Northwest Airlines keeps climbing; GM revolver easier

By Paul Deckelman and Sara Rosenberg

New York, May 4 - Northwest Airlines Corp. bonds continued to gain altitude on Thursday, rising for a second consecutive session on a combination of investor relief that the carrier's pilots approved a new labor deal that includes large wage and benefit givebacks - thus avoiding a possible strike - and a second straight day of sharp slides in the price of crude oil.

Fellow bankrupt carrier Delta Air Lines Inc.'s bonds were also seen higher on sector sympathy with Northwest and helped as well by the oil price tumble.

General Motors Corp.'s revolver felt a touch weaker on the bid side, a bank debt trader said, as activity in the name slowed following a mad run-up and strong volume during the previous session, according to a trader.

Also in the automotive sphere, Dana Corp.'s bonds were seen solidly higher as a result of a late-session surge - although traders had no firm fresh news out about the bankrupt Toledo, Ohio-based automotive components maker that might explain the rise.

Northwest's 8 7/8% notes due 2006 - which had risen about three points on Wednesday to the mid-40s - were seen up another three to end around 49 bid, 51 offered.

Traders cited the impact of two pieces of news - the announcement earlier in the week that the bankrupt Eagan, Minn.-based Number-Four U.S. airline operator's 4,800 pilots had approved a labor agreement that continues a 23.9% pay cut they had temporarily accepted back in November - and the news that for a second straight day world oil prices slid more than $2 per barrel.

If that latter trend continues, it could have a major beneficial impact on Northwest as well as its sector peers, including bankrupt Delta, since finances are being strained all over the industry by escalating fuel costs. The movement of crude prices on the world market is frequently used as an indicator of possible future price movements for petroleum distillates such as aviation fuel, an increasingly expensive commodity.

On Thursday, prices for June delivery light sweet crude fell to intraday lows of $69.30 on the New York Mercantile Exchange. They bounced off their lows to end at $69.94 - but it was the first time in nearly two months that prices had fallen so sharply over two days, $2.33 per barrel on Wednesday and another $2.34 per barrel on Thursday. Prices were pushed down by release of U.S. government petroleum statistics Wednesday that showed larger than expected supplies, traders said.

"Whether it's oil, or the pilots - well Northwest sometimes moves up and down under its own steam," said a trader who saw the bonds closing at 48 bid, 50 offered.

Investors continued to savor the news of the pilots' new deal, which averted the threat of a walkout by the captains, which would have crippled the airline or even grounded it for good. Some 63% of the more than 4,000 who voted approved the deal.

Northwest, which filed for Chapter 11 last September, driven to seek bankruptcy protection by a combination of rapidly escalating fuel prices and heavy pension and labor costs, said that the new pilots' pact would save it $358 million annually - an important step as the airline tries to cut its labor costs by some $1.4 billion a year.

Northwest's flight attendants are meanwhile set to vote on a tentative agreement by June 6. Northwest is still trying to reach an agreement on givebacks with two work groups represented by the International Association of Machinists.

While Northwest's bonds were rising Thursday, Delta's were rising along with them, as the bankrupt Atlanta-based Number-Three U.S air carrier's 8.30% notes due 2029 were seen up two points on the day at 28.5 bid, 29.5 offered.

GM revolver slips

Back on solid ground, a bank loan trader saw GM's revolver closing out the day quoted at 96.5 bid, 97.5 offered, down a quarter on the bid from Wednesday's levels of 96.75 bid, 97.5 offered.

The bank debt had seen a lot of trading activity during Wednesday's session after the Detroit-based automotive giant - struggling to bounce back after continued sales declines and loss of market share to overseas carmakers - said that it is working on an amendment or refinancing of its existing $5.6 billion line of credit and plans to complete any such transaction by the end of the second quarter or early in the third quarter.

Following that announcement, the revolver traded as high as 98, but then settled down to 96.75 bid, 97.5 offered. By comparison, on Tuesday, the bank debt went out at 95 bid, 95.75 offered.

GM's 8 3/8% notes due 2033 meantime were seen down ¾ point at 73.75 bid, 74.25 offered, a junk bond trader said.

He saw the bonds of GM's financing unit, General Motors Acceptance Corp., a point lower, with GMAC's 8% notes due 2031 ending at 93.5 bid 94 offered.

Also on the automotive front, the trader saw Dana's 6 5/8% notes due 2008 84.75 bid, 85.75 offered, and its 5.85% notes due 2014 closing at 78 bid, 78.5 offered, each up 2½ points on the session. All of the action in the bonds, he said, came in the latter part of the day - but he saw no news out to explain such a rise.

Another trader who also saw the Dana bonds up on the day but did not know why said "we'll just have to see [Friday] if there was anything up."

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