Dana bank debt, bonds rise after Chapter 11 filing; other autos gyrate lower

By Paul Deckelman and Sara Rosenberg

New York, March 3 - Dana Corp.'s revolving credit loan and its bonds traded higher and received a lot of attention on Friday after the company announced that it filed for Chapter 11. A bank debt trader said that investors in that market are anticipating getting a higher spread on the debt.

Other names in the troubled, volatile automotive parts sector initially nosedived as Toledo, Ohio-based Dana became the latest name from among that group to find itself in bankruptcy, but after gyrating around lower levels, they were heard to have mostly ended unchanged on the day.

Outside of the autos, Tembec Industries' bonds were seen lower Friday.

Dana's revolver closed out the day quoted in the 100.25 to 100.375 bid region and the 100.625 to 100.875 offered context, a trader said. Prior the bankruptcy filing, the revolver was being quoted at par bid.

The trader explained that lenders are anticipating being switched over to prime rate on the revolver, as opposed to the Libor rate that they are currently getting since that is what typically happens in a bankruptcy situation, and would result in a higher interest rate.

Over on the bond side of the fence, Dana was clearly the name of the day, as traders saw brisk activity in the company's bonds following its bankruptcy filing. Those bonds had been trading flat, or without their accrued interest, since Wednesday, when Dana said that it had missed the coupon payments due March 1 on its 6½% notes due 2009 and its 7% notes due 2029.

Following the mid-morning announcement of the bankruptcy filing (see related story elsewhere in this issue), a trader saw those '09 bonds having jumped two points to 69.5, while another saw the bonds actually breach the psychologically important 70 level, moving up to 69 bid, 71 offered.

By the afternoon, a trader said, the bonds had been on a wild and crazy ride, with the 61/2s having opened at 67 bid, 68 offered, then having dipped to 65 bid, 67 offered, before finishing at 69 bid, 70 offered. The 5.85s, he said, traded about a point cheaper after the filing.

A trader at another shop saw the 61/2s due 2008 up two points at 69 bid, 70 offered, while the 5.85s were up 3½ points at 67.5 bid, 68.5 offered, and the 7s of both 2028 and 2029 were four points better at 69 bid, 70 offered, and all trading flat.

Yet another trader saw Dana's '09 bonds up two points at 68.5 bid, 69.5 offered, and likewise observed "big volatility in the rest of the sector."

Dana said that the choice to file voluntary petitions for reorganization under Chapter 11 was to enable it to address financial and operational challenges that have hampered its performance.

The company has received a commitment for a $1.45 billion debtor-in-possession financing facility from Citigroup, Bank of America and JP Morgan Chase Bank.

"The Chapter 11 process provides the company an opportunity to fix our business comprehensively - financially and operationally. This will be fundamental change, not just incremental improvement. The Chapter 11 process allows us to continue normal business operations, while we restructure our debt and other obligations and enhance performance," said Michael J. Burns, chairman and chief executive officer, in the release.

The company went on to say that it intends to proceed with its previously announced divestiture and restructuring plans, which include the sale of several non-core businesses and the closure of several facilities and shift of production to lower-cost locations.

Dana's bankruptcy filing was the latest shadow to fall over the junk automotive sector, which has already seen a series of auto parts makers skid off the road and into the bankruptcy courts, bedeviled by a witches' brew of falling orders plus higher raw materials costs and heavy labor expenses. Among these are such names as Delphi Corp., Collins & Aikman Corp. Tower Automotive Inc. and J.L. French Automotive Casting, to name a few.

Other autos moving about

A trader observed "big volatility" in the supplier sector following Dana's mid-morning announcement of the Chapter 11 filing.

That included Visteon Corp., whose 8¼% notes due 2010 opened at 78 bid, then "caved in" during the morning to hit lows of 75, before ending unchanged at 78 bid, 79 offered.

Lear Corp's 8.11% notes due 2009 were likewise staggering around, dropping to 85 bid from 88 at the opening, although those bonds worked their way back up to 87.5 bid, 89 offered.

ArvinMeritor Inc.'s 8¾% notes due 2012 dropped to 96.5 bid, 97.5 offered around mid-day, before coming back to end unchanged at 97.5 bid, 98.5 offered.

One name which fell but which did not come back was Dura Operating, whose 9% notes due 2009 ended down two points at 47 bid.

Among the already bankrupt, Delphi's 6.55% notes due 2006 were actually seen up a point at 56 bid, 57 offered, while its 7 1/8% notes due 2029 were half a point higher at 57 bid, 58 offered.

Tower's 12% notes due 2013 were at 63.75 bid, 64.75 offered, unchanged on the day, while Collins & Aikman's 10¾% notes due 2011 were likewise little changed, at 28 bid, 29 offered.

While the parts suppliers were swooning - however temporarily - GM and Ford and their various financing arms were largely unchanged, with GM's benchmark 8 3/8% notes due 2033 steady at 69.75 bid, 70.25 offered, while its General Motors Acceptance Corp. financial arm's 8% notes due 2031 were also steady at 88.75 bid, 89.25 offered.

Ford's 7.45% notes due 2031 were down perhaps ¼ point at 70 bid, 70.5 offered and its financing unit's 7% notes due 2013 "didn't stray very much at all," finishing at 86.5 bid, 87 offered.

Tembec declines

Outside of the auto world, a trader detected notable weakness in Tembec's bonds, although he could not say whether this was due to new bad news about the struggling Montreal-based forest products company. He quoted its 8½% notes due 2011 down 2½ points at 48 bid, 49.5 offered.

A second trader also saw those bonds at 49 bid, 50 offered, off about three points on the day.

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