Airlines higher on Delta's narrower loss; Collins & Aikman better on Ford contract

By Carlise Newman

Chicago, Oct. 14 - Airlines led distressed debt trading Tuesday, boosted by Delta Airlines Inc.'s narrower loss for the third quarter.

Delta narrowed its third-quarter net loss, and announced it has sold 11 planes that had been scheduled for delivery in 2005 as part of a plan to reduce costs and boost liquidity. Delta expects the sale of the planes to an unnamed third party to reduce capital expenditures through 2005 by about $500 million.

On Tuesday the airline reported a net loss of $164 million ($1.36 a share), compared with a net loss of $326 million ($2.67 a share) a year earlier.

Delta's news served as the catalyst for an airline rally. Delta's10% notes due 2005 were seen at 93 bid, 95 offered, up 2 points. Northwest Airlines Inc.'s 11¾% notes due 2005 were quoted at 88 bid, also up 1 point.

After treading water at 10 bid for weeks, United Airlines Inc.'s notes added another 1 point to recent gains, taking them to 14 bid.

"Airlines were better today on Delta's results. They're better overall these days," a trader said.

Delta's latest results included a gain of $9 million ($0.08 a share), related to a debt exchange, and a charge of $1 million ($0.01 a share), stemming from an adjustment in the value of derivatives. The year-earlier period included charges of $139 million for write-downs of aircraft and equipment, as well as other items.

Without these items, Delta said its loss for the latest quarter was $172 million ($1.43 a share), compared with a loss of $212 million ($1.75 a share) a year earlier.

Analysts were expecting a loss of $1.46 a share for the latest quarter.

Collins & Aikman Corp. "saw some decent gains" on Tuesday after a rocky few days last week.

The Detroit auto parts supplier's paper had dropped over 10 points in three days after news that it may be dropped as a contractor by DaimlerChrysler AG's Chrysler Group, but then improved when the company announced a new contract with Ford Motor Co. on Friday.

Collins & Aikman said it was chosen by Ford Motor Co. to supply interior components for the new Futura sedan, the line that will replace Ford's highly successful Taurus.

Collins & Aikman's 10¾% notes due 2006 were seen rising 2 points after rising 5 on Friday, a trader said, ending the session at 87 bid, 88 offered.

"That's nearly out of distressed levels, but we're still trading it and I can't see it holding on to the gains forever," he said.

News reports said Chrysler Group may be ready to drop all current and future contracts with the auto parts supplier. Chrysler's current and planned business with Collins & Aikman is worth $1 billion.

Elsewhere, Loral Space & Communication bonds rose Tuesday. Loral's 10% notes due 2006 were up 2 points to 76 bid, one trader said.

Last week the company rejected a $1.85 billion bid from EchoStar Communications Corp. to buy all the company's assets.

Meanwhile WorldCom Inc. was back in the headlines Tuesday and the bonds were higher.

"WorldCom's grinding higher, up a little every day, as company comes closer to coming out of bankruptcy," a trader said.

Perhaps boosting the bonds even more was the news that AT&T Corp. dropped its objections against WorldCom's bankruptcy plan, but said it would continue to pursue federal court charges that it was allegedly defrauded.

WorldCom's 7½% notes due 2011 were seen at nearly 36 bid at one point in the day, and closed the session at 35 5/8 bid.

MCI bonds were seen "north of 80.25 for the first time since we began trading it," a trader said.

Reuters reported that AT&T dropped its objection to WorldCom's plan to emerge from bankruptcy protection and will pursue in federal court charges it was defrauded.

AT&T objected to the plan in July when it found that WorldCom had allegedly routed some calls through Canada onto AT&T's network, possibly illegally avoiding connection fees, and demanded that the bankruptcy court protect AT&T's right to sue its rival.

AT&T is pursuing unspecified damages from WorldCom, and if AT&T wins damages would have to be approved by the bankruptcy court that was overseeing WorldCom's reorganization, according to a court filing.

"It appears to me that they took this to be good news - the AT&T stuff," a trader said.

Elsewhere a trader saw Adelphia paper all trading on top of each other at 81½ bid, 82½ offered. One trader said the paper was "up a couple." But at another desk, a market source pegged Adelphia's 9 7/8% notes due 2007 down a point at 78 bid.

And in other news, WestPoint Stevens Inc.'s 7 7/8% notes due 2008 were down 1 point at 13½ bid.

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