Collins & Aikman leads auto group lower; Owens Corning bank debt, bonds up

By Paul Deckelman and Sara Rosenberg

New York, March 9 - A short-lived rebound in Collins & Aikman Products Co. bonds, and those of some of the other automotive supplier companies, came to an abrupt end on Wednesday as the bonds of the Troy, Mich.-based maker of plastic automotive components resumed their recent negative course, towing other auto names down along with it.

On the upside, Owens Corning's bank debt was seen up about half a point to three quarters of a point on Wednesday in reaction to the release of decent fourth-quarter numbers late in the day on Tuesday. Its bonds were also seen firmer.

Collins & Aikman's bonds had been pushing upward over the past several sessions, after having fallen for most of last week in response to announced production cutbacks by two of its biggest customers, Ford Motor Co. and General Motors Corp., as well as market fears that the renewed rise in oil prices could adversely affect Collins & Aikman by driving up the cost of plastic, used extensively in the interior and exterior components the company produces.

But on Wednesday the rebound ran out of gas, and its 10¾% senior notes due 2011 were seen down two points at 92 bid, 94 offered while its 12 7/8% subordinated notes due 2012 likewise were down a deuce at 70 bid, 72 offered.

At another shop, a trader saw the 103/4s down only a point, at 93 bid, 94 offered, although he said that during the day they had gone as low as 92.5.

The trader saw other automotive names "down a point across the board,", including Dura Operating Corp.'s 9% notes due 2009 at 92 bid, 93 offered, Visteon Corp.'s 8¼% notes due 2010 at 96.5 bid, 97.5 offered, and Delphi Corp.'s 6½% notes due 2013 at 87.5 bid 88.5 offered. Delphi's bonds had started sliding Tuesday, when Moody's Investors Service downgraded the Troy, Mich.-based automotive electronics maker's ratings to junk bond status, completing Delphi's fall from investment-grade grace that had begun when Standard & Poor's first lowered the ratings to below investment grade.

That followed last week's revelations about new accounting problems and the abrupt ouster of the company's chief financial officer.

In a research note to clients Wednesday, UBS Investment Bank auto analyst Rob Hinchcliffe warned that "the thought of filing Chapter 11 is being bantered about," and added that "at this point given Delphi's situation, we think this could be a good move for the company."

Delphi declined comment on the bankruptcy speculation.

Foamex drops

Another automotive name taking it on the chin Wednesday was Foamex International Inc., the Linwood, Pa.-based maker of foam rubber products for a variety of industries, including autos, where it is used to stuff everything from car seats to dashboards.

On Tuesday the company's 9 7/8% notes due 2007 had firmed to 65.5 bid from 62 previously, while its 10¾% notes due 2009 were a point better, at 91 bid.

But on Wednesday, the bonds lurched abruptly into reverse as the 9 7/8s dropped to 59 bid, 61 offered, while its 103/4s were down to 89 bid, 91 offered, a trader said. He also saw the company's 13½% notes slated to come due on Aug. 15 three points lower at 94 bid, 96 offered.

Owens Corning bank debt higher

In bank loan dealings, Owens Corning saw its loan quoted at 109.5 bid, 110.5 offered by day's end, a trader said, up as much as ¾ point.

For the fourth quarter, the Toledo, Ohio-based building materials maker reported net income of $72 million on sales of $1.484 billion. The figures are up 67% from income of $43 million and 16% from sales of $1.275 billion in the year-earlier period.

Operating income was $146 million, including $21 million of Chapter 11-related charges and $21 million in asbestos-related insurance recoveries. The comparable 2003 figure was $112 million, including a credit of $10 million for restructuring and other charges, $10 million of Chapter 11-related charges, and $1 million in asbestos-related insurance recoveries.

A trader in distressed bonds saw the company's notes firm to 67 bid, 68 offered from 63 bid, 65 offered on Tuesday.

And he saw the bonds of another bankrupt asbestos-challenged company, Lancaster, Pa.-based floorcovering maker Armstrong World Industries Inc., at 70 bid, 72 offered, up two points.

Mirant down

Mirant Corp. continued to lose some ground on Wednesday with the bankrupt Atlanta-based energy operator's bank debt quoted at 77.25 bid, 77.75 offered, down from 77 bid, 78 offered at Tuesday's close, according to traders.

Mirant's 7.90% notes due 2009 and 7.40% notes due 2004, were seen unchanged at 84, while its Mirant Americas Generation Inc. (MAGI) 9 1/8% notes due 2031 were half a point lower at 112.

aaiPharma hit on coupon fears

Concerns about whether aaiPharma Inc. will be able to make the scheduled April 1 coupon payment on its 11% notes due 2010 were seen by a trader as the likely catalyst behind the sharp slide in those notes on Tuesday and, to a lesser degree, again on Wednesday, in absence of any other news about the Wilmington, N.C.-based pharmaceuticals company, which has a $9.625 million coupon payment due April 1 on the $175 million of outstanding bonds.

He saw the bonds, after having been traded "in the low 70s a week ago," ending at 59.5 bid, 61.5 offered Wednesday, "down significantly in the last three or four days. They botched up one [interest payment], although they finally paid, and now they've got another payment coming up April 1, and I guess people are concerned about them."

At another desk, the bonds were seen having dipped to 59 bid, 60 offered, off a point, after having lost six points on Tuesday top end at 60 bid, 61 offered.

Radnor plunges

Elsewhere, Radnor Holdings' 11% notes "got mowed," a trader said, quoting the bonds as having dropped to 83 bid, 84 offered, down from 88.5 bid, 89.5 offered on Tuesday before Standard & Poor's downgraded the company's credit ratings, which were lowered to CCC+ from B- for the corporate credit and senior secured notes, and to CCC- from CCC for the unsecured bonds.

S&P cited the Radnor, Pa.-based plastic cup manufacturer's deteriorating financial performance and business challenges, noting "Radnor's inability to materially improve its already weak liquidity position ahead of about $9 million in interest payments due within the next 45 days on its debt obligations."

The interest payment on its $135 million of notes is specifically due on March 15, although there is the standard 30-day grace period should it not make it; the trader said that payment "apparently is in jeopardy."

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