Tembec bonds rebound; Tower, other autos pull out of skid, but not Dana

By Paul Deckelman

New York, Jan. 19- Tembec Industries Inc. bonds were seen rebounding on Thursday after several sessions in which the Montreal-based forest products concern's notes had been heading steadily lower.

Also on the rebound were Tower Automotive Inc.'s bonds - a key loser on Wednesday. The bankrupt Novi, Mich.-based vehicular frame maker was among a number of automotive issues which turned higher after several sessions on the slide. However, Dana Corp. was not among them, continuing its ride to the downside after having released terrible third-quarter numbers earlier in the week.

Tembec "seems a little better," said a trader in distressed issues on Thursday. He quoted its 7¾% notes due 2012 at 44, its 8½% notes due 2011 at 45, and its 8 5/8% notes due 2009 at 46.5 bid, all one to two points higher on the session.

"Those bonds had been around 42ish, 43ish, 44ish before," he said,

At another desk, a trader said that the 73/4s had fallen to as low as 40 bid, 42 offered during Wednesday's dealings, before ending that session at 42. He saw the notes move up to 43.5 bid, 45.5 offered on Thursday. He saw the 81/2s at 44.5 bid, 46.5 offered, up 1½ points on the day, while the 8 5/8s were "up that same amount" to close at 46 bid, 48 offered.

Tembec's bonds had been getting chopped up all week, whipsawed by what traders described as market rumors that the company might choose to not make its upcoming bond interest payments - although some traders noted that company officials flatly denied that any plans were afoot to skip the coupon.

Even throwing out such speculation as unfounded, Tembec has been getting steadily weaker over the past several months, in line with the hard times that Canada's forest products industry has been going through. Tembec and its rivals such as Domtar Inc. and Abitibi-Consolidated Inc. have been hurt by the higher Canadian dollar, which depresses export sales, particularly to the United States; other negative factors include declining demand for newsprint, heavy duties on lumber exports to the United States, and competition in pulp and paper from emerging producers in Asia and South America.

Tembec and the other companies have pared operations and announced plant and sawmill closings, with the accompanying loss of thousands of jobs in Quebec, Ontario, Newfoundland and Western Canada.

Calpine firm

Elsewhere, Calpine Corp.'s bonds "might have been a little better," a trader said, quoting the bankrupt San Jose, Calif.-based power generating company's 8½% notes due 2008 at 36.5 bid, 37.5 offered, while its 8½% notes due 2011 were up a point at 26 bid, 27 offered. Its 8¾% notes due 2007 were two points better at 38 bid.

"The autos seemed to be getting better," a trader said, which even included the bonds of bankrupt supplier companies, such as Tower Automotive's 12% notes due 2013. A trader saw those bonds "up a couple of points" at 74 bid, 76 offered after the issue had fallen to around a 70ish context on Wednesday. Another trader pegged Thursday's advance at 3½ points to 74 bid, 75 offered. The traders had no ready explanation for the gyrations in Tower's bonds.

Delphi, Collins gain

Another bankrupt auto name that was higher Thursday was Delphi Corp. The company's 6.55% notes due 2006 at 55 bid, 56 offered, up ¼ point on the day, and its 7 1/8% notes due 2029, up half a point at 56 bid, 57 offered.

And bankrupt interior components maker Collins & Aikman Corp. - based in Troy, Mich., like Delphi - was also seen better Thursday, its 10¾% notes due 2011 "up a couple" of points to a 35-ish context from the lower 30s, a trader said. Yet another source actually saw those bonds a point lower on the day, at 32 bid, 34 offered, but did see Collins & Aikman's extremely distressed 12 7/8% subordinated notes due 2012 up two points at 8 bid, 9 offered, although he joked that "at that low level, where else can it go? It doesn't take much to move such an issue."

Collins & Aikman, which filed for Chapter 11 protection from bondholders and other creditors in May, said Wednesday that it was pursuing a dual strategy restructuring in order to emerge from the bankruptcy process as a stand-alone company, while at the same time exploring the possible sale of certain company units, or even the whole company itself, should a buyer come along.

Other auto names better

The upturn in the automotive sector was felt well outside the select circle of the bankrupts; industry leader General Motors Corp.'s benchmark 8 3/8% notes due 2033 were seen up ¾ point at 70.5 bid, while the carmaker's 7 1/8% notes due 2013 were a point better at 73.5 bid.

The bonds of GM's financing arm, General Motors Acceptance Corp., were likewise higher, with GMAC's flagship 8% notes due 2031 up 1½ points on the day at 100.75 bid, 101.75 offered, and its 6 7/8% notes due 2012 a point better around 93. Moody's Investors Service said Thursday that it was maintaining a "developing" outlook on GMAC's Ba1 credit rating, meaning it could either be downgraded or upgraded, depending on the outcome of GM's widely publicized efforts to find a deep-pocketed financial services company to buy a 51% stake in GMAC.

Elsewhere in the automotive sphere, former Ford Motor Co. subsidiary Visteon Corp.'s 8¼% notes due 2010 were seen by a trader to have climbed two points in the early going, before coming slightly off that peak level to end a point higher on the day at 83.5 bid, 84.5 offered.

Another trader saw the Van Buren Township, Mich.-based automotive components maker's bonds "up a skosh," with its 7% notes due 2014 at 77 bid, 77.5 offered, half a point higher on the day.

Dana keeps dropping

The one exception to the otherwise rosy rule Thursday was Dana Corp., whose bonds - which fell earlier in the week on the Toledo, Ohio-based automotive systems maker's poor third-quarter numbers - kept right on sliding. A trader pegged its 5.85% notes due 2015 down ¾ point at 66.5 bid, 67.5 offered, while its 6½% notes due 2008 lost even more, down 1½ points to 74.5 bid, 75.5 offered.

At another desk, a trader saw the 5.85s down even further, pegging them at 64 bid, down 1½ points on the session.

However, yet another trader saw little movement on the day in the bonds. While acknowledging that the 61/2s were off a point to around 73.75 bid, 74.75 offered earlier in the day, by the time trading wrapped up, he said, they had climbed back to 74.75 bid, 76 offered, "about unchanged."

Dana's bonds hit the skids after the company reported a net loss of $1.27 billion ($8.50 per share) for the three months ended Sept. 30 - a sharp deterioration from its year-earlier profit of $42 million (28 cents per share), despite sales having edged higher in the latest period to $2.4 billion from $2.11 billion last year.

Most of the loss - well over $1 billion of it - was attributable to very large charges that Dana took in connection with its efforts to restructure its business, which has been badly hurt by soaring raw materials prices and a slowdown in orders from two of its biggest customers, GM and Ford.

Dana said that excluding those charges, its loss from operations was $63 million, which still represented a reversal from its $39 million profit a year ago.

Noting that Dana had just filed its third-quarter numbers, which had been delayed because the company had to restate its results for the first half of 2005, analyst Shelly Lombard of the Gimme Credit investment advisory service opined in a research note Thursday that "investors probably wished Dana hadn't issued any financials at all - its third quarter results were terrible. . .What's worse, however, is that the earnings call [that followed the release of the results] didn't inspire any investor confidence. Management talked about its planned restructurings but admitted that past restructurings have been ineffective. The company refused to give any guidance and was vague about what kind of earnings investors could expect from a restructured Dana."

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