Collins & Aikman still struggling; Oakwood Homes firmer; Air Canada steadily rising

By Carlise Newman

Chicago, Oct. 6 - Collins & Aikman Corp. paper continued to slide in Monday's distressed debt trading session, after news reports that the company may be dropped from DaimlerChrysler AG's Chrysler Group list of contractors. In addition, Oakwood Homes Corp. bonds were stronger a day after the company obtained court approval for its disclosure statement.

The Detroit Free Press said Friday that Chrysler Group is ready to drop all current and future contracts with the auto parts supplier.

Chrysler's current and planned business with Collins & Aikman is worth $1 billion, according to the newspaper.

The auto parts supplier's 10¼% notes due 2006 were quoted 2 points lower than Friday at 76 bid, 78 offered. On Friday, that issue had dropped to 78 bid from 87 bid.

The 11½% notes due 2006 were seen at 58 bid, 3 points lower than Friday's levels of 61 bid, a trader said. The bonds were said to have fallen as low as the mid-50s on Friday before rebounding back to levels in the low 60s.

"The paper was really hit hard on Friday, but I think we've seen the worst of it - for now," one trader commented. "Today was quiet and not much was happening."

News reports have said that losing Chrysler's business would be a huge blow to Collins & Aikman, which analysts expect to report a loss this year of $65 million on sales of about $4 billion.

Collins & Aikman chairman and chief executive officer David Stockman was quoted by the Detroit Free Press saying the idea that Chrysler would put most or all of Collins & Aikman's business up for grabs was "flat wrong."

Oakwood Homes bonds rose Monday and traded actively, a trader said. The company obtained court approval for its disclosure statement on Friday, bringing it one step closer to emerging from bankruptcy.

The Greensboro, N.C. manufactured housing company said it is aiming to have a confirmation hearing in late November.

Oakwood's bonds were seen firming to 40 bid, 41 offered, a rise of 2 points on the day, a trader said.

Oakwood also said it has obtained a commitment for $250 million in exit financing from Greenwich Capital Financial Products, Inc. The new facility will replace Oakwood's debtor-in-possession credit facilities and the loan purchase facility that provides short-term liquidity for warehousing loans in the consumer finance company.

"The bonds were better because everything's going pretty smoothly," a trader said.

Under the reorganization plan, holders of Oakwood's $303 million of senior unsecured debt, its guarantees of principal and interest on $275 million principal amount of subordinated Remic securities and certain other unsecured debt will receive all the company's post-restructuring equity.

Existing common shares will be exchanged for out-of-the-money warrants to purchase approximately 10% of the post-restructuring stock.

Air Canada Inc. bonds were "much better" on Monday after news Friday that it had reached an agreement with four different aircraft lessors to restructure the terms on 14 of its aircraft, bringing to 184 the total number of aircraft with new leases.

The news was announced as part of Air Canada's restructuring under the Companies' Creditors Arrangement Act.

Air Canada's 10¼% notes due 2011 were up 1 point to 46 bid, traders said.

The Montreal-based airline said it and its Air Canada Jazz division were about to finalize a deal on another 23 aircraft with six different lessors.

"Substantive discussions are currently under way with respect to the balance of the fleet. To date, 23 aircraft have been returned to lessors and the company is presently finalizing decisions on which leases are to be repudiated to complete the process," the airline said in a statement.

Air Canada said it is restarting lease payments as the deals are completed.

In other news, AK Steel Holding Corp. stumbled Thursday after the company issued third-quarter earnings report guidance last week.

AK Steel said as a result of a less favorable product mix and higher raw material and energy costs, it expects its third quarter results to be lower than current estimates by industry analysts. The company said it now expects to report a net loss between $0.82 and $0.86 per share.

The 7 7/8% notes due 2009 were quoted at 63 bid, 66 offered, while the 7¾% notes due 2012 were seen at 61½ bid, 63½ offered. Both issues were lower on the session but the trader could not recall previous levels.

"They were hit hard last week. Today wasn't so bad, but there's a lot of negativity surrounding that company," a trader said.

And Cone Mills Corp. was reportedly "very active," with its 8 1/8% notes due 2005 rising to 38 bid from 36, a trader said. He said that financier Wilbur Ross, who is trying to buy the troubled textile maker out of bankruptcy, has been buying bonds of late.

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