Northwest bank debt up, bonds seen steady post-filing; Delphi bonds lower

By Paul Deckelman and Sara Rosenberg

New York, Sept. 15 - Northwest Airlines Corp.'s bank debt headed higher as the bankruptcy speculation proved true with the company's after-the close Wednesday Chapter 11 filing announcement. The Eagan, Minn.-based Number-Four U.S. airline carrier's bonds meantime held steady at the levels to which they traded on Wednesday.

Delphi Corp.'s bonds were seen lower, in line with a generally weaker automotive sector, following Dana Corp.'s sharp reduction in its full-year guidance, although its bank debt was quoted better. Collins & Aikman Corp.'s bonds however, looked firmer.

Both the Northwest term loan A and the term loan C were quoted at 99.5 bid, par offered Thursday, up from previous levels around 98 bid, 99 offered, according to a trader. The term loan B was quoted at 100.125 bid, 100.5 offered, compared to previous levels around 99.25 bid, 99.5 offered, the trader added.

A bond trader saw Northwest's various bond series all settling in in a 23 bid, 24 offered context, trading flat, or without their accrued interest, following the filing. Another trader also saw the bonds in the 23-25 neighborhood.

Northwest, like others operating in its sector - particularly fellow new bankrupt Delta Air Lines Inc. - has been struggling with soaring fuel costs and low-fare competition, sparking recent rumors and expectations of an upcoming Chapter 11 filing.

Then on Wednesday evening, the company announced that it had indeed filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the Southern District of New York - ironically, the same court where Delta had filed earlier in the afternoon.

According to documents filed with the court, Northwest has $14.35 billion in assets, $17.92 billion in total debt and 87.75 million shares of common stock outstanding.

Delta's bonds, were meantime also pretty much steady around Wednesday's closing levels, traders said. While one pegged the Atlanta-based Number-Three airline's bonds at 16.5 bid, 17.5 offered, another saw them "up maybe a little" to a 17-18 context.

He said that "there was a lot of percolating activity" in the airlines in terms of number of trades and volume but "not much movement pricewise."

Neither Northwest nor Delta seemed much affected by the news that the executive director of the federal government's Pension Benefit Guaranty Corp. warned that bankruptcy filing or no, both Delta and Northwest are still obligated to make their pension payments.

"These companies will continue to pay for fuel, wages, health care, utilities and aircraft leases. As long as companies remain in operation with ongoing pension plans, they have a legal obligation to meet their funding requirements," declared PBGC chief Bradley Belt.

Delta had said it would miss its next pension fund payment to the PBGC, while Northwest said Wednesday it would continue to seek changes in pension laws to give it more time to make payments. The pension funds of both carriers are underfunded by billions of dollars.

Delphi bonds lower, loans higher

Back on terra firma, a market source said Delphi's 6.55% notes due 2006 dipped to 79 bid from 82 previously, while its 6½% notes due 2009 and 2013 were each seen down about 2½ points, at 73 bid and 71 bid, respectively. The Troy, Mich.-based automotive electronics maker's 7 1/8% notes due 2029 retreated to 66 bid from 68.5.

Another trader, who saw the bonds in that same general area, thought they had initially "moved up a little, and then settled unchanged or maybe a little weaker."

Traders thought that Delphi may have retreated in line with a general weakening in the automotive supplier sector as Dana Corp.'s bonds skidded lower after the Toledo, Ohio-based maker of automotive powertrain components revised its 2005 earnings outlook sharply downward. That, which in turn led Standard & Poor's and Fitch Ratings to both cut its credit levels to junk bond status, where Moody's Investors Service has had them all along.

Over in the bank debt market, however, Delphi's revolver continued to post gains during Thursday's session, with traders citing news of a potential investment in the company. They also said investors remained pleased with the security package essentially taking full effect.

Delphi's revolver was quoted at 98 bid, 98.5 offered, well up from previous levels of 96.75 bid, 97.25 offered, according to a trader.

"Today there was news out there that Wilbur Ross may be interested in investing in the company," the trader explained.

And, yesterday [Wednesday], the lien was perfected," the trader added.

The loan was completed in June of this year. Since it takes 90 days to perfect the lien, the event just took place on Wednesday.

Delphi's New York Stock Exchange-traded shares fell 38 cents (8.76%) to $3.96 on volume of 11.4 million, more than double the usual daily handle.

Collins & Aikman higher on Ross talk

Wilbur Ross also may have been a potential factor in a one-point rise in the bonds of bankrupt Troy, Mich.-based automotive interior components supplier Collins & Aikman. Traders saw its 10¾% senior notes due 2011 a point better, around 40 bid, 41 offered.

Ross - who already owns much of Collins & Aikman's bank debt - was quoted Thursday in news reports saying he would be interested in bidding if Collins were to put its U.S. operations up for sale.

A trader suggested that such an expression of interest from Ross might not necessarily be such a positive from a bondholder perspective, since the billionaire - who earlier in the decade rolled up the assets of bankrupt steel, coal and textile companies at fire-sale prices - "doesn't exactly pay top dollar" when he consolidates a troubled industry.

Mirant loans keep falling

Meanwhile, Mirant Corp.'s bank headed lower for the third day in a row basically in connection with overall market heaviness, a trader explained.

The company's 2003 paper was quoted at 102 bid, 103.5 offered, its 2004 paper quoted at 101 bid, 102.5 offered and its 2005 paper was at 99 bid, 100.5 offered, the trader said, adding that all tranches were down by about half a point on the day.

Late last week, the Atlanta-based energy company announced that it has reached an agreement with its creditors that will lead to an amended plan of reorganization.

Since news of the agreement hit the market, the Atlanta-based energy company's bank debt has pretty much been on a continuous trip higher. But since early on this week, the paper has been slowly ticking lower.

Mirant's 7.40% notes that were to have come due last year ended at 113.5 bid, 114.5 offered and its 7.90% notes due 2009 closed at 114.5 bid, 115.5 offered, each down a point on the session.

© 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.