Atkins, Allied Holdings file for Chapter 11; United Air bonds continue climb

By Paul Deckelman and Sara Rosenberg

New York, Aug. 1 - Atkins Nutritionals Inc.'s first-lien bank debt moved up by approximately two points Monday, spurred on by the news that the company filed for reorganization under Chapter 11.

Bonds of another company filing for Chapter 11 - Allied Holdings Inc. - were also seen several point higher, after the Decatur, Ga.-based automobile transport operator filed for protection from its junk bond holders and other creditors; however, those bonds were now being quoted trading flat, or without their accrued interest, essentially offsetting the gain in their nominal price, market participants said.

Among the already long-bankrupt names, United Airline parent company UAL Corp.'s bonds were up yet again, continuing the rise seen at the tail end of last week.

And the same could be said for Tower Automotive Inc.'s bonds, helped by their recent not-so-bad monthly numbers.

A trader in distressed bank loans saw Atkins Nutritional's first-lien paper quoted at Monday at 69 bid, 72 offered, up two points from there it stood at the end of last week.

As for the second-lien bank debt, it was quoted pretty much unchanged, at 10 bid, 15 offered, the trader added.

In connection with the bankruptcy filing, Atkins - a Ronkonkoma, N.Y.-based provider of special foods for low-carbohydrate dieters - has reached agreement with the overwhelming majority of its lenders on a pre-arranged plan to restructure its debt.

Under the terms of that arrangement, the lenders will receive the equity of the company in exchange for a substantial reduction of its outstanding debt.

Allied higher but trading flat

Also seen ducking under the Chapter 11 umbrella Monday alongside Atkins was Allied Holdings, whose bonds were seen several points higher after the Decatur, Ga.-based automobile transport operator filed for protection from its junk bond holders and other creditors; however, those bonds are now being quoted trading flat, or without their accrued interest, essentially offsetting the gain in their nominal price, market participants said.

A trader saw those 8 5/8% notes due 2007 as having pushed up to 56 bid, 58 offered from prior levels at 52.5 bid, 54.5 offered, while another one quoted the bonds at 57.5 bid, up from 55.

However, they noted that, as is customary following a bankruptcy filing or other event of default, the bonds were trading flat - i.e. without several points of accrued interest - meaning basically that there was little real change in their overall value, with the bonds neither helped nor hurt by the widely expected Chapter 11 filing (see related story elsewhere in this issue).

Collins & Aikman steady

Elsewhere in the automotive area, a trader in distressed issues saw Collins & Aikman Products Co.'s 10¾% senior notes due 2011 unchanged at 28 bid, and saw its subordinated 12¼% notes due 2012 perhaps a point better at 6 bid, 7 offered, although there was no fresh news out on the bankrupt Troy, Mich.-based automotive interior components maker.

Exide dips

The trader also saw Exide Technology's 10½% notes "a little easier" at 78 bid, 80 offered, though on not much activity and with no fresh news out on the Alpharetta, Ga.-based maker of car batteries and other automotive electric storage devices.

Tower rises further

But there seemed to be some activity in the 12% notes due 2013 issued by R.J. Tower Corp. - Tower Automotive's bond-issuing arm - which were "up a little," a market source said, on top of Friday's 10-point gain that had boosted those bonds into the lower 80s.

The source saw the Tower notes having firmed to 84.25 bid from Friday's close at 81.5.

A trader at another desk saw Tower's 12s at 83.5 bid, 84.5 offered, up from 81 bid, 83 offered, and yet another pegged them at 83 bid, 85 offered.

Those Tower bonds had zoomed up into the 80s on Friday from prior levels in the low 70s, traders said, after the Novi, Mich.-based automotive frame maker released its June operating results; June 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.

That relatively good news apparently more than compensated for the operating loss for the month having widened to $25.22 million from May's $2.02 million deficit, and the net loss for June ballooning to $124.46 million, wider than the $17.73 million net loss in May.

A trader also noted the positive impact of numbers in the company's 10-K annual report, released this past Thursday night; he said that those numbers were better than expected, giving investors hope that the recovery values for the bonds, are way undervalued and can only go up.

Equity investors were also enthused - Tower's over-the-counter-traded penny stock shares were up a nickel - 26.32% - to 24 cents a share. Volume of 2.3 million shares was nearly five times the norm.

Northwest, Delta unchanged

In the airline sector, traders didn't see very much going on with Northwest Airlines Corp.'s notes, which had pushed sharply higher over several sessions last week, after the Eagan, Minn.-based Number-Four U.S. airline carrier released its quarterly numbers. Although Northwest lost money in the second quarter - which is historically the best quarter of the year for the airline industry - its bonds caught a bid, with traders saying investors were relieved that the financial carnage was not as bad as it could have been; they also cited short covering and other technical factors, positive investor reaction to Senate Finance Committee approval of a pension reform bill that includes a measure designed to help faltering airlines like Northwest and competitors such as Delta Air Lines Inc. meet their huge unfunded pension liabilities, by giving them substantially more time to pay into those funds.

But after having risen smartly last week, traders Monday said that the Northwest bonds were "pretty much unchanged," in the words of one. He quoted its 8 7/8% notes due 2006 at 68.5 bid, 69.5 offered, while its 10% notes due 2009 were at 49 bid, 50 offered.

Another trader said he "just didn't see very much action" in Northwest on Monday. He also didn't see very much movement in Delta's bonds, with its benchmark 7.70% notes due 2005 at 64 bid, 65 offered, the levels to which those bonds had fallen last week in reaction to renewed investor fears that the Atlanta-based Number-Three U.S. airline carrier might be forced into bankruptcy by the lethal combination of continued sky-high fuel costs and increasingly burdensome pension and debt obligations.

Another trader meantime saw Delta's 8.30% notes due 2029 unchanged at 22 bid, 23 offered.

UAL up again

However, the trader did see UAL's bonds - which had firmed solidly last week on better monthly financial data - continuing to rise, to 17 bid, 18 offered. The bankrupt Elk Grove Village, Ill.-based Number-Two U.S. airline carrier's bonds had pushed all the way up to the mid-16s last week from prior levels around 13, after 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.

© 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.