Automotive bank debt, bonds, continue to decline

By Paul Deckelman and Paul A. Harris

New York, Sept. 22 - Bank debt and junk bonds of distressed companies continued to meander southward on Friday, traders in both markets said - not with any real conviction in response to fresh negative news out of those companies, but just carrying forward the momentum from those companies' declines earlier in the week.

Outside of the autosphere, traders said not too much seemed to be going on, noting that many financial market participants opted for an early exit ahead of the Rosh Hashanah holiday, which began at sundown Friday.

Junk traders did notice some deterioration in the bonds of Canadian forest products producer Tembec Inc., although they saw no fresh news on the Montreal-based company.

Dura still eroding

In the bank debt market, the week appeared to be coming to a lackluster close for the auto parts sector.

Traders quoted Dura Automotive Systems Inc.'s second-lien loan trading down ½ to ¾ point at 92.50 bid, 93.50 offered.

The Rochester Hills, Mich.-based parts maker's second-lien paper has been watched closely since speculation of a potential bankruptcy filing surfaced recently, along with rumors that the company is having a hard time lining up debtor-in-possession financing on favorable terms.

Demonstrating that when it rains, it pours, Dura was informed this past Tuesday that it was in danger of being delisted from the Nasdaq Global Market, since its stock price has been below $1 per share for at least 30 consecutive days. However, the company has six months to fix the situation.

Dura's 8 5/8% senior notes due 2012 were meantime "still drifting lower," a junk trader said, to 49.5 bid, 50 offered from prior levels around 52 bid. He also saw that its 9% subordinated notes due 2009 "stayed down" around the 7 bid, 9 offered level.

Another trader pegged the seniors at 50 bid, 51 offered, which he called a 2½ point drop from Thursday's close, and said that the 9s were unchanged at 6.5 bid, 7.5 offered.

Visteon is vanquished

A junk trader saw former Ford Motor Co. parts unit Visteon Corp.'s bonds "giving up a couple of points to drift lower," with the Van Buren Township, Mich.-based parts maker's 8¼% notes due 2010 at 97 bid, 98 offered and its 7% notes due 2014 at 90 bid, 91 offered, both down about 2 points.

Meanwhile the company's Libor plus 300 basis points term loan was "a little lower" on Friday, according to the trader who saw it wrapped around par, down a quarter point.

Ford is firmer

Former Visteon corporate parent Ford's bonds actually bucked the generally negative trend, its 7.45% notes due 2031 up ½ point at 76.5 bid, 77 offered, while its Ford Motor Credit Co. 7% notes due 2013 were ¼ point better at 91.75 bid, 92.25 offered.

A market source at another desk saw those Ford Credit bonds up nearly a point to 92.5 bid, while its 9¾% notes due 2010 were ½ point better at 102.5.

Ford arch-rival General Motors Corp.'s 8 3/8% notes due 2033 were unchanged at 84.75 bid, 85.25, offered, a trader said, while the latter's General Motors Acceptance Corp. financing arm's 8% notes due 2031 were ¼ point up at 103 bid, 103.5 offered.

Lear loan little moved

A bank loan trader said that Southfield, Mich.-based automotive interior, seating and electronic components provider Lear Corp. - which traded down Thursday after announcing that production cuts by the Big Three auto-makers would force it to revise its financial guidance lower - was unchanged on Friday.

A bank loan investor saw the loss in value in the loan paper of the auto parts makers as inevitable.

"Under the restructurings at the big automakers, companies like Lear - which is a good company - are now facing a competitive disadvantage," the investor said.

"If you have 100,000 auto workers on the street, anybody can have cheap labor, which was Lear's big advantage versus the Big Three.

"When Lear revised its guidance downward, it woke up a few people, temporarily.

"It's tough to be in the auto space.

"It's hard to imagine what an auto parts supplier is going to look like in two or three years."

Mixed readings on Lear bonds

Back among junk bond market participants, Lear's 8.11% notes due 2009 were quoted at 94 bid, 94.5 offered, "a little lower," a trader said, a day after its bonds gyrated around at lower levels on news of the reduced guidance, before firming from their lows to end unchanged to just modestly lower.

However, a trader at another shop saw the 8.11s actually up ½ point Friday around that same 94 bid level, while calling Lear's 5¾% notes due 2014 unchanged at 79.25 bid, 79.75 offered.

Among other automotive names, Metaldyne Corp.'s 11% notes due 2012 were down a point at 87 bid, 88 offered, continuing the retreat seen the last several days amid what traders are terming market angst over whether the Plymouth, Mich.-based parts maker's recently announced $1.2 billion sale to Japanese partsmaker Asahi Tec Corp. will in fact be completed.

Sector stalling out

A trader said that once again on Friday, the auto names were where the activity was concentrated, and "if it had to do with autos - it stalled."

He saw Cooper Standard Automotive Inc.'s 7½% notes due 2012 at 82.5 bid, 83.5 offered, and its 8 3/8% notes due 2014 at 71 bid, 72 offered, each "down about a point or so."

Delphi Corp.'s 6½% notes due 2009 were seen 1½ points lower, even though there was not fresh news out about the bankrupt Troy, Mich.-based parts maker, a former GM subsidiary. However, a trader he saw Delphi's 7 1/8% notes due 2029 down just ½ point at 81 bid, 82 offered.

And he saw a 2 point drop in Dana Corp.'s 5.85% notes due 2015 to 62.5 bid, 63.5 offered, and in the bankrupt Toledo, Ohio-based parts maker's 7 1/8% notes due 2029, which dropped a deuce to 64.5 bid, 65.5 offered. However, he saw Dana's shorter bonds, like its 6½% notes due 2008, down only ½ point at 67 bid, 68 offered.

A trader called bankrupt Novi, Mich.-based vehicle frames maker Tower Automotive Inc.'s 12% notes due 2013, which were beaten down during the week to just under the 20 mark, "pretty much unchanged" at 19 bid, 21 offered.

Tembec tumbles

A market source saw the bonds of Tembec Industries lower, although there was no immediate indication as to why.

Tembec's 7¾% notes due 2012 dropped to 51.75 bid from 53.625 previously. Its 8½% notes due 2011 fell more than a point to 53.5, and its 8 5/8% notes due 2009 were off a point at 57.25.

Elsewhere, a trader saw Solo Cup Co.'s bonds "drifting lower," with the Highland Park, Ill.-based packaging maker's notes retreat to 84.5 bid, 85.5 offered, from prior levels at 86.

On Wednesday, the notes initially fell on the news, announced after the close on Tuesday, that the previously announced review of apparent accounting problems had indeed found irregularities, forcing Solo to restate results for the 2005, 2004 and 2003 fiscal years, as well as the first fiscal quarter of 2006. In addition, certain selected consolidated financial data for 2002 and 2001 are expected to be restated as well. However, the notes popped back up to close unchanged around 86 after the company reassured noteholders about its liquidity status on a conference call.

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