Dura bank debt, bonds lower; Visteon bonds off as Valeo bid seen fading

By Paul Deckelman and Sara Rosenberg

New York, Sept. 25 - Dura Automotive Systems Inc.'s second-lien bank debt continued to slide lower on Monday as investors still seem to be coming to grips with the recent influx of negative sector news.

The Rochester Hills, Mich.-based automotive parts maker's recently hard-hit junk bonds continued to also retreat, its subordinated notes now seen at nearly worthless levels of just pennies on the dollar.

Elsewhere in junk bond land, Visteon Corp.'s notes were falling on market rumors that French auto parts maker Valeo SA - previously said to be in the bidding to acquire the Van Buren Township, Mich.-based U.S. parts company - was no longer interested, given the recent sharp downturn in the American auto industry, including big output cuts by Visteon's former corporate parent and single largest customer, Ford Motor Co.

Dura debt drops

Dura's second-lien paper closed out the day at 89 bid, 91 offered, a trader said, down from Friday's closing levels of 92.5 bid, 93.5 offered.

"It's all technical related," he added.

Dura's bank debt has been on people's radars since talk of a potential bankruptcy filing surfaced earlier in the month, as well as whisperings that the company is having a hard time lining up debtor-in-possession financing on favorable terms.

Then, a week ago, Dura was informed that it was in danger of being delisted from the Nasdaq Global Market, since its stock price has been below $1 per share for at least 30 consecutive days. The company has six months to fix the situation.

On top of that, on Wednesday, Dura's ratings were lowered by Moody's Investor Services, including the second-lien ratings, which were dropped to Caa2 from Caa1.

Bank debt traders said that the performance of Dura's loans was also being affected by the recent barrage of bearish news that has come from other auto-related companies.

For example, last week, Lear Corp. lowered its previously issued net sale and core operating earnings guidance because of production cuts, Ford got downgraded deeper into junk by both Moody's and Standard & Poor's, and DaimlerChrysler AG's Chrysler Group announced delivery reductions.

Over on the bond side of the fence, Dura has been moving steadily downward, its 8 5/8% notes due 2012 seen by a trader Monday down 2 points to 46 bid, 48 offered, while its almost-valueless 9% notes due 2009 were a point lower at 5 bid, 6 offered.

Another trader saw the senior bonds 3 points easier at 45 bid, 46 offered, but dismissed the 9s, at 6 bid, 7 offered. "Who cares?" he asked rhetorically. "They don't have much further to go."

Visteon off as Valeo seen uninterested

But the major downside driver Monday among the distressed automotive junk bonds was Visteon, leading yet another day's retreat.

A trader cited market speculation that the company's efforts to sell itself might be running into trouble because recent announced output cuts by Detroit's Big Three carmakers translate to lower orders for Visteon, making it less valuable.

Published reports have named France's Valeo as a possible buyer, since its chief executive officer, Thierry Morin, has said in recent months that he would be interested in buying all or part of Visteon. Those news reports have also linked Visteon as well as to Indian automotive concern Tata Group.

On Friday and Monday, there was market speculation, reported by some news services, that Valeo may no longer be interested.

According to one report, Morgan Stanley was quoted as saying that a deal to buy Visteon would make little or no sense for Valeo, saying that it "appears dilutive at or above the current Visteon share price on 2007 earnings." The investment bank also reportedly said that anticipated 2008 accretion is dependent on a 37% jump in Visteon profits.

However, there were contradictory stories out there to the effect that Valeo was shopping its motors and actuators division, possibly to raise cash with which to fund a Visteon deal. Valeo has refused any and all comment on the stories and rumors.

Wherever the truth lies, the hard fact was that Visteon's bondholders were taking the scuttlebutt to heart, taking its 8¼% notes due 2010 and its 7% notes due 2014 each down a point, a trader said, quoting those bonds at 95.5 bid, 96.5 offered, and at 87.5 bid, 88.5 offered, respectively. "The rumor is that the sector woes may scare off Valeo."

A trader saw the latter bond close at 88 bid, 89 offered, which he called down 1½ points on the day, but said that the bonds had been off by as much as 2½ points during the session.

Dana and Delphi down

Other troubled automotive names seemed to be following Visteon lower as if they were riding in a convoy, with bankrupt Toledo, Ohio-based Dana Corp.'s 5.85% notes due 2015 two points lower at 61 bid, 62 offered, while bankrupt Troy, Mich.-based Delphi Corp.'s 6.55% notes supposedly coming due later this year were likewise down a deuce at 84 bid, 85 offered.

Bankrupt Novi, Mich.-based vehicle frames maker Tower Automotive Inc.'s 12% notes due 2013 were "down 2 or 3 points" at 17 bid, 19 offered.

GM steady

Among the more mainstream auto names, General Motors Corp.'s benchmark 8 3/8% notes due 2033 were seen unchanged on the day at 85 bid, 86 offered, neither helped nor hurt by the various conflicting stories circulating on how GM's talks with prospective alliance partners Renault and Nissan are going. Some quoted Renault/Nissan chief executive officer Carlos Ghosn - who is to meet with his GM counterpart, Rick Wagoner, this week in Paris - as saying the talks are progressing well, while other stories said he sees GM as at best reluctant about the alliance idea.

GM arch-rival Ford's 7.45% notes due 2031 were seen up ¼ point at 77.25 bid, 77.75 offered.

Asbestos, airlines quiet

Apart from the automotive realm, little was going on, a trader in distressed bonds said.

He saw bankrupt Toledo-based insulation maker Owens-Corning's 7½% notes due 2018 two points lower at 46 bid, 48 offered, on no news, but said that the bonds of the other major asbestos-challenged issuer, the bankrupt Lancaster, Pa.-based floorcovering maker Armstrong World Industries Inc., were unchanged at 62 bid, 64 offered.

The trader also saw bankrupt air carrier bonds Northwest Airlines Corp. and Delta Air Lines Inc. unchanged at levels around 51 bid and 30 bid, respectively.

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