Dura bank debt up, bonds off after Chapter 11; Tembec gains on tariff reimbursement

By Paul Deckelman and Sara Rosenberg

New York, Oct. 30 - Dura Automotive Systems, Inc.'s second-lien term loan headed higher Monday after the company filed for Chapter 11 bankruptcy, according to a trader.

However, the company's junk bonds - particularly its 8 5/8% senior notes due 2012 - were seen gyrating around at lower levels following that filing.

Elsewhere in the automotive sector, Dana Credit Corp.'s bonds were better after the financing arm of the Toledo, Ohio-based auto parts company Dana Corp. said it was in forbearance talks with its noteholders - who had accelerated those bonds. However, Dana Corp.'s own bonds were down several points.

Apart from the autos, Tembec Inc.'s bonds were standing tall, as the Canadian forest products company banked a big payment from Uncle Sam as part of the settlement of a long-running lumber tariff dispute between the United States and Canada.

Dura second lien better

A bank loan trader, explaining the rise in Dura's second-lien paper in the wake of the Chapter 11 filing, said that "people were happy to hear that they're going to be kept current" in terms of interest payments on the loan in connection with the bankruptcy case.

That second-lien loan closed out the day at 86 bid, 87 offered, up about a point from previous levels, the trader added.

As part of the Chapter 11 process, Dura has obtained a commitment for a $300 million debtor-in-possession financing facility from Goldman Sachs, GE Capital and Barclays that consists of a $130 million asset-based revolver at Libor plus 175 basis points, a $150 million term loan B at Libor plus 250 bps and a $20 million synthetic-letter-of-credit facility.

The Rochester Hills, Mich.-based automotive parts maker said that it filed for bankruptcy because of the accelerating deterioration of the North American automotive industry, further production cuts by the major U.S. original equipment manufacturers - i.e. the Big Three domestic automakers - and the escalating cost of raw materials.

Dura bonds head lower

That filing with the U.S. Bankruptcy Court in Wilmington, Del., announced several hours before the financial markets opened for business Monday, surprised nobody - it had been widely expected by analysts and other sector-watchers for some months, and the bankruptcy buzz intensified when Dura failed to make the scheduled $17.25 million payment on its 8 5/8% notes that came due in mid-October. The company instead invoked the standard 30-day grace period.

At that point, junk bond traders said it was only a matter of time before the problem-plagued company would finally run up the white flag and seek bankruptcy protection, joining such sector peers as Dana, Delphi Corp., Tower Automotive Inc. and Collins & Aikman Corp. in Chapter 11.

With the overnight news release announcing the filing already on the screens when the day's trading got under way, the Dura bonds promptly fell several points in busy morning dealings, with its 8 5/8% senior notes due 2012, which had closed out trading at 33 bid on Friday, plunging to 28 bid, 29 offered, a trader said, before coming back and stabilizing at somewhat lower levels around 30 bid, 31 offered.

He saw Dura's 9% subordinated notes due 2009 drop as low as 5 bid from prior levels at 5.5 bid, 6.5 offered, but then come back to actually end a little higher at 6 bid, 7 offered.

"Dura was gyrating around this," another trader said, "down at first, and then it traded right back up a little bit, and then it headed down again. So they were sort of all over the place."

Yet another trader saw the 8 5/8s fall to as low as 27.5 bid, 28.5 offered, which he called a 5 point drop, before they came back to close around 30 bid, 31 offered, which he termed around a 3 point loss. The 9s, he said, finished "pretty much unchanged" around 6 bid, 7 offered.

In its filing, Dura noted that its action only covered the company's U.S. and Canadian operations. Dura's European business, which accounts for about 51% of the company's revenues, is not covered by the filing.

Dana Credit up, corporate bonds lower

The other big mover seen coming out of the autos segment Monday was Dana. While most of the bonds were seen down 2 or 3 points, the company's Dana Credit 8 3/8% notes due 2007 were seen up 3 points or more, given wings by the company's announcement in a Securities and Exchange Commission filing that it was in talks with an ad hoc committee representing holders of some $399 million of Dana Credit notes, including the widely traded 8 3/8s. Those holders had declared the several series of Dana Credit bonds immediately due and payable when Dana filed for Chapter 11 protection in March. Under the terms of the forbearance agreement currently being negotiated, they would hold off on exercising their legal rights to demand immediate payment on the bonds, subject to approval of an intercompany agreement in Dana's Chapter 11 case (see related story elsewhere in this issue).

A trader saw the Dana Credit 8 3/8s push up to 101.75 bid, 102.75 offered from prior levels at 98 bid, 99 offered.

However, Dana Corp.'s own bonds were moving in the opposite direction, with its 6½% notes due 2008 falling to 73.5 bid, 74.5 offered from prior levels around 76 bid, 78 offered.

MagnaChip bounce continues

A trader saw MagnaChip Semiconductor Ltd. - whose distressed bonds were gyrating around last week after the Korean chipmaker reported earnings, continuing the bounce which was seen on Friday. "They still stayed on the upside."

The company's 8% notes due 2015 pushed up to around 60.5 bid, while its floating-rate notes due 2011 ended at 86 bid, 86.5 offered.

The 8s had initially plunged to 47 bid, 48 offered on Thursday after the poor numbers were released, a loss of about 4 or 5 points, but then moved back up later that session after the company's conference call, during which executives indicated that they had sufficient cash. That pushed the bonds back up to around 54.5 bid 55 offered, a gain of about 4 or 5 points on the session, and set the stage for the further upside movement on Friday, when the bonds moved up to around the 57-58 area.

The 2011 notes had meantime bounced back from the low 80s on Thursday to a close Friday around 85, setting the stage for Monday's move up to an 86ish context.

The high-tech firm had a net loss for the fiscal quarter ended Oct. 1 of $47.7 million, sharply wider than $13.2 million in the third quarter of 2005.

Tembec up on tariff payment

A trader saw Tembec's bonds better as the Montreal-based paper and lumber company received a US$242 million reimbursement under a softwood tariff agreement negotiated earlier this year between the United States and Canada. Under that pact, the U.S. repaid 80% of some US$3 billion in tariffs it collected from Tembec and a number of other Canadian forest products companies during the period that the two countries were in dispute.

The trader said that Tembec's 8 5/8% notes due 2009 got as good as 59.5 bid, a better than 2 point gain on the session, before they fell back from that peak to close at 58 bid, 59 offered, up a point on the day.

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