Worldspan rebounds on Orbitz release; Collins & Aikman jumps around on Chrysler contract concerns

By Sara Rosenberg

New York, Oct. 3 - Worldspan LP's bank debt rebounded on Friday as investors reacted positively to Orbitz Inc.'s after-market announcement on Thursday, which assured investors that a "mutually agreeable resolution" would be reached. Collins & Aikman Corp.'s bank debt was also a main focus as it dropped on a report that DaimlerChrysler AG's Chrysler Group may terminate its contract with the company, and then rebounded partially by the end of the day. And, two new issues - Centerpoint Energy Inc. and Crown Castle International Corp. - broke for trading at plus-par levels.

By late morning, Worldspan's bank paper was quoted at 99½ bid, par ¼ offered, compared to quotes of 95½ bid, 96 offered during the previous day, according to a fund manager. According to a trader the paper closed at 99 bid, 101 offered.

Late Thursday, Orbitz said in a statement: "Worldspan is an important vendor and technological partner to Orbitz. We are discussing service level issues with Worldspan, and given our long and constructive relationship, expect to find a mutually agreeable resolution."

This came on the heels of Worldspan's announcement on Thursday afternoon that it received a notice of termination of its agreement from Orbitz effective Oct. 31. "Orbitz claims that it has a right to terminate the agreement because of a material service level failure by Worldspan," the company said in a news release. "Worldspan has provided and continues to provide a superior level of service and Orbitz does not have the right to terminate the agreement. Worldspan is currently considering its remedies against Orbitz, including with respect to wrongful termination of the agreement."

The bank debt plummeted by around four to 4½ points following Wordspan's revelation as investors worried over a possible drop in revenues being that Orbitz accounts for about 10% to 11% of the company's revenues, as well as the possibility that other customers may follow suit and terminate their agreements.

Meanwhile, on Friday Standard & Poor's said its ratings and outlook on Worldspan (B+/Stable) are not affected at the present time. The course of the dispute between Orbitz and Worldspan will be monitored and, if the contract is terminated, S&P will evaluate potential implications for Worldspan's outlook or rating, the rating agency said.

Worldspan is an Atlanta travel technology resource for travel suppliers, travel agencies, e-commerce sites and corporations. Orbitz is a Chicago online travel company.

During the day a couple of trades on Collins & Aikman's bank paper took place at 97½ to 973/4, and then the paper bounced back to close at 98¼ bid, 98¾ offered, according to one trader. According to a second trader, the paper traded at 98 at the end of the day. On Thursday the paper was quoted at 98½ bid, 99½ offered.

On Friday, The Detroit Free Press reported that DaimlerChrysler AG's Chrysler Group is rebidding nearly all $1 billion-plus in current and future business it does with Collins & Aikman. Chrysler work makes up about 30% of all Collins & Aikman business, or $1.2 billion a year, according to the news story.

Collins & Aikman is a Troy, Mich. designer engineer and manufacturer of automotive interior components.

Centerpoint's $925 million term loan B, which is priced at Libor plus 350 basis points and was offered to investors at par, traded at par ¾ on Friday during its first day in the secondary bank loan market, according to a trader.

The paper also contains call protection of 102 in year one and 101 in year two.

The Houston public utility holding company's $2.275 billion credit facility also contains a $1.35 billion revolver with an interest rate of Libor plus 300 basis points.

JPMorgan and Citigroup are the lead banks on the refinancing deal.

Crown Castle's $601 million term B add-on due Sept. 30, 2010 (B-), which is priced at Libor plus 325 basis points, also broke in the secondary on Friday, trading as high as 101 during market hours, according to a trader.

J.P. Morgan Securities Inc. and Morgan Stanley Senior Funding Inc. are co-lead arrangers and joint bookrunners on the deal that will be used to repay credit facility debt at the U.K. subsidiary, repay 9% notes at the U.K. subsidiary and pay a dividend to Crown Castle International.

Crown Castle is a Houston-based communications tower operator.

The bid on Levi Strauss & Co.'s floating-rate term loan B was up a bit on Friday, according to a trader, mainly due to market technicals. The paper was quoted at 102½ bid, 103 offered, compared to Thursday's levels of 102¼ bid, 103¼ offered.

Earlier this week, the San Francisco brand name clothing company released relatively positive financial results for the third quarter that included a rise in net sales by 6% to $1.082 billion from $1.018 billion in the third quarter of 2002, gross profit of $404 million, or 37.3% of sales, compared to $414 million, or 40.7% of sales, in the third quarter of 2002, operating income of $98 million, or 9.1% of net sales, compared to operating income of $97 million in the third quarter of 2002, or 9.5% of sales, and net income of $27 million compared to $14 million for the same period last year, an increase of 95%.

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