Collins & Aikman bank debt up; asbestos bank debt and bonds higher

By Paul Deckelman and Sara Rosenberg

New York, Aug. 17 - Collins & Aikman Corp.'s bank debt continued to push higher Wednesday in the wake of Lear Corp.'s interest in the bankrupt Troy, Mich.-based automotive interior components maker, although its bonds - which had risen in Tuesday's dealings - were pretty much unchanged.

Bonds of bankrupt companies with big asbestos liability issues were seen better, and their bank debt also seemed to be firmer.

In airline news, the sharp fall in world oil prices - down over $3 on the session to under $64 per barrel - plus continued investor optimism in the wake of Tuesday's upgrade in both its stock and its bonds, helped Northwest Airlines Corp. bonds to continue to fly higher. However, whatever positive momentum Delta Air Lines Inc.'s bonds may have gained from the news earlier in the week that it will sell its Atlantic Southeast Airlines, with the proceeds slated for debt repayment, seems to have dissipated.

The Collins & Aikman bank debt was being quoted at the end of the day at 88.5 bid, 90 offered, according to a trader, who said that first thing in the morning that paper had been quoted as low as 87 bid, 89 offered.

By comparison, late Tuesday, a different trader had the bank debt quoted at 87.75 bid, 88.75 offered.

On the bond trading front, a trader in distressed issues said that he had seen the company's 10¾% senior notes due 2011 trade up to 34.5 bid, before ending at 34 bid, 35 offered, unchanged on the session.

A source at another desk even saw the bonds slip a little to 34 bid, down a quarter point, although another trader saw the bonds "hanging in there" and going home bid at 34 with no offers, a tightening from morning levels around 33.5 bid, 34.5 offered.

On Tuesday, definitive news of a second potential bid for bankrupt Collins & Aikman surfaced, as Southfield, Mich.-based Lear filed a letter with the Securities and Exchange Commission that it sent to Collins & Aikman's president and chief executive officer, Frank Macher, expressing interest in the company. A first bid for the company, to the tune of $1 billion, came last week from Plastech Engineered Products Inc.

Lear executive vice president and chief financial officer David C. Wajsgras said in the letter that of particular interest is potentially merging all or a part of Collins & Aikman's interior components/systems business with its own.

Delphi, Federal-Mogul rise

The auto sector in general was seen stronger on Wednesday, with Delphi Corp. bank debt and that of Federal-Mogul Corp. each trading up by about half a point.

Delphi's revolver was quoted at 95.25 bid, 95.75 offered and its term loan was quoted at 102.75 bid, 103.5 offered, a trader said.

As for the Troy, Mich.-based automotive electronics manufacturer's bonds, a trader said there were "buyers around" for the company's 6.55% notes due 2006, "with good two-way flows."

He saw Delphi's 6.55% notes due 2006 trading as high as 92, up from 90 bid at the start of the day, before they came off that peak to end at 91 bid, 92 offered, up a point.

The company's other bonds were "well bid-for" during the day, with its 7 1/8% notes due 2029 at 74.5 bid.

At another desk, a source saw those long bonds at 75 bid up from 73.5 earlier. The 6.55s were also up 1½ points, to 91.5, while the 6½% notes due 2009 rose to 86 bid from 84.5 and the 61/2s due 2013 were three points up at 81.25.

Meanwhile, Federal-Moguls' bank revolver was quoted at 92.5 bid, 93.5 offered, the bank debt trader added. A bond source saw its notes up 1/8 point at 27.75.

Besides being watched by investors playing in the automotive supply area, the bankrupt Southfield, Mich.-based maker of auto brakes and other components is also tracked by market players trying to keep ahead of developments relating to asbestos liability.

Asbestos names gain

And the bonds of two other widely followed asbestos-challenged companies were seen higher Wednesday, although a trader saw no specific news out on them.

Bankrupt Lancaster, Pa.-based floorcovering maker Armstrong World Industries rose to 83 bid, 85 offered, up two points on the session, while those of bankrupt Toledo, Ohio-based insulation maker Owens Corning pushed up three to four points across the board, a trader said, its 7½% notes due 2018 four points ahead at 86 bid 87 offered, and its 7% notes due 2009 up three points at 83 bid, 85 offered.

Owens' bank debt was meantime up about half a point on the day, fueled by the recent ruling throwing out substantive consolidation for its bankruptcy case, according to a trader, who said that the paper was trading in the 125.5 bid, 126 offered context.

"On Monday it was as high as 127. Came in a little yesterday and now it's up again," the trader added.

Owens Corning's use of substantive consolidation in its Chapter 11 case was recently overturned by the U.S. Court of Appeals for the Third Circuit. The company had obtained approval from the U.S. Bankruptcy Court for the District of Delaware in October 2004 to treat the parent and subsidiaries as a single unit.

After the October ruling, Credit Suisse First Boston, the agent bank for the company's lenders group, appealed, saying the ruling was a big setback to the group of 43 banks, led by CSFB, which fought against consolidation in pressing their claim that their approximately $1.6 billion in loans to the parent company and its units had priority over the claims presented by the bondholders and other creditors.

According to the ruling, in this case, substantive consolidation fails to lead to an equitable result, "communizing assets of affiliated companies to one survivor to feed all creditors of all companies."

Northwest "euphoria"

Among the airlines, Northwest's bonds were "up on continued euphoria" about Tuesday's upgrade in the company's bonds and shares to "overweight" from "equal weight" by Morgan Stanley, a trader said.

He quoted the Eagan, Minn.-based Number-Four U.S. airline carrier's 8 7/8% notes due 2006 at 56.25 bid, 57.25 offered, and its 10% notes due 2009 at 40 bid, 41 offered, both up 1½ points on the session.

Another trader also saw Northwest "a little better," with the 8 7/8s unchanged at 55 bid, 57 offered, but the 10s and the 7 7/8% notes due 2008 each two points better, at 40 bid, 42 offered and 39 bid, 41 offered, respectively. The 9 7/8% notes due 2007 were a point better at 45 bid, 47 offered.

Besides the warm afterglow of the Morgan Stanley endorsement, energy prices seemed to moderate on Wednesday, with crude down more than three dollars on the session, and published reports quoted officials of the Northwest mechanics union as saying talks between the two sides on a new contract for the mechanics had made some progress - although the clock continues to tick down to a possible strike by the mechanics on Friday.

But the second trader saw Delta's bonds meanwhile at best spinning their wheels, with the troubled Atlanta-based carrier's benchmark 7.70% notes due 2005 down a point at 24 bid, 26 offered, while its 10% notes due 2008 were unchanged at 17 bid, 18 offered, and the company's other bonds "all the same" at 15 bid, 16 offered.

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