Northwest DIP allocates; Adelphia up as plan filed; auto parts dive on Ford cuts

By Paul Deckelman and Sara Rosenberg

New York, Aug. 21 - Northwest Airlines Inc. was heard to have allocated its debtor-in-possession financing facility on Monday, traders in the bank loan market said - a key step in making available the roughly $1 billion of liquidity that the bankrupt Number-Four U.S. airline carrier will need to access as it restructures.

In the junk bond market, Adelphia Communications Corp.'s bonds were seen up solidly, following the bankrupt Greenwood Village, Colo.-based cable company - once the fifth largest operator in the United States - filing its latest amended plan of reorganization, which it anticipates will be approved and put up for a creditor vote soon.

The junk bonds of such automotive supplier names as Visteon Corp. and Metaldyne Corp. fell after Standard &Poor's put those two companies, and a number of others, on CreditWatch with negative implications, citing the likely damage to their liquidity and financial condition as a result of the sweeping output cuts announced Friday by one of the supplier sector's biggest customers, Number-Two domestic automaker Ford Motor Co.

The bad news from Ford continued to have a ripple effect among the supplier sector, even affecting companies not mentioned in the S&P downgrade warning such as Dura Automotive Systems Inc. and the bankrupt Tower Automotive.

Northwest's DIP loan allocated Monday afternoon, after the books on the deal had been closed at noon ET that day, and, as the term loan hit the secondary market, levels were seen at 100.25 bid, 100.75 offered, where they stayed throughout the session, according to a trader.

The Eagan, Minn.-based airline carrier's $975 million term loan is priced with an interest rate of Libor plus 250 basis points. Its $1.225 billion debtor-in-possession financing facility (Ba2/BBB-) also includes a $250 million revolving credit line with an interest rate of Libor plus 250 basis points.

The DIP is convertible into a five-year exit financing facility once the company emerges from Chapter 11.

Upon conversion into the exit facility, pricing will be subject to a grid, under which the spread will increase to Libor plus 300 basis points if the facility gets less than four-B ratings. This ratings-based grid was just added to the deal this past Friday.

Prior to the DIP's launch, the transaction was expected to carry a size of $1.375 billion, consisting of a $1.225 billion term loan and a $150 million revolver. However, at the actual Aug. 7 bank meeting, lenders were presented with a slightly downsized deal with different tranching.

Citigroup and JPMorgan are the lead banks on the company's facility, with Citi acting as the left lead. Proceeds from the DIP facility will be used to repay amounts owed under the company's existing DIP facility and, at the company's option, some proceeds will be used to replace or provide cash collateral for its first-lien obligations.

Northwest's bonds meantime were seen little changed from the levels they held at the end of last week, with its 8 7/8% notes continuing to hover around 48.5 bid.

The bonds of rival bankrupt air carrier Delta Air Lines Inc. were also seen staying in a holding pattern, with the Atlanta-based Number-Three carriers' 8.30% notes due 2029 seen in a 25-26 context, and its other bonds, like the 7.90% notes due 2009 trading around a point lower than that.

Adelphia rises on new plan

Back on solid ground, Adelphia's bonds were seen on the upside, with a trader in distressed notes quoting its 10¼% notes due 2006 a point higher at 59 bid, 61 offered, and its 10¼% notes due 2011 also up a point, at 53 bid, 55 offered.

A market source at another desk quoted its 9 7/8% notes due 2007 up nearly 2 points on the session, at 61 bid.

Adelphia on Friday filed drafts of its Fifth Amended Joint Chapter 11 Plan of Reorganization and the related Supplement to its Fourth Amended Disclosure Statement with the U.S. Bankruptcy Court for the Southern District of New York.

Adelphia said the latest plan embodies the framework agreed upon by Adelphia, its official unsecured creditors' committee and certain ad hoc committees representing most of Adelphia's major bondholders and trade creditors, as well as significant individual bond funds. It said that the plan "reflects the compromise among these important creditor groups" under which some $1.08 billion in value will be transferred from some unsecured creditors of various Adelphia subsidiaries to unsecured senior and trade creditors of the Adelphia Communications parent corporation, subject, in some cases, to reimbursement from contingent sources of value, including the proceeds of a litigation trust to be established under the plan to pursue claims against third-parties that are alleged to have damaged Adelphia.

Assuming the plan passes muster with the court and the judge issues his approval, Adelphia and the official committee of unsecured creditors will begin the process of soliciting creditors and equity holders to vote on the Fifth Amended Plan. The company - which sold its operations to Time Warner NY Cable LLC and Comcast Corp. in a $17 billion sale that closed last month, will divvy up those proceeds among the various stakeholder groups, and envisions the bankruptcy process concluding before the end of the year.

Collins & Aikman loans down

Elsewhere, Collins & Aikman Corp.'s already faltering pro-rata bank debt slid some more during Monday's session, with levels now seen wrapped around the 50-type context, according to a trader.

Once again, no specific reason was given for the continued softness, but, there has been reference to "how terrible" the company is doing, the trader said, and that investors are disappointed with the lack of news on potential bidders for the company.

At the close, the pro-rata paper was quoted at 49 bid, 51 offered, down about 1½ points from Friday's levels of 50.5 bid, 52.5 offered, the trader added.

The bankrupt Troy, Mich.-based automotive interior components maker's junk bonds - which have now lost more than 90% of their face value - were at the same time continuing to further erode, a trader said, quoting its 10¾% senior notes due 2011 as having fallen 2 points to 6.5 bid, 8.5 offered. The company's essentially worthless 12 7/8% subordinated bonds due 2012 were quoted at levels less than a penny per dollar.

Other auto names lower

But the major news among the troubled junk-rated supplier names continued to be Friday's announcement by Ford of big output cuts - and the damage that will likely do to the finances of the supplier companies that sell to the venerable Dearborn, Mich.-based auto giant.

Ford's Friday announcement continued to create turbulence in its wake, as S&P cautioned that it will review its ratings for eight auto component suppliers for possible downgrades in light of the planned production cutbacks at the Number-Two domestic automaker.

Among them was one very familiar high yield market name, former Ford unit Visteon, as well as several other names which also show up fairly often, such as Metaldyne, Hayes Lemmerz International Inc., Cooper-Standard Automotive Inc. and Mark IV Industries Inc.

Also put on CreditWatch with negative implications were the ratings of Plastech Engineered Products Inc., Citation Corp. and Yazaki International Corp. The latter company's debt is currently rated BBB-, while the other seven companies are all junk issuers of one ranking or another.

S&P warned that the cutbacks announced on Friday by Ford - which will cut third-quarter production by 78,000 units, or 11%, from last year's levels, and will slash fourth-quarter output by 21%, or 168,000 units, versus a year ago, and sees a 9% full-year decline from 2005 levels - "will adversely affect on several fronts those suppliers with substantial Ford exposure." The ratings agency further remonstrated that "fourth-quarter cash flow and liquidity will likely be reduced from previous expectations, perhaps significantly."

As Ford's single largest supplier, one-time subsidiary Visteon stands to take perhaps the biggest hit from any Ford cutbacks, and its bonds were down accordingly. A trader saw the Van Buren Township, Mich.-based parts maker's 8¼% notes due 2010 down 2 full points at 96 bid, 98 offered, while its 7¼% notes due 2014 were likewise down a deuce at 86 bid, 88 offered.

A trader at another desk saw the Visteon 81/4s start the day at 99, fall as low as 96 during the session, before coming slightly off that low point to go home at 96.5 bid, 97.25 offered.

"There was definite follow through" from Friday's news he said, "with the parts guys all getting beat up."

Besides the Visteon retreat, he saw Metaldyne's 10% notes due 2013 off 1½ points on the session, at 94.5 bid, 95.5 offered, and its 11% notes due 2012 down some 2½ points at 78.5 bid, 79 offered.

A market source at another desk saw the Plymouth, Mich.-based metal stamping company's 10s more than a point lower at 95.375, but saw the 11s slide a full 5 points on the day to 79.

Among bonds in the other names cited by S&P, Hayes Lemmerz's 10½% notes due 2010 were seen by a trader to be off 2½ points at 80 bid, 82 offered, while Cooper-Standard's 8 3/8% notes due 2014 were off 3 points at 75.5. However, the latter company's 7% notes due 2012 were seen actually up ½ point at 86.5 bid, a market source said, while Mark IV's 7½% notes due also managed to inch upward, to 101.125

The ratings agency also said that other auto suppliers not placed on CreditWatch will likely face similar problems during the rest of 2006, but should have greater flexibility to deal with them.

That comforting proviso did little Monday to help the bonds of such suppliers not named in the S&P downgrade warning, such as Lear Corp. A trader saw the Southfield, Mich.-based automotive seating and interior components maker's 8.11% notes due 2009 down 2 points at 96 bid, 98 offered, while its 5¾% notes due 2014 were down 1½ points at 80.25 bid 80.75 offered. Another trader saw American Axle and Manufacturing Inc.'s 5¼% notes due 2014 down a point at 82.75.

A distressed-debt trader saw Dura Operating Corp.'s 8 5/8% notes due 2011 down a point on the session at 75 bid, 77 offered, while its badly battered 9% subordinated notes due 2009, which ended Friday at 17 bid, 19 offered, tightened a little to 17 bid, 18 offered.

He also saw the 12% bonds due 2013 of bankrupt Novi, Mich.-based RJ Tower 2 points lower at 42 bid, 44 offered.

However, other bankrupt supplier names seemed to be holding their own. A trader saw Delphi Corp.'s 6½% notes due 2009 unchanged at 88.5 bid, 89.5 offered, and saw the Troy, Mich.-based parts maker's 7 1/8% notes due 2029 also steady at 80 bid, 80.75 offered.

And he quoted Dana Corp.'s 6½% notes due 2008 actually up a point on the day at 82.75 bid, 83.75 offered, although the Toledo, Ohio-based automotive systems maker's 5.85% notes due 2015 were unchanged at 72.5 bid, 73.5 offered.

The trader saw Ford's own flagship 7.45% notes due 2031, which lost a point on Friday, when many of the company's other, less-traded issues seemed to be holding their own, also fall another 2 points on Monday to 75.25 bid, 76.25 offered. He saw financing arm Ford Motor Credit Co.'s 7% notes due 2013 a point lower at 90 bid, 90.5 offered, while Ford arch-rival General Motors Corp.'s 8 3/8% notes due 2033 were a point lower at 82.75 bid, 83.25 offered, and GM's financial unit, General Motors Acceptance Corp. was unchanged at 99.25 bid, 99.75 offered on its 8% notes due 2031.

Apart from the autos, Tembec Industries Inc.'s 8 5/8% notes due 2009 were seen "up 2 or 3 points" around 55 bid, 57 offered, a trader said. He also saw the troubled Montreal-based forest products company's 7¾% notes due 2012 gaining 4 points on the day to 52 bid, 54 offered.

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