Tower continues to firm; Federal-Mogul numbers better, but bonds steady

By Paul Deckelman

New York, Oct. 22 - Tower Automotive Inc.'s bonds continued to steer an upward course Friday, continuing the strength that the Novi, Mich.-based maker of steering gear and other assemblies for the automotive industry has shown of late on the news that it was trying to line up some badly needed financing. Other automotive issues came along for the ride.

Bankrupt auto parts producer Federal-Mogul Corp. reported better third-quarter numbers, although its bonds were seen little changed. Some other asbestos-related debt, on the other hand, was quoted at better levels.

And traders saw firmer levels in the bonds of beleaguered Atlanta-based airline operator Delta Air Lines Inc.

The bonds of Tower Automotive's debt-issuing R.J. Tower Corp. subsidiary continued to push higher, the 12% notes due 2013 ending the day at 70 bid, a trader said, up three points. Those bonds had also risen about 1½ points on Thursday and in general have been firming over the last several sessions, pushed up by speculation that the company is working on a collateralized financing package that would provide much-needed capital.

The company's term loan B paper was meanwhile following the bonds up, ending at 97.91 bid, up from 97.78 on Thursday. However, Tower's second-lien hybrid term loan was seen down a few ticks, at 98.83 bid from 98.92 previously.

Earlier this month, Tower warned that it expects to report a third-quarter net loss of between $22.5 million and $25 million, or 39 to 43 cents per diluted share. This compares to previous guidance for the quarter of a net loss of between $10.4 million and $12.8 million, or 18 to 22 cents per share. The net loss and diluted loss per share estimates exclude restructuring charges and certain non-recurring, non-cash charges.

The company blamed the anticipated downturn on lower domestic vehicle production volumes, continued escalation of steel costs and, to a lesser extent, higher launch costs on new business.

Tower also said that its revenues have softened for the quarter to a range of $710 million to $720 million, versus previous guidance of between $725 million and $735 million. Liquidity as of Sept. 30, 2004, is expected to be in excess of $115 million.

Tower has scheduled an Oct. 28 webcast of its results and management's explanation.

Among other automotive names, Visteon Corp. - which on Thursday reported a $1.36 billion ($10.86 a share) loss in the third quarter - was still higher on the session, despite the sea of red ink, its 8¼% notes due 2010 up 1½ points at 101. The loss by the Van Buren Township, Mich.-based auto parts maker - a key supplier of former corporate parent Ford Motor Co. - far surpassed its year-ago deficit of $168 million ($1.34 a share). It blamed much of the loss on a one-time charge for deferred tax assets - but warned of challenging conditions ahead.

The company said that while it expects revenues to increase in the current fourth quarter, "our current cost structure combined with escalating material surcharges will challenge our operating performance for the rest of the year."

Federal-Mogul bonds steady

Bankrupt Southfield, Mich.-based auto parts maker Federal-Mogul on Friday reported that net sales in the three months ended Sept. 30 rose to $1.5 billion from $1.33 billion a year ago, while its pre-tax loss from continuing operations fell to $4 million from $14 million a year ago. It said that the increases in revenues were driven by favorable foreign currency, new business and increased volumes.

""New business and increased sales volumes highlighted our financial results during the third quarter, said Steve Miller, Chairman of the Board and Interim Chief Executive Officer in a statement.

"However, difficult market conditions including increased cost of steel and other commodities and ongoing customer pricing challenges continue to pressure our financial results."

Despite the better results, however, Federal-Mogul's bonds were seen holding around the same 28.5 -29 levels that they've recently been hovering at.

Earlier in the week, Federal-Mogul - which was driven into bankruptcy three years ago under a deluge of asbestos-related lawsuits - said that for the fiscal year ending Dec. 31, it expects to clear $1.23 billion in profits on projected revenues of $5.89 billion. For 2005, it will earn an estimated $55 million on net sales of $5.94 billion. For 2006, the net profit is estimated at $202 million on revenues of $6.09 billion and in 2007, the company estimates it will earn $246 million on sales of $6.23 billion.

EBITDA for the fiscal year ending Dec. 31 is estimated at $585 million, $683 million in 2005, $860 million in 2006 and $929 million in 2007.

Other asbestos names edge up

While Federal-Mogul's bonds were unmoved, some of the other bankrupt asbestos names were seen a tad better, with a trader quoting Armstrong World Industries' bonds at 63 bid, 66 offered, but then having tightened to 64 bid, 65 offered, while at another desk, the Lancaster, Pa.-based floorcovering maker's 6.35% notes that would have matured in 2003 were seen a point better at 63.5. Its 9% 2001 notes were unchanged at 64.

Owens Corning's bonds were seen at 49 bid, 50 offered, up from 48 bid, 50 offered Thursday, but a trader said that while the Toledo, Ohio-based insulation maker's bonds' bid side moved up, "nothing really happened."

He also saw Delta Air Lines' recently beleaguered bonds looking like "they're doing better," although he saw no fresh positive news out on the troubled carrier. He quoted its benchmark 7.7-% notes due 2005 as high as 48 bid, 50 offered, while its 8.30% notes due 2029 were at 24 bid, 26 offered, both issues up two to three points on the session.

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