Collins & Aikman firms before subpoena news; Northwest bonds keep falling

By Paul Deckelman and Sara Rosenberg

New York, Aug. 12 - Collins & Aikman Corp.'s bank debt and bonds were seen firmer in quiet Friday dealings, market participants said - although that was before the bankrupt Troy, Mich.-based automotive interior components maker announced that it had received a federal grand jury subpoena seeking documents regarding the company's financial statements for the past few years.

Elsewhere, Northwest Airlines Corp.'s bonds continued to weaken in the face of the unrelenting oil price spike and its own problematic labor situation - factors encouraging renewed bankruptcy speculation about the troubled airline company.

And Calpine Corp.'s recently oversold bonds were seen bouncing back from the lows they hit earlier in the week, a downward move apparently in reaction to revelations about the use of asset-sale proceeds in a Securities and Exchange Commission filing.

Collins & Aikman's bank debt was up about half a point, with levels closing out the session at 85 bid, 86.5 offered, basically on some auto sector noise, according to a trader.

The company created some buzz earlier in the week, when it confirmed that it had received a $1 billion acquisition offer from a smaller rival, Plastech Engineered Products Inc. Collins & Aikman said it would evaluate that bid.

In Friday's dealings, a trader said he saw the company's 10¾% senior notes due 2011 move up to 32.25 bid from 31, while its 12 7/8% subordinated notes due 2012 were seen a point better at 7 bid.

However, those movements apparently came before the company's late-day announcement that it has received a grand jury subpoena from the U.S. Attorney's Office in the Southern District of New York, seeking documents and information relating to the company's financial statements for the fiscal years 2000-2005, as well as documents and information pertaining to accounts receivable, rebates given to customers or suppliers and other matters. Collins & Aikman said it "intends to fully cooperate" with the request.

Foamex steady ahead of maturity

Also on the automotive front, a trader saw Foamex International's bonds holding steady "in bond hell - call it bond purgatory" - ahead of the scheduled maturity Monday of one of the Linwood, Pa.-based foam rubber products producer's issues, the 13½% subordinated notes due Aug. 15. Even though those bonds are set to mature Monday, he saw them only languishing at 40.5 bid - a sure sign, he said that "the market thinks they're not going to be able to pay and are going to file" for Chapter 11 protection.

The company's 10¾% senior notes due 2009 were seen at 85 bid, 87 offered, although the trader said there seemed to be some uncertainty about whether the bonds were already trading flat - as they would when a default had occurred or was imminent and inevitable - or not.

Foamex's other issue, the 9 7/8% subordinated notes due 2007, was trading as low as 23.25 during the day before going out offered at 28, but with no bids seen.

Mirant loans rise again

Elsewhere, Mirant Corp.'s 2003 bank debt continued to strengthen, moving up about a quarter of a point to 87.5 bid, 88 offered, according to a trader.

On Tuesday, the Atlanta-based energy company revealed second quarter numbers that included a net loss of two cents per share compared to a net loss of eight cents per share in 2004 and operating revenues of $457 million compared to operating revenues in the second quarter of 2004 of $496 million.

Immediately following the release of earnings the paper started to tread downwards, however, by Wednesday it had basically rebounded completely and then continued to move its way up during Thursday's and Friday's sessions.

Calpine makes up some lost ground

Another energy producer, the San Jose, Calif.-based Calpine, "got hit [Thursday], but was up [Friday]," as its notes bounced back from their recently oversold condition. He quoted Calpine's 9 7/8% notes due 2011 a point better at 74.5 bid, 75.5 offered.

Calpine "did have a little recovery - though not that much," another trader said, quoting the company's Calpine Canada Energy Finance 8½% notes due 2008 "a little better" at 66.5 bid, 68.5 offered, up from 64.25 bid, 65.25 offered, although he saw "no news" out on the company - which revealed in its latest 10-Q filing earlier in the week that some of the proceeds from Calpine's recent sale of its Saltend Energy Centre in Britain were used to purchase gas, as opposed to paying down second-lien debt, as bondholders and other debtors had apparently been counting on. That brought into question the company's oft-repeated projections that it will be able to take out $3 billion of debt by the end of the year using asset sale proceeds, and the sudden uncertainty caused both the bonds and Calpine's bank debt to fall at mid-week.

But on Friday, a market source said, the 81/2s of 2008 advanced to 66.75 bid from 65 previously, while the company's 8½% notes due 2010 were two points ahead at 73 bid and its 8½% notes due 2011 gained a point to close at 63.5 bid. He further saw the Calpine 8¾% notes due 2013 firm to 72.5 bid from 70, while its 8¾% notes due 2007 closed at 74.5 bid, up from 73.

"They were up a point or two across the board."

However, at another desk, a trader said that Calpine's 8½% notes due 2011, which he saw unchanged at 61.5 bid, 63.5 offered, "were up earlier - but then they came back down."

Northwest keeps losing

And downward was where Northwest Airlines bonds continued to head Friday, as the troubled Eagan, Minn.-based Number-Four U.S. airline carrier seemed headed for a strike by its mechanics, perhaps as soon as Aug. 19, when a 30-day federally mandated "cooling off" period expires, leaving the Airline Mechanics Fraternal Association free to put down their tools and pick up their picket signs.

While the two sides have a negotiating session scheduled Monday, the war of words between the two sides kept up Friday, with the union reporting that it had gotten unanimous pledges of support from its chapters at other airlines, while Northwest said that it has 1,500 replacement mechanics and management members who qualify as mechanics in place and ready to work if there is a strike.

Northwest is trying to wring about $1.1 billion of permanent labor cost cuts from its employees, including $176 million from the mechanics, who have already rejected that demand. The carrier said that it would have to get rollbacks from its various employee groups if it is to avoid bankruptcy, brought on by escalating fuel costs.

Northwest's flagship8 7/8% notes due 2006 were seen retreating to 51.5 bid from 54 earlier, while its 8.70% notes and its 9 7/8% notes, both due in 2007, each dropped two points, to end at 42 bid. And Northwest's 7 7/8% notes due 2008 and 10% notes due 2009 each dropped a point or so, to 34.

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