Tower Auto bonds skid lower; Mirant bank debt in retreat

By Paul Deckelman and Sara Rosenberg

New York, Jan. 21 - RJ Tower Corp.'s bonds "got hammered" for a second straight day Friday, in the words of one trader, who noted that the Novi, Mich.-based automotive components maker's notes lost a whopping 20 points over two sessions after its corporate parent, Tower Automotive Inc., released bearish guidance warning about likely sharp reductions in its liquidity.

In the market for distressed bank loans, meanwhile, things felt "heavy and illiquid" again on Friday, "down with high yield and all the other capital markets" according to a trader, who saw names like Mirant Corp. and Adelphia Communications Corp. weaker on the day.

Tower's 12% notes due 2013 - which on Thursday had swooned all the way down to 67 bid from prior levels as high as 80 following the bearish guidance - were seen by one trader as having ended at

61.5 bid, 62 offered "after their call," presumably a hastily arranged conference call, which the company did not publicize on its website.

Another trader saw the bonds even lower, going home "wrapped around 60," at 59 bid, 61 offered.

A trader specializing in distressed issues quoted the bonds at 60 bid, 62 offered, "a big, ugly drop" from its recent levels. "There's just too many cars and too many companies," he said of the automotive components sector and the general weakness in the auto area, following the weak earnings reported this past week by the two largest of Detroit's Big Three, General Motors Corp. and Ford Motor Co., both big customers of companies like Tower.

The company's convertibles also plunged as investors in the sector were treating the securities like the company was on the brink of bankruptcy.

"TWR is toast. They have already essentially defaulted on the convertibles," said a buyside analyst, referring to the deferral of dividend payments on the 6.75% preferred in December. "They [Tower Automotive convertibles] are in a freefall now."

While the indenture for the preferreds allows deferred dividends, credit analysts have viewed it as manifest of a default. S&P had cut the preferreds to D on the development. Market sources have been fearful of coupon payments on the 5.75% bonds since they were sold in May, but the first interest payment was made in November on schedule.

Tower Automotive's 5.75% convertibles plunged another 29.5 points to 19.25 bid, 23.25 offered while the 6.75% preferreds plunged 3.25 points farther to 4.

"There's no way to look at TWR as anything but a bankruptcy name now," the buyside analyst said.

On Thursday, Tower had warned that its ongoing initiatives to improve liquidity "were adversely impacted by the length of customer shutdowns over the holiday season," in that the shutdowns were longer than expected. Cumulatively it said, those shutdowns will adversely impact the company's liquidity by as much as $40 million during the current 2005 first quarter.

Tower said it continues to face "significant challenges in meeting its ongoing liquidity requirements" - especially in the wake of the elimination of early payment programs from the company's customers. For January, it said, those changes in payment terms will adversely impact liquidity by some $17 million.

Tower said it was continuing to work with its customers and suppliers to address its liquidity issues, and was also continuing to pursue a European factoring facility, the possible sale of certain equipment and other liquidity initiatives.

Tower's New York Stock Exchange-traded shares, which had fallen 27.12% on Thursday in response to its guidance release Thursday morning, were in absolute freefall on Friday, collapsing by 97 cents (56.40%) to end at 75 cents, on volume of 22.2 million - more than 11 times the normal daily volume.

Intermet down

Another auto name seen skidding lower Friday was bankrupt Troy, Mich.-based automotive metal casting company Intermet Corp., whose 9¾% notes due 2009 were seen having slid to 52.5 bid from prior levels at 55.

Some Mirant loans lower

Among bank loan investors, Mirant's 2003 bank debt was quoted Friday at 71 bid, 72.5 offered, down from 73 bid, 74 offered on Thursday, a trader said.

However, the Atlanta-based power company's Mirant Americas Generating Inc. (MAGI) paper held in strong, with quotes of 106.25 bid, 107.25 offered, unchanged to up about a quarter of a point on the day, the trader added.

Recently, Mirant's bank debt has been somewhat buoyed by the company's filing of its reorganization plan with the U.S. Bankruptcy Court for the Northern District of Texas.

Adelphia slips with market

Adelphia's bank debt also felt the weight of the market, moving down by about half a point on both its Century Old paper and revolver paper, the trader said.

The Greenwood Village, Colo.-based cable television company's Century Old debt was quoted at 99.25 bid, 99.75 offered and the revolver was quoted at 98.5 bid, 99 offered, the trader added.

Adelphia's bonds were seen range-bound on Friday, with its 9½% notes due 2005 easier at 118, off a quarter point, but its 8 3/8% notes due 2017 and 8¾% notes due 2007 each up half a point, at 117 and 115 bid, respectively.

Meanwhile, Mirant's 7.40% notes, which were to have come due last year, and its 7.90% notes due 2009 were seen Friday unchanged, at 77 bid and 77.25 bid, respectively.

The MAGI 8.30% notes due 2011 improved by half a point to 111.25 although its 7 5/8% notes due 2006 lost half a point to end at 113.25.

American Banknote sees wide quotes

American Banknote's 10 3/8% notes were seen quoted at a wide 70 bid, 80 offered, following the company's Chapter 11 filing this past week, due to its lack of funds to make the scheduled bond payments. It is the second visit to the bankruptcy courts for the company in the last five years.

A trader - who is also a stamp collector - noted that last time around among the valuable assets the company ended up liquidating as part of its reorganization was decades worth of die proofs of postage stamps which the company had printed under contract from the government; these were sold for a fraction of what they ultimately fetched from collectors on the philatelic market. But this time around, he said, "I guess the cupboard is bare."

(Ronda Fears contributed to this report)

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