Airline bonds firmer as Mineta talks up consolidation; Integrated Electrical bonds climb

By Paul Deckelman and Sara Rosenberg

New York, Jan. 11 - Airline company bonds were seen trading better Wednesday, apparently helped by comments from Transportation Secretary Norman Mineta touting the possibility of consolidation among bankrupt carriers such as Northwest Airlines Corp. and Delta Air Lines Inc.

Elsewhere, Integrated Electrical Services Inc.'s bonds were seen several points higher, although traders seemed at a loss to explain why. The company did recently amend its bank facilities to gain some covenant relief.

Automotive bonds were seen at best unchanged, to mostly lower Wednesday, the early 2006 momentum that the troubled and oversold sector had displayed apparently dissipating under the weight of bad news coming out of Detroit, the latest being a two-notch downgrade of Ford Motor Co.'s bonds and those of its Ford Motor Credit Co. financial arm by Moody's Investors Service.

In the distressed loan market, trading volume lightened up when compared to previous sessions; as the high-yield market lost some steam, bank loans of some problem-plagued companies were pushed lower, including Calpine Corp. and Adelphia Communications Corp.

San Jose, Calif.-based power company Calpine saw its second-lien loan trade down to 84.75 bid, 85.5 offered from 85 bid, 86 offered, a trader said.

And, Greenwood Village, Colo.-based cable operator Adelphia saw its Century paper trade down by about a quarter of a point, with both the Old and the New closing out the session at 96.75 bid, 97.25 offered, the trader added.

A trader in distressed bonds, meantime, saw little change in Adelphia's bonds, with its 10 7/8% notes due 2010 still around 59 bid and its 10¼% notes due 2006 at 58.5 bid, down from 60. He likewise saw no change in Calpine's bonds, with its 8½% notes due 2008 seen most recently at 39.5 bid, its 8½% secured notes due 2010 at 86.5 bid, and its 8½% notes due 2011 at 29.5.

Airlines gain

Airline bonds seemed to be flying a little higher Wednesday, apparently helped by transportation chief Mineta's speculation that Delta and Northwest - which both filed for bankruptcy protection on the same day last September - could conceivably be combined.

A trader, citing Mineta's comments, saw Eagan, Minn.-based Number-Four U.S. carrier Northwest's bonds up two points on the session to 40 bid, 42 offered, while the bonds of Atlanta-based Delta, the third-biggest U.S. carrier, were a point better at 25 bid, 26 offered.

He saw the bonds of UAL Corp., the bankrupt Elk Grove Village, Ill.-based parent of the Number-Two U.S. airline, unchanged at 24 bid, 26 offered.

The transportation secretary, speaking to a business conference in Shanghai on Tuesday, said that "I sometimes wonder whether or not ... Delta and Northwest will come out as a merged carrier." However, he quickly added that he was not expressing the government's wishes but merely "thinking out loud."

While a merger of the two carriers would produce a larger airline with relatively little redundant overlap in their respective route areas, domestically or abroad, analysts say such a combination would still be daunting, given the differences in the two companies' aircraft fleets, their corporate cultures, the financial problems that drove each of them separately into the courts, and the problems inherent in merging the pilot seniority lists of two separate carriers.

At another desk, a trader saw AMR Corp., the parent of Fort Worth, Tex.-based airline industry leader American Airlines, "hanging in there" despite a move downward by the company's stock and world crude oil prices - considered a reliable barometer of future price moves for jet fuel - nosing above $64 per barrel. He saw AMR's 9% notes due 2012 up a point at 92 bid, 93 offered.

Integrated Electrical higher

Back on solid ground, a trader saw Integrated Electrical Services' 9 3/8% notes due 2009 having jumped four points on the session, to 80 bid, 82 offered, from prior levels at 76 bid, 78 offered, although he did not know why they were up.

Another trader saw those bonds as high as 81 during morning trading, which he pegged as up 2¼ points on the day and well up from recent levels around 76 bid, 77 offered, but by the afternoon, the bonds had pushed up to as high as 82.

Another trader, who quoted the bonds at 81 bid, 83 offered, noted that while they were up on the session from the high 70s previously, "those things have moved up from the high 50s in the last month or whenever, and nobody really knows what the deal is. There must be some sort of refinancing news or some sort of [other developments]. The stock has been up too, but I'm not hearing anything."

On Friday, the troubled Houston-based provider of electrical engineering services said in an 8-K filing with the Securities and Exchange Commission that it and Bank of America NA had agreed to amend its $80 million revolving credit facility on Jan. 3, in order to eliminate the fixed charge coverage ratio test for the period ending Nov. 30, 2005 and to provide that the test for the period ending Dec. 31, 2005 will not be made until Integrated Electrical's delivery of its financial statements covering that period on or before this coming Monday.

The amendment further provides that should Integrated Electrical not deliver the financial statements by Monday, it will be considered to have failed to maintain the minimum fixed charge coverage ratio for that period ended Dec. 31.

The amendment between the company and BofA further provides a limited waiver of any event of default that would otherwise exist regarding its audited annual financial statements for the period ending Sept. 30, 2005. Integrated Electrical entered into the credit agreement with B of A last Aug. 1.

Winn-Dixie lower

Elsewhere, a trader in distressed notes saw Winn-Dixie Stores Inc.'s 8 7/8% notes due 2008 retreating to 82 bid, 84 offered from Tuesday's levels around 84 bid, 85 offered; those bonds had risen to that peak level Tuesday from prior bid levels in the 79-81 area. However, he did not know whether anything was going on with the bankrupt Jacksonville, Fla.-based supermarket company's reorganization that might explain the price volatility.

Another trader saw the 8 7/8s still around 85, and the company's real estate-secured 8.181% pass-through notes unchanged at 79 bid, 80 offered.

Yet a third trader saw the 8 7/8s at 83.5 bid, 84.5 offered, and said they had been up over the past several days.

Auto names weak

With Ford's downgrade the latest piece of bad news to hit the troubled U.S. automotive industry, other auto-related high yield names were seen having remained steady, at best, to lower, the robust gains seen in the first trading week of the new year apparently now over with.

A trader saw Ford rival General Motors Corp.'s bonds "staying right in their [recent] range," and added that "the auto suppliers all got tagged."

He saw bankrupt Delphi Corp.'s bonds down a point at 55 bid, 57 offered, while the bonds of another bankrupt supplier, Tower Automotive's 12% notes due 2013, were two points down at 79 bid, 81 offered.

The trader saw the bonds of yet another bankrupt parts maker, Collins & Aikman Products Corp., at 41 bid, 42 offered, down two points on the day

"GM really didn't move around," another trader said, pegging the troubled Detroit giant's benchmark 8 3/8% notes due 2033 at 71 bid, 72 offered, "roughly unchanged."

Yet another trader saw those GM bonds up perhaps a quarter point at 70.75 bid, 71.75 offered, while the company's General Motors Acceptance Corp.'s 8% notes due 2031 were half a point better at 101.5 bid, 102.5 offered.

That trader saw a general deterioration throughout the auto sector, with former Ford unit Visteon Corp.'s 8¼% notes due 2010 down 1¼ points at 86.5 bid, 87.5 offered, and former GM subsidiary Delphi's 6.55% notes due 2006 half a point lower at 55.75 bid, 56.75 offered.

He saw Dura Automotive Systems Inc.'s 9% notes due 2009 two points lower at 55 bid, 57 offered, while the Rochester Hills Mich.-based auto components maker's 8 5/8% notes due 2012 lost a point to end at 84 bid, 85 offered.

Dana Corp.'s bonds were also lower, partly on the general sector weakness, and party on the Toledo, Ohio-based automotive systems maker's own ratings downgrade, with the Fitch agency slashing its senior unsecured and issuer ratings a full five notches to B from BB- previously, with the possibility of further cuts as well. Fitch cited deteriorating operating results, accounting and financial control problems, and higher debt levels.

The trader saw Dana's 5.85% notes due 2015 down 1½ points at 72 bid, 73 offered.

Another trader even saw Metaldyne Corp. - whose 11% notes due 2012 jumped on Tuesday on the news that the Plymouth, Mich.-based automotive metal stamping company had agreed to sell its underperforming North American metal forging unit in a $129 million deal - as having come down from Tuesday's closing levels.

Those bonds - which had shot up to 85 bid on Tuesday on the news from prior levels around 80 and then came off that peak to end around 83 bid, 85 offered, still up some three points on the day- gave up another point Wednesday to finish at 82 bid, 84 offered.

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