Collins & Aikman drags other autos lower; Delta continues descent

By Paul Deckelman and Sara Rosenberg

New York, March 17 - Like a driverless SUV careening across a highway, Collins & Aikman Products Co. bonds were seen bouncing crazily around at lower levels Thursday, after the Troy, Mich.-based automotive components maker said it had uncovered an accounting problem and thus could not file its 10-K annual report with the Securities and Exchange Commission on time. Also part of the wreckage were the bonds of other companies in that auto supplier sector, reacting to both the latest Collins & Aikman problems and to Wednesday's sobering announcement by auto industry leader General Motors Corp. of anticipated lower profits.

Outside of the auto sphere, Delta Air Lines Inc.'s bonds were seen lower, with sky-high oil prices suspected as a likely culprit.

Collins & Aikman's 10¾% senior notes due 2011 were seen by a trader in distressed securities as having traded all the way down to 82 bid, 84 offered and then back up to 89 bid, 90 offered - actually higher than where they started - before giving up the ghost and dropping back to 85 bid, 86 offered, down four points on the session.

He meanwhile saw the company's 12 7/8% subordinated notes due 2012 collapse down to 52 bid, 54 offered, from Wednesday's levels around 65 bid.

The story was the same at another desk, where a trader saw the company's bonds gyrating around all over the place at lower levels, with the junior bonds opening trading at around 60 bid, 62 offered, well down from 65 bid, 67 offered on Wednesday. After that, things only got worse, with the bonds cascading down to offered levels around 58, but then bouncing back up to 61 bid at mid-afternoon, before "they caved back in again" and tumbled into the low 50s at the close. Late in the day, he saw the bonds offered at 55, implying a bid level around 53 or 54, "if there is one."

The trader saw the 10¾% notes as having been "hanging in there" at higher levels, owing to their senior status, losing maybe a point or two during previous sessions when the juniors were getting killed on investor angst over the problems of the automotive industry in general and Collins & Aikman in particular.

But on Thursday, he described the bonds as having fallen to 84 bid, 86 offered from prior levels around 87.5 bid, 89.5 offered, then "trickling back up" to 87 bid, 89 offered, virtually unchanged, before giving back its hard-won progress as the session closed, finishing down 2½ points on the day at 85 bid, 86 offered.

Collins & Aikman announced Thursday that it that it was not able to file its annual report with the SEC on time and had filed for an automatic 15-day extension - and even that might not be enough time. It also revealed an accounting problem which will certainly cause a restatement of its results for the first nine months of last year, and which may make a restatement of its 2003 results necessary as well (see related story elsewhere in this issue).

Other auto names fall

That news - combined with the auto sector's already pessimistic feelings after industry leader General Motors Corp.'s earnings warning Wednesday - helped drag other automotive component suppliers lower.

Bankrupt Novi, Mich.-based auto frames maker Tower Automotive Corp.'s 12% notes due 2013 was seen having retreated to 55 bid, 55.75 offered, down from 56.5 bid, 57.5 offered previously.

A trader saw Foamex International Inc.'s 10¾% notes due 2009 fall to 87 bid from 89.25, while the Linwood, Pa.-based automotive foam rubber products maker's 9 7/8% notes due 2007 were 1½ point lower at 56.

Bankrupt Troy, Mich.-based automotive metal stamping company Intermet Corp.'s 9¾% notes due 2009 were seen having lost a point to 64.5.

"That's ugly," the trader said of the carnage being inflicted on the auto sector by the combination of softer domestic auto sales and continued sky-high gas prices.

"What's leading us south here is the auto parts guys and the airlines," he said, "and I think we're going to see [more] bankruptcies in both sectors, several of them. Definitely in autos - and I bet you have another one in airlines in the next three to six months, but in autos, I bet one or two more bite the dust by the end of the first half."

Airlines lower as oil stays high

Airlines meanwhile continued to struggle Thursday, as world crude oil prices hovered around their new-record levels above $57 per barrel.

A trader saw Delta Air Lines' 8.30% notes due 2029 down two points on the session, at 30 bid, 32 offered, while its 7.90% notes due 2009 was likewise down a pair at 37 bid, 39 offered. The company's 10% notes due 2008 also were two down, at 43 bid, 45 offered, while the company's benchmark 7.70% notes due 2005 were four points lower, at 73 bid, 75 offered.

The trader saw bankrupt Indianapolis-based low-fare carrier ATA Holdings's several sets of bonds down a point at 44 bid, 46 offered. Even Continental Airlines' 8% notes due 2006 were down a point to 98 bid, 99 offered.

In convertible names, Delta and FLYi led another sharp descent in airline paper Thursday.

"It's ugly," said a sellside trader. All the airline paper was spiraling lower, he said, and "having engine problems," inferring further declines are in store for the sector.

Delta's 8% convertibles dropped 1.5 points to 42.25 bid and the 2.875% convert lost 2.25 points to 40 bid, while Delta shares ended Thursday at $4.12, down 17 cents, or 3.96%, on the day.

The FLYi 6% convertibles, which still show the company's former name Atlantic Coast Airlines, plunged 5 to 10 points, depending on how you looked at it. On Thursday, the issue was at 20 bid, 25 offered, according to a sellside trader, who said the issue had an offer at 30 with no bids on Wednesday.

"This one [FLYi] will be liquidated and the debt will be worth the food trays," the trader said. "When you charge $69 bucks to fly to the West Coast [from its hub at Dulles, Va., just outside Washington, D.C.] the engines eat up the few assets left rather quick."

FLYi shares lost 7 cents, or 4.4%, to end at $1.52 on Thursday.

FLYi's relationships with Delta, which has repeatedly warned of a possible bankruptcy filing over the last year, and United Airlines Inc., whose parent UAL Corp. has returned to bankruptcy court for the second time, are "fatal connections," remarked a buyside convert trader.

In addition to skyrocketing fuel prices, traders said there is increased concern about recovery levels. It is extremely worrisome, one said, in light of a Moody's Investors Service report earlier this week showing heightened concern about lower recovery amounts for aircraft guarantors.

aaiPharma trading flat

A trader saw aaiPharma's 11% notes due 2010 trading around in the high 50s, but trading flat - without the interest - after the Wilmington, N.C. based pharmaceuticals maker warned in an SEC filing that it might have to go bankrupt - or at the very least, would have trouble meeting its capital needs, and likely won't make the scheduled April 1 coupon interest payment.

"It looks like they've been here before," a trader said. "They're going to use the grace period. It's gonna be a real squeaker, getting that coupon paid," he said, "but who knows?"

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