Delta bonds, equity sink; Northwest nosedives; Dana mixed; Auto sector mostly firm

By Stephanie N. Rotondo

Portland, Ore., April 27 - The distressed market was seen firmer overall Friday, despite a decline in the airlines sector that sent Delta Air Lines Inc.'s bonds on a nosedive.

The airline, which is close to exiting Chapter 11, saw its equity take a tumble: Both its current stock - which will soon be of no value - and its new shares in the when-issued market lost altitude on the day.

Northwest Airlines Corp.'s bonds also fell about 5 points, and the company was lumped in with Delta as "the two biggest movers" of the day by a trader.

Still, "the whole market is pretty firm," a trader said. "There's generally a firm tone, but there is nothing particularly happening [to cause it]."

In the distressed automotive parts supplier paper, the results were mixed but mostly firmer, echoing the general feel of the week.

Though one trader called Dana Corp.'s bonds unchanged, another source called the notes up as much as 2 points. Still another saw the company's notes lose ground, calling them down half a point.

Meanwhile, fellow distressed companies Federal-Mogul Corp. and Remy International Inc. gained about a half a point in their debt, while some other automotive names remained unchanged.

Delta bonds, equity sink

Delta's bonds "got whacked," a trader said, as JP Morgan issued major downgrades in the airline sector.

The trader called Delta's 8.3% notes due 2029 down 5 points at 53 bid, 55 offered. A market source pegged the notes at 54.25, down from the previous day's levels around 59.

At another desk, a trader saw the notes fall to 53.5 bid, 54.5 offered from 59 bid, 60 offered on Thursday. Another trader pegged the 8.3s at 54 bid, 55 offered, which he called down 4 points.

In the JP Morgan report, analyst Jamie Baker cut ratings for six carriers - American Airlines parent AMR Corp., US Airways, Alaska Air Group Inc., United parent UAL Corp., Continental Airlines Inc. and JetBlue Airways Corp. - saying the move was long overdue.

According to an Associated Press report, Baker was unsure where to lay the blame for domestic weakness: softer demand or too great a supply of airline seats. In either scenario, he said, there is little the industry can do in the short term.

In assessing the industry's equity, Baker wrote that he sees no positive indicators for industry stocks, including fuel prices.

Fuel is a major expenditure for airlines, and prices for crude oil have continued to climb. At the close of market, light sweet crude rose $1.40 to $66.46 a barrel, spurred by news that Saudi Arabia had arrested 172 Islamic militants, some of whom planned to attack oil fields.

Delta's current stock, which will become worthless when the airline emerges bankruptcy on Monday, spiked down 3.5 cents, or 66.04%, to close at 1.8 cents. The Atlanta-based company's new stock, trading on a when-issued basis, also fell, closing down to $20.91 from Thursday's levels of $22.80. Market players indicated that growing skepticism of the stock's upbeat debut next week sparked the decline.

Northwest nosedives

Also falling on the JP Morgan downgrade, Northwest Airlines' 10% notes due 2009 were quoted at 81 bid, 83 offered, down from 86 bid, 88 offered, by one trader. Meanwhile, another trader called Northwest's 10s down 6 points at 79 bid, 80 offered.

Another source saw Northwest's 7 7/8% notes due 2008 at 84 bid, down 2 points.

Northwest Airlines expects to emerge from bankruptcy this summer.

Dana mixed

A trader called automotive parts manufacturer Dana's bonds "barely changed," though another source saw the 7% notes due 2029 up almost 2 points.

The trader quoted the bonds at 82 bid, 82.5 offered. The market source echoed those levels but placed the bonds up from the previous day's close at 80.25.

However, Dana's 6½% notes due 2008 were called down half a point at 83 bid, 84 offered.

On Thursday, the Toledo, Ohio-based company received approval from the bankruptcy court overseeing its case to value its reclamation claims at zero. In addition, the company received a go ahead to pay about $26 million to the cluster of law firms, restructuring consultants and financial advisers working on its bankruptcy reorganization.

Auto sector mostly firm

In the rest of the autosphere, Federal-Mogul's bonds were called better by a half a point, closing at 97.5 bid, 98 offered. Remy's notes were also seen firmer, with its 11% notes due 2009 at 39.5 bid, 40 offered.

Delphi Corp. was unchanged, its 6.55% notes due 2006 staying at 111 bid. Dura Automotive Systems Inc.'s 8 5/8% senior notes due 2012 were unchanged at 36 - after having pushed upward over several sessions from about 30 bid at the start of the week, probably on the strength of a potentially lucrative contract to supply technology to Aditya Auto Products and Engineering Pvt. Ltd., an Indian auto parts company - giving Dura a foot in the door in the burgeoning Indian automotive market.

Its subordinated 9% notes due 2009 were also unchanged at 7½ bid, 8½ offered - up from around 3 bid, 4 offered at the start of the week.

Le-Nature's loses ground

Back on solid ground, Le-Nature's Inc.'s 9% notes due 2013 continued to weaken on Friday, with a trader saying the bonds are now at 43 bid, 46 offered - down some 5 points from the week's peak, but still up about 5 to 7 points from the 35-38 context in which the bankrupt Latrobe, Pa.-based soft-drink distributor's bonds had previously been seen.

Le-Nature's notes had jumped 10 to 12 points earlier in the week, to the upper 40s, after bondholders and other creditors filed a liquidation plan for the company - only to give up some of those gains on Thursday and Friday.

The trader said the company's bank debt was unchanged on the day at 67 bid, 69 offered.

Broad market firm

MagnaChip Semiconductor LLC's floating-rate notes were called a "little firmer" by a trader, who placed the notes at 87 bid, 88 offered. The Seoul, Korea-based chip maker released its first-quarter results Thursday, posting an unsurprising wider loss.

Elsewhere, MAAX Corp., a Montreal-based manufacturer of bathroom products and spas for the residential housing market, saw its 9¾% notes due 2012 slip 4 points, according to the trader. He pegged the notes at 65 bid, 66 offered, adding that MAAX was "definitely a troubled company."

Iridium LLC's 14% notes due 2005 were up a point, at 23 bid, 24 offered.

And Tembec Inc.'s bonds were better, its 8 5/8% notes due 2008 up 1 point at 63 bid, 65 offered, its 8½% notes at 57 bid, 59 offered and its 7¾% notes due 2012 also a point better, at 56 bid, 58 offered.

Paul Deckelman contributed to this article.

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