friday.

He quoted the Eagan, Minn.-based Number-Four U.S. air carrier's 10% notes due 2009 up a point to 48 bid, 49 offered, for "no particular reason" other than the factors already cited.

A market source at another desk saw Northwest's 7 7/8% notes due 2008 two point better, at 47.5 bid.

Delta's bonds, meantime, were seen little changed, although one trader did see the troubled Atlanta-based Number-Three U.S. carrier's benchmark 7.70% notes due 2005 down 1½ points at 64 bid, 65 offered.

Tower bonds are day's winner

Back on terra firma, a trader said that Tower Automotive Inc. "was the standout of the day," quoting the company's R.J. Tower 12% notes due 2013 as having jumped to 81 bid, 83 offered from opening levels around 70 bid, 72 offered.

He saw no news moving across the tape, but noted that the company had on Thursday filed its 10-K annual report for the 2004 fiscal year ended Dec. 31.

Another trader quoted the Tower bonds up 10 points on the session to 81 bid, 83 offered, rhetorically asking "how do you like that?"

He attributed the rise to "the numbers that were out [Thursday] night, they were very good, way better than expected, and people were thinking the recovery values for the bonds, are way undervalued, that's the general consensus. Their numbers were great, so being they're in Chapter 11, their recovery values were that much greater. So there you go."

He opined that the bonds "are probably going higher on Monday."

Besides the 10-K late Thursday, Tower also released its June operating results, and while its operating loss for the month widened to $25.22 million, far wider than May's $2.02 million deficit, and the net loss for June was $124.46 million, wider than the $17.73 million net loss in May, revenues rose to $188.01 million from $177.89 million in May. And cash and cash equivalents as of June 30 stood at $5.76 million, up from $2.86 million at the end of May.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.