Collins & Aikman up again - modestly; Calpine falls after filing shows debt paydown back-burnered

By Paul Deckelman and Sara Rosenberg

New York, Aug. 10 - Collins & Aikman Corp.'s bank debt and its bonds were somewhat higher Wednesday as investors tried to evaluate how viable a $1 billion bid for the distressed automotive components maker might be.

Elsewhere, Calpine Corp.'s debt and bonds were lower, after the company's latest quarterly filing with the Securities and Exchange Commission seemed to show that it might not be as gung-ho about paying down debt as previously thought.

And Delta Air Lines Inc.'s bonds continued to retreat, down a little more, on top of several sessions of pronounced slide, with market participants now apparently resigned to the inevitability of a bankruptcy filing.

Collins & Aikman's bank debt was up about a point, with levels closing out the session at 84½ bid, 86 offered after see-sawing around during the previous session on Plastech Engineers Products Inc.'s bid for the bankrupt Troy, Mich.-based automotive interior components manufacturer.

"It started to come in at the end of the day [Tuesday]. It traded as high as 87 then came back in to the 83½ [bid], 85½ [offered] level. People are thinking about [Plastech] and realizing it's a stretch," the trader said.

A trader in distressed bonds saw Collins & Aikman's benchmark 10¾% senior notes due 2011 up perhaps a point on the session, after having firmed on Tuesday in response to the Plastech news. He quoted those bonds as having gone as high as 35 during Tuesday's session before dropping off those peak levels to end about 31 bid, 33 offered, up from prior levels around a 30ish context, but still well of their highs. On Wednesday, he said, the bonds firmed to 32 bid, 34 offered, up a point.

The trader saw the company's subordinated 12 7/8% notes due 2012 at 7.5 bid, 8.5 offered, up maybe a point.

Another trader, though, characterized Collins & Aikman's bonds as having "softened" - at least relative to the peak levels seen Tuesday. He said that after having gotten as high as 35.5 bid Tuesday the 103/4s "settled in" at about 33.5 bid, and on Wednesday dropped to bid levels around 31.5 bid, off 1½ to two points on the session.

Yet another trader also saw the senior bonds having "softened up a bit," trading around 31 bid, 33 offered, down from Tuesday's close at 32 bid, 33 offered, and well down from Tuesday's peak levels at 34 bid, 36 offered.

"I think the bonds kind ran up, not much traded, and then softened a little bit, because guys couldn't figure out where exactly the bonds should or should not be."

Delphi moves down

Also in that automotive sector, a trader saw Delphi Corp.'s bonds heading lower, with the positive momentum generated by the Troy, Mich.-based automotive electronics manufacturer's less-bad-than-feared quarterly results and its reassuring conference call Monday having apparently dissipated. The numbers and the call had helped push the bonds higher both Monday and Tuesday - but the rally seemed to be out of gas by Wednesday.

The trader quoted the company's 6.55% notes due 2006 off a point at 90 bid, 92 offered, while the former General Motors unit's other bonds were also seen down about a point, with the 6½% notes due 2009 finishing at 84 bid, 86 offered, the 6½% notes due 2013 at 78 bid, 80 offered, and the 7 1/8% notes due 2029 at 72 bid, 73 offered.

Calpine loans, bonds lower

Calpine's second-lien term loan came in by about a point or two as investors discovered they would not be getting a pay down that they had been counting on, and the San Jose, Calif.-based energy company's bonds were seen down as much as five or six points on the session.

Calpine revealed in its latest 10-Q filing that some of the proceeds from the Saltend Energy Centre sale were used to purchase gas as opposed to paying down second-lien debt, according to a bank debt trader, who quoted its paper as having come down a point or so to 81 bid, 83 offered by Wednesday's close.

Over on the bond side of the bridge, meantime, a trader guesstimated that the company's bonds "look to be down five points" or so on the news.

He quoted Calpine's 8½% notes due 2008 as having retreated to 65 bid, 67 offered from prior levels around 71 bid, 73 offered, while its 7¾% notes due 2009 were also a half-dozen points off the previous pace, plunging to 62 bid, 64 offered from 68 bid, 70 offered on Tuesday.

Calpine's New York Stock Exchange-traded shares were seen off 19 cents (6.07%), ending at $2.94, although volume of 16 million shares was only about 25% above the norm.

Mirant loans rebound

Fellow power generator Mirant Corp.'s 2003 bank debt was up about a point, closing out the session at 86.75 bid, 87.75 offered, basically rebounding to pre-second quarter results levels, according to a bank loan trader.

On Tuesday, the bankrupt Atlanta-based energy company revealed second quarter numbers that included a net loss of two cents per share, versus a net loss of eight cent per share in 2004 and operating revenues of $457 million, down from operating revenues in 2the 2004 second quarter of $496 million.

"It was down yesterday [Tuesday] on second-quarter [numbers] and traded all the way down to 84.5. It's up today [Wednesday], with the rest of the energy sector - except for Calpine," the trader said.

Airlines mostly steady

Among the recently hard-hit airline issues - particularly Delta Air Lines Inc. and Northwest Airlines, there was "a lot of trading, but no real change in prices," a trader said - at least not for Delta.

He saw the troubled Atlanta-based third-largest U.S. air carrier's benchmark 7.70% notes due 2005 essentially unchanged around 27 bid, 29 offered, while its 10% notes due 2008 were also steady at 18 bid, 20 offered, its 7.90% notes due 2009 held at 17 bid, 19 offered, and its 8.30% notes hung in at 16 bid, 18 offered.

Another trader saw the 8.30s dipping to bid levels around 17-17.25, from Tuesday's close at 18 bid, 19 offered. "The good news for Delta," he quipped, "it that they can only fall 17 more points."

The 7.70% notes, he said, were down a point, around 25 bid, 26 offered, "but on very light trading."

"Until [Delta] actually files [for Chapter 11], they're not going to go much lower," the first trader opined - giving voice to what has become the prevailing sentiment in much of the junk bond market, that Delta, despite its best efforts to stay out of the courts and restructure its obligations outside of bankruptcy, is going to be forced to file sooner or later, with "sooner" seen as the more likely choice.

Delta - which successfully wrung over $1 billion of permanent labor cost concessions from its unions and which is belt-tightening on many other fronts companywide - is still beset by such negatives as its heavy pension obligations, barring a miracle on Capitol Hill, where pension reform is only slowly wending its way through the House and the Senate, both now in recess, and sky high fuel prices, with crude oil pushing over $65 on Wednesday - a harbinger of still higher jet fuel costs down the line.

As for Northwest, which faces many of the same unfavorable industry dynamics as Delta, plus its own unique labor problems - its mechanics could go on strike in 10 days - the Eagan, Minn.-based Number-Four U.S. air carrier's bonds have been following Delta's down over the past week, and on Wednesday, a trader saw them off another two points, with the 8 7/8% notes due 2006 at 52 bid, 54 offered, and the 9 7/8% notes due 2007 at 41 bid, 43 offered.

"They may go on strike before they file," he observed. "Who knows?"

The convertibles of Delta Air Lines and Northwest Airlines were mostly flat to slightly better, stemming a steep slide that has hit the debt and equity of both companies as investors look for a potential bankruptcy from Delta.

"Delta felt fine today, maybe even a smidge better," a Connecticut-based sellside trader said.

An early trade of Delta's 8% convertible due 2023 was reported at 17.50 versus a stock price of $1.95. But later it was seen at 18 bid, 18.50 offered. Delta shares closed down three cents, or 1.54%, at $1.92.

Northwest's 6.625% convertible traded early at 38 versus a stock price of $4.03. Its 7.625% issue was seen at about 35. Northwest shares closed up 18 cents, or 4.47%, at $4.21.

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