Delphi bonds bounce 4-6 points; Dura easier; Winn-Dixie down; Collins & Aikman bank paper off

By Ronda Fears

Memphis, Oct. 2 - There was no news of a bankruptcy filing from automotive parts supplier Dura Automotive Systems, Inc. but distressed traders said the debt of the Rochester Hills, Mich., maker of seat controls, door structures and exterior trim for vehicles was trading like it was a situation of when, not if.

"Nothing yet," said a distressed bond trader when asked if there was news of a bankruptcy filing from Dura, which has circulated through the market for some time now.

"The company has 13 days until the coupon comes due; I guess we will find out then if they are going to pay it or take the grace period or something else."

Dura's bonds traded off Monday by about a half-point with the senior notes, the 8 5/8% due 2012, in the 39 bid, 41 offered area and the junior bonds, the 9% due 2009, at 4 bid, 5 offered.

A source at a fixed-income shop in New York said Monday that he heard there were some big buyers for the subordinated paper on Friday, which even if true did not seem compelling outside of special situation funds.

"There were some big buys on the lower sub prices Friday, I heard," the buysider said. "Either someone knows something positive or the greater fool theory is alive and well. I agree the brown stuff hits the fan when the October bond payment defaults. I say forget the subs with the way the seniors are being trashed. Why anyone owns this is beyond me."

Two weeks ago, the Dura situation became more desperate on a Lehman Brothers research note predicting that Dura might soon join sector peers Delphi Corp., Dana Corp., Tower Automotive Inc. and Collins & Aikman Corp. in Chapter 11 as the trouble besetting big automakers General Motors Corp. and Ford Motor Co. trickle down to the part suppliers.

Lehman debt analysts Sarah Thompson and Marc Aylett wrote that a decision by Dura to forgo upcoming coupon payments would be a positive for senior note holders as no additional value would be distributed to subordinated note holders through coupon payments, but the overall value of the company may be lower than originally calculated in a drawn out bankruptcy.

Dura is scheduled to pay the coupon on the 8 5/8% notes on Oct. 15 and again on April 15, 2007. The coupon on the 9s comes due Nov. 1 and again next May 1. Meanwhile, the company has retained Miller Buckfire & Co., a well-known turnaround firm, to advise it on reducing or restructuring its debt, and last week announced that it would sell its German subsidiary to an entity controlled by Hannover Finanz Group for an undisclosed price.

Delphi up on Appaloosa buzz

In another auto parts name, bankrupt Delphi Corp. bonds were better by 4 to 6 points Monday following a Wall Street Journal weekend story that hedge fund Appaloosa Management may end up with a significant stake in the restructured company, along with hedge fund Harbinger Capital Partners and investment banks UBS AG and Merrill Lynch & Co.

Delphi's benchmark 6.55% bonds due 2006 gained 4 points on the day to 93 bid, 95 offered from a level of 89 bid, 90 offered at Friday's close, and the 6.5% bonds due in 2009 traded up 6 points to 95 bid, 96 offered.

Citing several people familiar with the discussions, the Journal said in a report Saturday that Appaloosa may be near an agreement that could give it up to a one-third equity stake in Delphi when it emerges from bankruptcy. Appaloosa bought a 9.3% stake in Delphi for pennies per share after Delphi filed for bankruptcy in October 2005.

Appaloosa would pump billions of dollars into Delphi for the increased stake, according to the article, and the suggestion that Delphi bondholders will get at least par in a workout pushed the debt higher. Delphi shares (Pink Sheets: DPHIQ) also shot up, gaining by a dime, or 6.25%, to close Monday at $1.70.

Under the proposal being considered, Delphi bondholders would have the option to invest new money into Delphi in exchange for larger stakes in the restructured company, the Journal said.

Winn-Dixie dives 5 points

To the other extreme, Winn-Dixie Stores, Inc. bonds were lower on negative sentiment about consolidation in the supermarket industry as it struggles to restructure and emerge from bankruptcy.

Winn-Dixie's 8 7/8% bonds due 2008 dropped to 65 bid, 67 offered on Monday from 70 bid, 72 offered at Friday's close. The stock (Pink Sheets: WNDXQ) also fell, losing 9% on the day.

Part of the pressure on Winn-Dixie, a sellside market source said, was chatter last week that the sale of Marsh Supermarkets Inc. would entail the purchaser, Sun Capital Partners, breaking the chain up and selling off some stores.

Jacksonville, Fla.-based Winn-Dixie, a supermarket chain along the southeast, filed for Chapter 11 reorganization in February 2005. Since its filing, Winn-Dixie has announced some 326 store closings, aiming at a restructured operation of about 587 units in its core market areas.

Marsh shareholders met Friday in Indianapolis and officially approved the $88 million sale of the chain to Sun Capital Partners, a Florida-based private equity firm. Marsh and Sun Capital officials have previously said they had no intention of breaking up the company and selling off its components, but the sellside source said there was chatter circulating Monday that there would be some ongoing restructuring amounting to some individual stores going on the auction block.

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