Collins & Aikman bonds gyrate lower; Calpine bank debt keeps climbing

By Paul Deckelman and Sara Rosenberg

New York, Jan. 26 - Collins & Aikman Corp.'s bonds bounced around crazily at lower levels Thursday, traders said, before coming off their lows for the day to end down about two points on the session, probably due to the company's latest recorded loss.

In the bank debt market, Calpine Corp.'s second-lien paper continued its upward trend on Thursday, gaining about half a point during the session, still on follow-through from the interest payment news that hit the market earlier this week, a trader said.

The San Jose, Calif.-based power company's second-lien paper closed out the day quoted at 90 bid, 91 offered, up from Wednesday's closing levels of 89.5 bid, 90.5 offered, the trader said.

By comparison, that second-lien bank debt was being quoted at 84 bid, 85 offered before the news came out Tuesday that Calpine will be paying current interest on all first-lien debt and will be making payments on the second-lien debt at the end of March and the end of June of $78 million each. The second-lien debt interest payments will be paid on a pro rata basis across the second-lien bond and bank debt.

A bond trader also noted that the company had successfully lined up some $2 billion in debtor-in-possession financing, allowing it to continue normal operations while it restructures. Calpine filed for Chapter 11 in late December, after struggling for months to avoid bankruptcy amid legal disputes with some of its bondholders.

Calpine's 8¾% notes due 2007 were seen two points better on the day at 40 bid, although another trader saw the company's paper little changed from ranges it occupied on Wednesday.

In the troubled automotive sector, "Collins & Aikman had a little flushdown, but then it was back up," a trader said, quoting the bankrupt Troy, Mich.-based automotive interior components maker's

10¾% senior notes due 2011 as having opened at 32 bid, 34 offered, then having plunged as low as 26 bid, 28 offered, before coming off that low to end at 30 bid, 32 offered, still down two points on the day.

He cited as a probable cause, Collins & Aikman's filing of an 8-K report with the Securities and Exchange Commission outlining its latest monthly results, with the company posting a $19.7 million loss in the month of December.

Collins' notes fell as low as 27.5 bid, 29.5 offered, another trader said, "after there was news out," before coming back to end at 30 bid, 32 offered, off two points from Wednesday, but up 2½ points from its day's low.

Also in that sector, the bonds of bankrupt Novi, Mich.-based vehicle frames maker Tower Automotive Inc. were mostly unchanged, its 12% notes due 2013 at 76 bid, 77 offered, down perhaps a point on the offered side and steady on the bid side.

Delphi gains after GM call

But the bonds of former General Motors Corp. subsidiary Delphi Corp. - now also mired in bankruptcy - were stronger, on signs that the giant carmaker might be close to an agreement with its problem child and with the United Auto Workers union on the extent of GM's Delphi-connected liabilities.

Delphi "was actually up two points on positive comments on the GM conference call" that followed GM's release Thursday of its fourth-quarter and full year results, a trader said. He quoted the bankrupt Troy, Mich.-based automotive electronics manufacturer's 6½% notes due 2009 up a pair at 57.5 bid, 58.5 offered, on "positive comments" during the conference call.

GM said that it had taken a $2.3 billion charge associated with benefits at Delphi, and said that it expects to spend between $3.6 billion and $12 billion on benefits promised to Delphi workers. GM further estimated its total liability would be at the low end of that range - seen by some as a sign that GM might be near an agreement with Delphi and the UAW on just what Delphi obligations it will assume.

GM down on results

GM's own bonds, meantime, were lower after it reported its quarterly numbers and, as expected, the world's largest automaker lost a ton of money - but what was not expected was just how much red ink there actually was. Also down were the bonds of the company's financial subsidiary, General Motors Acceptance Corp., especially since GM executives offered no real progress reports on their efforts to sell a majority stake in GMAC, a transaction which is apparently proving to be more difficult than first imagined.

GM's bonds were seen down about a point on the day following the release of the carmaker's fourth-quarter and year-end results, with its benchmark 8 3/8% notes due 2033 at 71.5 bid, 72.5 offered, while its 7 1/8% notes due 2013 were at 76.

GM announced that it lost $4.8 billion ($8.45 per share) in the quarter versus a $99 million loss (18 cents per share) in the year ago period. For the year it lost and $8.6 billion - far wider losses than Wall Street had been expecting. The bulk of the losses came from GM's underperforming North American operations, where GM recently announced plans to close a number of plants and reduce headcount by thousands of positions.

Besides the sheer magnitude of the loss - which prompted GM's chief financial officer, Fritz Henderson, to admit during the company's conference call with analysts that "frankly, there were no highlights" to the year - there was some dismay in the bond market over the lack of any real developments in its efforts to sell a controlling stake in GMAC. Such a sale could swell GM's coffers by anywhere from $10 billion to $15 billion - although GM, for all of its losses, has no liquidity problems, with $20.5 billion in its cookie jar as of the end of the year. More importantly, the sale of control of GMAC to a presumably stable, secure deep-pocketed financial firm would bring the unit's ratings back to investment grade, greatly reducing its borrowing costs. GM said back in October that it would sell a majority stake in GMAC, but nothing has happened since then, other than several potential buyers publicly distancing themselves from the idea, and Henderson and other GM executives said on the call that GM could get by, sale or not.

GMAC's 8% notes due 2031 were being quoted down 1½ points on the session at 99 bid, 99.75 offered, while its 6 7/8% notes due 2011 were down by the same amount at 943.5 bid, 94.5 offered, while its 7¾% notes due 2014 were half a point lower at 99.5 bid, 93.5.

Asbestos bonds see interest

Apart from the automotive area, a trader in distressed notes saw asbestos-sector bonds better bid, with bankrupt Toledo, Ohio-based insulation maker Owens-Corning's 7½% notes due 2018 tightening to 91 bid, 92 offered from prior levels at 90 bid, 92 offered, while bankrupt Lancaster, Pa.-based floor-covering maker Armstrong World Industries' 6-handle coupon bonds were "up a little" at 80 bid, 82 offered from 79 bid, 80 offered previously. Armstrong's 9¾% notes were also firmer, at 83 bid, 85 offered.

The asbestos bonds have been firming over the past several sessions, following the announcement by Senate Judiciary Committee chairman Sen. Arlen Specter that the full Senate will at last begin debate on a proposed medical claims mechanism bill on Feb. 6. That bill - which would take asbestos claims out of the courts and establish a mechanism for paying injured parties off from a $140 billion, industry- and insurance-financed fund - was introduced early last year, was finally passed by the Judiciary Committee around mid-year, but then languished for the rest of 2005.

Claims that exposure to asbestos had produced serious medical problems led to thousands of lawsuits against Armstrong, Owens-Corning and dozens of other companies, driving many of them to seek bankrupt protection.

Teco Panda higher

Back in the bank debt market, Teco Panda's bank debt also continued its rise during Thursday's market hours, with the paper closing out the day half a point higher when compared to the previous session, according to a trader.

The bank debt ended the day quoted at 104 bid, 105 offered, up from 103.5 bid, 104.5 offered on Wednesday, the trader said.

The paper has been climbing higher over the past two weeks or so as demand for power project financing paper has grown. About a week and a half ago, this paper was trading in the low-90s.

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