Delta dive continues, Northwest also; Delphi, Collins & Aikman up

By Paul Deckelman and Sara Rosenberg

New York, Aug. 9 - Delta Air Lines Inc.'s battered bonds and convertible debt fell yet lower on Monday, with investors apparently believing, in the words of one bond trader, that the troubled Atlanta-based Number-3 U.S. airline carrier will soon be coming in for "a hard landing."

Rival carrier Northwest Airlines Corp.'s bonds also continued to move lower, with some investors feeling that Northwest also is unlikely to escape from the negative factors currently eating Delta alive, such as sky-high fuel prices and heavy pension costs. Northwest also has its deteriorating labor situation to deal with.

On the upside, Delphi Corp.'s bonds and bank debt were better, with investors apparently still feeling good about Monday's earnings numbers and tone of the company's conference call.

Out of that same automotive supplier sector came the news that a suitor has stepped forward to bid $1 billion for the bankrupt Collins & Aikman Corp., now in bankruptcy. That helped send the Troy, Mich.-based automotive components maker's bonds several points higher on the session.

Delta's flagship 7.70% notes due 2007 were seen by a trader late in the session as finishing at 27 bid, 29 offered, down about seven points on the session. At the other end of the maturity curve, its 8.30% notes due 2029 were seen having lost 1½ points to end at 16.5 bid, 17.5 offered.

Another trader saw the 7.70s lose three pounds on the session to finish at 16 bid, 17 offered.

A market source called the 7.70s down more than 10 points to around 27.5 bid from 38, while the 8.30s fell back to 17 bid from 18.25. The 7.90% notes due 2009 and 9¾% notes due 2021 both ended at 17.25 bid, down 19.75 bid and 18.75 bid, respectively.

In convertibles trading, the 8% converts due 2023 were seen trading down a point to 18 after slipping about 2½ points from Friday to Monday. Delta's New York Stock Exchange traded shares plunged 28 cents (12.56%) to $1.95, a new low.

On Tuesday, Merrill Lynch analyst Michael Linenberg cut his rating on the stock to "sell" from "neutral," saying the upward trajectory of oil prices increases the chance of a bankruptcy filing in the next two months.

Delta also said Tuesday it is delaying for up to five days the filing of its quarterly report to the Securities and Exchange Commission, and its pilots union postponed plans to elect new officers to its executive committee and to fill a position on its negotiating committee.

Northwest lower too

That news whammy sent the securities of other carriers down in sympathy, notably Eagan, Minn.-based Northwest Airlines, the fourth-biggest airline operator.

A market source saw its 8 7/8% notes due 2006 drop to 51 bid from 57 previously, while its 8.70% notes due 2007 lost five points to close at 38. The source saw Northwest's 9 7/8% notes due 2007 trading at 40 bid, down from 48, while its 7 7/8% notes due 2008 dipped to 34 bid, down six points. Its 10% notes due 2009 were three points lower, at 34.5.

Northwest's 6 5/8% convertibles traded at just below 40 early in the day, when their underlying stock was $4. Later in the session, those converts pushed down to 38.7. Northwest's Nasdaq-traded shares ended the session down six cents (1.47%) to $4.03.

Northwest - already facing some bad news on the labor front with each day bringing ever closer Aug. 20, after which the line's mechanics have a green light to strike - got some more on Tuesday, as flight attendants began voting on Tuesday on whether to strike later this month to support the mechanics. The airline and the mechanics' union disagree sharply on Northwest's demands for $176 million in permanent employee cost cuts, part of a $1.1 billion wish list of permanent labor revisions Northwest says it must have in order to stay solvent.

Also Tuesday, the mechanics and the airline said their contract talks would resume Monday, with a mediator present. Talks broke off last week after mechanics accused the airline of failing to move from its demand for the $176 million.

Delphi rebound continues

Elsewhere, Delphi Corp.'s revolver and term loan continued to head higher in Tuesday's market, with traders speculating that investors were still feeling good about Monday's earnings numbers and the tone of the company's conference call.

The revolver was quoted at 95 bid, 95.5 offered, compared to Monday's closing levels of 94.75 bid, 95.75 offered, and the term loan was quoted at 102 bid, 102.5 offered, compared to Monday's closing levels of 101 bid, 102.5 offered, according to a trader. At the open on Monday, the revolver was being quoted at 93.5 bid, 94.5 offered and the term loan was being quoted at 100.5 bid, 101.5 offered - bringing total gains so far this week to about two points on each tranche.

The Troy, Mich., automotive electronics manufacturer's bonds were also seen higher, with a trader pegging the 6.55% notes due 2006 at 91.25 bid, 92.25 offered, up from 89 on Monday, a trader said, also quoting the company's 7 1/8% notes due 2029 a point better at 73.5 bid, 74.5 offered, though those bonds were down a point from their day's highs, the trader said.

All eyes have been on Delphi ever since Friday, when the company announced that it initiated a draw under its $1.8 billion revolving credit facility - a move that sparked downgrades from all three rating agencies. That caused the bonds and the debt to slide badly.

Moody's Investors Service downgraded Delphi's senior secured credit facility to B3 from B1 and corporate credit rating to Caa1 from B2, with the outlook remaining negative. Standard & Poor's downgraded Delphi's senior secured credit facility to B- from BB- and corporate credit rating to CCC+ from B+, with a developing outlook. And, Fitch Ratings downgraded Delphi's credit facility to B from BB-, with the company remaining on Rating Watch negative.

Then on Monday, Delphi reported quarterly numbers that included revenues of $7 billion down from $7.5 billion in the prior year, and a net loss of $338 million or a loss of 60 cents per share, compared to net income of $143 million or earnings of 25 cents per share last year.

The company also announced that it is in talks with its major unions about modifications required to implement its restructuring plan, as well as with GM to seek related financial support.

Delphi then went on to say that the revolver draw was made to make additional cash readily available to finance operations to the extent required during the restructuring discussions with the unions and GM.

Collins & Aikman up on bid

Also in the automotive sphere, bankrupt Collins & Aikman's 10¾% notes due 2011 were seen closing at 32 bid, offered, a trader said, up two points on the day, though a few points down from peak levels around 36 at mid-day.

"They settled back in and finished up only two points," the trader said.

Market participants cited the news that rival auto supplier Plastech Engineered Products Inc. is offering up to $1 billion in cash to buy Collins & Aikman out of bankruptcy.

Plastech's offer is subject to its examination of Collins & Aikman's finances and operations, according to a letter sent to Collins & Aikman on Monday.

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