Rotech bonds gyrate after financing news; Tower, Dura lead autos lower

By Paul Deckelman and Sara Rosenberg

New York, Sept. 15 - Rotech Healthcare Inc.'s bonds - which swooned Friday after a government advisory panel recommended limitations on certain Medicare payments - were bouncing crazily around Monday at mostly higher levels in volatile trading, market participants said, helped by the news that the troubled Orlando, Fla.-based provider of medical products and services in homebound invalid patients has lined up new financing. But the bonds came well down from their early highs to end only modestly higher.

Companies in the troubled automotive segment meantime continued to struggle, with Tower Automotive Inc. and Dura Automotive Systems Inc. especially losing ground.

Airline bonds - which had turned skyward last week as oil prices continued to mostly slide, were seen little changed, a trader said, noting that the bonds of bankrupt carriers Delta Air Lines Inc. and Northwest Airlines Corp. had already "made their move."

The bonds of Atlanta-based Number-Three carrier Delta had moved up into the upper 20s for its 8.30% notes due 2029, while Northwest's notes, such as the Eagan, Minn.-based Number-Four carrier's 8.70% notes due 2007 and its 10% notes due 2009, had moved up into a 53-54 context.

Traders saw them generally unchanged Monday.

The bonds had been given a boost on lower world crude oil prices, which are seen in some quarters as a harbinger of potentially lower jet fuel prices down the line.

Crude prices moved up on Friday and again on Monday, but remain below $64 per barrel - still a relative bargain compared with the highs in the upper $70s seen over the summer.

Rotech rebounds, retreats

Back on solid ground, Rotech's bonds were gyrating, rising sharply on the news that the company had lined up a $120 million two-year credit facility, consisting of a $25 million revolving credit line and a $95 million term loan, which will be used to refinance existing debt.

That caused its 9½% notes due 2012 - which had dropped to around 63.5 bid, 65.5 offered from prior levels above 70 - to shoot back up to around the 70 mark in the early going.

After they "came back a little" from Friday's lows, a trader said, to reach that early peak, "they melted back down," and finally ended the day at 66.5 bid, 67.5 offered - "still up 2½ points on the day but well off their highs."

Although the news of the refinancing removed a major uncertainty from investors' minds, they were still apparently troubled by Friday's news, which saw the U.S. Office of Inspector General of the Department of Health and Human Services recommend limiting Medicare rental payments for certain oxygen equipment - a key Rotech product - to as little as 13 months. The inspector general's office estimated that such cuts could save Washington as much as $3.2 billion over the next five years.

Rotech's bonds and shares both plummeted Friday, as did shares of other companies in that same industry.

However, observers pointed out that the recommendation is by no means a done deal, with the politically controversial idea facing an uphill battle to gain support - especially in a federal election year - since the senior citizens lobby is a potent political force and would be expected to strongly oppose the proposed limitations.

Tower, Dura slump

From out of the distressed automotive segment, a trader said that bankrupt Novi, Mich.-based vehicle frames maker Tower Automotive's 12% notes due 2013 "got mowed," dropping from Friday levels around 37 bid, 38 offered to lows Monday around 31 bid, 32 offered, before coming back a little and finishing at 32 bid, 33 offered - down 5 points on the day rather than the 6 points they had lost at their nadir.

Also lower Monday was Dura, whose Dura Operating Corp. bonds got clobbered last week on renewed bankruptcy speculation, including market talk that the Rochester Hills, Mich.-based parts maker was having trouble getting lenders to give it favorable terms on debtor-in-possession financing and worries about the company's relations with its vendors in the wake of an unfavorable court ruling.

A trader, seeing the company's 8 5/8% notes due 2012 falling as low as 60.75 bid, 61.75 offered from Friday levels around 63-64, said that the company "seems to be rapidly moving towards bankruptcy - or so people think."

He saw Dura's 9% notes due 2009 "weaker" at 9 bid, 11 offered.

Ford, other autos still spinning wheels

Among the more mainstream automotive names, Ford Motor Co.'s flagship 7.45% notes due 2031 were down ¼ point at 76.25 bid, 76.75 offered, while its Ford Motor Credit Co. financing arm's 7% notes due 2013 were unchanged at 91.5 bid, 92 offered.

Ford's bonds meandered lower at the tail end of last week, with investors apparently not very impressed by the company's plans, unveiled late last week, to try to cut its cost structure down to size by offering its all of its United Auto Workers-represented hourly workers buyouts and early retirement packages, and saying it would cut an additional 10,000 white-collar jobs - about one-third of its professional, technical and administrative employees.

That sounds drastic - but analyst B. Craig Hutson of the Gimme Credit research service noted Monday that "there was no change in the assembly plant capacity targets, which remain too high relative to demand."

Besides not going far enough in his cuts, the analyst also noted that Ford at this point still considers Ford Motor Credit a "core asset" which it wants to keep control of - even though "the sale of a majority stake in FMCC would benefit the finance unit's ratings, access to capital, and competitiveness. It would also provide much needed liquidity to fund Ford's costly restructuring plan."

"The whole auto sector was sloppy," a trader said, seeing names like Lear Corp., ArvinMeritor Inc. and Cooper Standard all down a point on the session - Lear's 8.11% notes due 2009 at 94.5 bid, 95.5 offered, Arvin's 8 ¾% notes due 2012 at 96.75 bid, 97.75 offered, and Cooper's 8 3/8% notes due 2014 at 75.5 bid, 76.5 offered.

Bank loan market calm

In the bank debt market, meantime, participants reported a quiet session Monday, with familiar names trading lightly around, though at essentially unchanged levels.

Refco Inc.'s loan was quoted staying at 109 bid, 109½ offered.

The Century bank debt of bankrupt cabler Adelphia Communications Corp. closed at 97 bid, 97.75 offered, while bankrupt San Jose, Calif.-based power company Calpine Corp.'s second-lien loan was steady at 105 bid, 106 offered.

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