Collins & Aikman debt, bonds continue fall; Delphi up as asset sale completed

By Paul Deckelman and Sara Rosenberg

New York, Aug. 2 - Collins & Aikman Corp.'s bank debt continued to get slammed during Wednesday's session, dropping by another 4½ points on private-side information, according to a trader. The bankrupt Troy, Mich.-based automotive components maker's bonds were also continuing to move lower.

The bonds of bankrupt automotive parts maker Delphi Corp. - also based in Troy - were on the other hand moving higher, apparently helped by news that the company had completed a sizable asset sale.

Former Delphi parent General Motors Corp.'s bonds were seen holding steady even as the Detroit giant said it would increase the size of its just recently reported second-quarter loss, and warned that completion of the planned sale of a 51% stake in its General Motors Acceptance Corp. financial unit might have to be delayed past the beginning of next year

And traders noted the continued rebound of Dura Automotive Systems Inc.'s paper, which was run off the road late last week amid investor dismay over the Rochester Hills, Mich.-based automotive components maker's quarterly results, but which has been coming back all this week so far.

Collins & Aikman's bank debt closed out Wednesday quoted at 72 bid, 73 offered, down from Tuesday's levels of 76.5 bid, 77.5 offered, a trader said.

All-in-all, over the course of this week, the bank debt has plummeted by approximately 14 points.

According to the trader, the company released some financial numbers to private lenders on Tuesday that were obviously a major disappointment, and helped to cause this remarkable freefall in bank debt levels.

No further details on the financials were available, since it is all private information, market sources said.

A junk bond trader meantime said that the company's 10¾% senior notes due 2011 were a point lower on the day at 15 bid, 16 offered, continuing their recent slide in tandem with the erosion of the bank debt as investor optimism that any kind of a good bid for the company's assets will emerge anytime soon continues to wither.

Traders noted that such optimism had pushed Collins & Aikman's senior bonds as high as around 30 about a month ago, and had also pushed its 12 7/8% subordinated bonds due 2012 up to around 7 cents on the dollar. The latter bonds have also fallen back in the interim and now languish at near-worthless levels of 2 to 3 pennies on the dollar.

Delphi gains

Also on the automotive front, Delphi's bonds were better, as the company announced that has completed the sale of its U.S. battery business to Johnson Controls Inc., shifting a New Jersey plant to the supplier effective Tuesday. Johnson Controls and Delphi had announced the battery business deal in July 2005.

A trader saw Delphi's 6½% notes due 2009 three points better at 85 bid, 86 offered.

Another trader had Delphi's 8 5/8% notes due 2011 1½ points up at 79 bid, 80 offered.

Dura recovery goes on

Among other automotive parts names, Dura's 9% notes due 2009 were seen by a market source to have jumped 3 points on the session to 30.5 bid, continuing the big rebound in those bonds from the lows they hit in the lower 20s last week after Dura reported an unexpected fall deep into the red from its year-earlier profit.

However, those bonds still remain well off the levels around 50 bid they held before Dura reported its unfavorable numbers.

Another trader saw the Dura bonds up only a point, at 29 bid, 31 offered, but said that its 8 5/8% senior notes due 2012 were at least 2 points up on the day, at 79 bid, 81 offered. While that is up from the levels in the low to mid 70s to which the bonds fell in the two sessions following last week's poor earnings report, it's still well below their pre-results level in the mid 80s.

GM steady, GMAC slips

Elsewhere, GM announced late Tuesday that it was restating its second-quarter net loss upping it by $200 million, to reflect a tax provision related to the sale of a majority stake in GMAC. GM said that the revised net loss for the quarter would now be $3.4 billion ($5.97 per share), up from $3.2 billion ($5.62 per share) that the carmaker reported last week.

GM also said that completion of its $14 billion deal to sell a 51% stake in GMAC to an investor consortium could be delayed beyond the previously predicted end of the year because of difficulty in obtaining needed regulatory approval.

But while a trader saw GMAC's 8% notes due 2031 down a point at 97.5 bid, 98.5 offered, and its 6 7/8% notes due 2012 half a point lower at 96.5, he said that the parent company's benchmark 8 3/8% notes due 2033 were unchanged at 82.5 bid, 83 offered.

Ford up on review

GM arch-rival Ford Motor Co.'s bonds firmed smartly - just a day after the Number-Two domestic carmaker reported terrible July sales figures - as Ford reportedly began a strategic review of its more poorly performing operations, with the possibility of some sales, and hired a high-powered Wall Street merger expert to advise company chairman Bill Ford.

Ford "rallied in the morning," the trader said, on the news that the troubled carmaker would scrutinize its underperforming units, such as the Jaguar luxury sports car division, with a possible eye toward looking to unload such operations.

That news, he said, pushed the Ford 7.45% notes due 2031 up 1¾ points on the session to 75.25 bid, 75.75 offered. He also saw the 7% notes due 2013 of the carmaker's financing arm, Ford Motor Credit Co., a point better at 89 bid, 89.5 offered.

The Ford bonds "moved pretty much early in the day, and then stayed there. They did not move much after the initial rally up."

The Wall Street Journal reported that Ford was starting a review of its poorly performing units, including the pricey Jaguar, and might consider selling some operations as it attempts to turn itself around.

Ford - which on Tuesday reported that its July sales slid 35.2% from last year's incentive-swollen levels, paced by a 44% dive in light truck and SUV sales - said Wednesday in a Securities and Exchange Commission filing that its second-quarter loss was $254 million (14 cents per share), more than double the previously announced $123 million (seven cents per share) of red ink, blaming higher-than-expected pension costs. The bigger loss stands in even starker contrast to the year-ago profit of $946 million (47 cents per share) posted by the carmaker.

Ford also warned that its Premier Auto Group luxury car division, which includes Jaguar, Volvo, Land Rover and James Bond's favorite vehicle, Aston-Martin, won't turn a profit this year, based on recent sales trends.

That warning puts Jaguar, and possibly the other high-end nameplates, in the sights of company executives who will be reviewing those models' performance, as the Journal reported.

And as Ford looks itself over to determine what it should keep and what it might jettison, the company announced that it has contracted with former Wall Street M&A wizard Kenneth Leet - who formerly oversaw big deals for Goldman Sachs &Co. and Bank of America - to serve as a strategic adviser to chairman/CEO Bill Ford. The Journal said that Leet will head Ford's review of its ailing operations.

Outside of the auto names, a trader in distressed bonds said that there was not much going on, noting that the bonds of such troubled companies as Tembec Industries Inc., Delta Air Lines Inc., Northwest Airlines Corp., Calpine Corp. and the asbestos-challenged Owens Corning and Armstrong World Industries Inc. were all unchanged on the session.

However, he did see Adelphia Communications Corp. bonds a point firmer, with the bankrupt Greenwood Village, Colo.-based cable operator's 10¼% notes due 2006 at 58 bid, 60 offered, and its 101/4s due 2011 at 62 bid, 64 offered.

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