Collins & Aikman debt easier, bonds better; airline issues head upward

By Paul Deckelman and Sara Rosenberg

New York, July 18- Collins & Aikman Corp.'s bank debt fell off by a point during Tuesday's session as private side information seems to be weighing heavily on the paper, according to a trader.

However, the Troy, Mich.-based automotive interior components maker's senior bonds - which on Monday were hammered down about three or four points on the session - were seen to have made a modest comeback.

Also on the comeback trail were the bonds of beleaguered air carriers Northwest Airlines Corp. and Delta Air Lines Inc., apparently helped by world crude oil prices falling for a second consecutive session.

A trader in distressed notes pronounced the 8 7/8% notes slated to mature this year of bankrupt Eagan, Minn.-based Number-Four U.S. air carrier Northwest up 2 points to 48 bid, 50 offered.

He saw the 8.30% notes due 2029 of Northwest's bankrupt Atlanta-based rival, Delta, the third-largest U.S. air carrier, ½ point better at 27 bid, 28 offered.

A market source called Northwest's 7 7/8% notes due 2008 up a point on the day at 48 bid.

The bonds of both companies had recently lost altitude as world crude oil prices push to nominal record levels in the $77-$78 per barrel area on the latest tensions in the Middle East and on continued strong U.S. demand for gasoline during the summertime driving season. Crude prices are seen by some observers as a harbinger of future price trends for distillates such as jet fuel, the rising cost of which has emerged as a major factor in driving both Delta and Northwest to seek Chapter 11 protection last September.

But on Tuesday, oil prices tumbled for a second straight day, sliding back to the level they traded at before fighting between Israel and Hezbollah began in Lebanon.

After hitting an intra-day high of $76.55, up from Monday's close at $75.30, light sweet crude for August delivery fell $1.40 to $73.90 a barrel in afternoon trading on the New York Mercantile Exchange. The slide was attributed to profit-taking.

Besides oil prices, airline-bond investors were watching their screens for news about Northwest's efforts to rein in its labor costs, which have emerged as a big enough factor in the airlines' financial problems, right up there with energy costs.

On Monday, the airline said that its flight attendants' union, the last holdout labor group at Northwest, tentatively agreed to deep pay cuts and work rule changes. The airline was seeking - and got - $195 million in annual savings.

That puts the troubled carrier closer to the labor solution it had sought for three years.

And on Tuesday, the company's chief executive officer, Douglas Steenland, and hundreds of his employees, descended upon Washington to press Congress for pension-relief laws that would give airlines decades to stretch out pension contributions.

Steenland met with lawmakers there, warning them that without such a break, the airline "may have no choice" but to cancel the retirement plans for its employees - which would then drop those pension funds into the lap of the Pension Benefit Guaranty Corp., a government firm that partially insures failed plans.

While Steenland was making his pitch to lawmakers, hundreds of pilots, machinists and flight attendants flown in from the airline's hubs in Detroit and Minneapolis/St. Paul lobbied their senators and representatives on behalf of the bill. Delta - in the same boat as Northwest - plans to make a similar plea for congressional pension relief.

The employee pension plans of Northwest and Delta are underfunded by billions of dollars, and the airlines say they need at least 20 more years to fund the pensions properly - although they are not likely to get that long a stretch-out period, even if the bill does pass.

Collins & Aikman loans down

Back on terra firma, Collins & Aikman's bank debt closed out the day quoted at 90 bid, 91 offered, down from Monday's closing levels of 91 bid, 92 offered, a trader said. At the end of last week, the bank debt was being quoted at 92 bid, 93 offered.

When asked whether this week's downward trend had anything to do with recent amendments to company's debtor-in-possession financing facility and two-month extension of its exclusivity period, the trader responded, "I'm hearing a lot of stuff. But it's all private side."

The company had amended its DIP to allow for the sale of some of its assets.

But while the bank debt headed south, the bonds - which had gotten drubbed on Monday - were headed in the opposite direction. A trader saw its 10¾% notes due 2011 a point better at 20 bid, 21 offered.

Another trader saw those bonds at that level, but up 1½ points. However, he saw the company's 12 7/8% subordinated notes due 2012 languishing at 2 to 3 cents on the dollar, down a point on the day.

The trader also saw a slight rebound in the bonds of bankrupt Novi, Mich.-based frames maker Tower Automotive Inc., which had fallen about 4 points on the session Monday, apparently on investor worries about likely recovery levels. But on Tuesday those bonds pushed up a point to end at 60 bid, 61 offered.

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