Dana bonds continue slide, even as autos steady; asbestos bonds firmer

By Paul Deckelman

New York, Jan. 20- Dana Corp.'s bonds finished the week pretty as much as they had began it, continuing to fall in response to the Toledo, Ohio-based automotive systems maker's poor third-quarter numbers.

However, most of the other names in the automotive sector managed hold their own, although upside movement was limited by the junk bond market's overall lack of much pop; traders attributed this to the terrible showing by the equity markets.

A trader saw Dana's 6½% notes due 2009 "down two points on the day and 10 points on the week" at 70.5 bid, 71.5 offered.

Another trader saw its 5.85% notes due 2015 down 2½ points on the day at 63.75 bid, 64.75 offered.

Yet another trader said, "saw better sellers." He saw the company's 6½% notes due 2008 at 73 bid, 75 offered.

The Dana bonds have been on a downside ride since the company reported a net loss of $1.27 billion ($8.50 per share) for the three months ended Sept. 30. That was a sharp deterioration from its year-earlier profit of $42 million (28 cents per share), despite sales having edged higher in the latest period to $2.4 billion from $2.11 billion last year.

Most of the loss - well over $1 billion of it - was attributable to very large charges that Dana took in connection with its efforts to restructure its business, which has been badly hurt by soaring raw materials prices and a slowdown in orders from two of its biggest customers, GM and Ford.

Dana said that excluding those charges, its loss from operations was $63 million, which still represented a reversal from its $39 million profit a year ago.

But while Dana continued on its long slide to nowhere on Friday, other automotive names - which had been lower earlier in the week - seemed to steady somewhat, either unchanged or down only marginally.

A trader saw Ford Motor Co.'s widely traded 7.45% notes due 2031 pretty much rangebound around 69.5 bid, 70.5 offered, little moved by the prospect that the Number-Two U.S. carmaker will provide the financial markets with the details of its long-awaited turnaround strategy on Monday. Ford - struggling to bring its costs into line with its reduced sales revenues, is expected to specify which of its plants it plans to close or divest, and the size and location of anticipated headcount reductions. Whatever details emerge, the trader said, "they'll have been pretty much as expected. We know Ford is making lots of job cuts."

Ford rival General Motors Corp.'s flagship 8 3/8% notes due 2033 were likewise seen in that same 69.5-70ish context. GM's financial arm, General Motors Acceptance Corp., saw its 8% notes due 2031 stay around par, off perhaps half a point on the day.

Among the troubled auto parts suppliers, a trader in distressed issues saw Dura Automotive Systems Inc.'s 9% notes due 2009 steady at 51 bid, 53 offered, while its 8 5/8% notes due 2012 were at 82.

Another trader saw former Ford subsidiary Visteon Corp.'s 7% notes due 2014 a point lower at 75.5 bid, 76.5 offered.

Looking at the bankrupt supplier names, the first trader estimated Collins & Aikman Corp.'s 10¾% notes due 2011 down perhaps a point to around 32 bid, 34 offered, but said that Tower Automotive's 12% notes due 2013 "didn't look like they had changed much," hanging in at 74. Delphi Corp.'s 2009 bonds also were pretty much unchanged, he said, hanging in around 55 bid.

Asbestos issues better

Outside of the automotive sphere, traders saw some upside movement in the bonds of asbestos-challenged companies, with bankrupt Toledo, Ohio-based insulation maker Owens Corning's bonds at 89 bid and bankrupt Lancaster, Pa.-based floorcovering maker Armstrong World Industries' notes at 79, both up about a point on the day.

There was no firm, market-moving news out on the asbestos front, although a trader said that the sector's bonds "had been moving up all week" and were up perhaps four to five points in that time.

Sector investors are hoping that a long-delayed bill to set up a $140 billion, industry-paid claims fund for people suffering medical problems from asbestos exposure may finally gain Senate passage soon after kicking around on Capitol Hill for more than a year.

Tembec steady

Traders saw Tembec Industries Inc.'s bonds, in the words of one of them, "not as active as they were yesterday [Thursday]."

He quoted its 7¾% notes due 2012 at 43 bid, its 8½% notes due 2011 at 44 bid and its 8 7/8% notes due 2009 at 46, where all three issues "started the day and ended it."

Tembec has been getting steadily weaker over the past several months, in line with the hard times that Canada's forest products industry has been going through. Tembec and its rivals such as Domtar Inc. and Abitibi-Consolidated Inc. have been hurt by the higher Canadian dollar, which depresses export sales, particularly to the United States; other negative factors include declining demand for newsprint, heavy duties on lumber exports to the United States and competition in pulp and paper from emerging producers in Asia and South America.

Tembec and the other companies have pared operations and announced plant and sawmill closings, with the accompanying loss of thousands of jobs in Quebec, Ontario, Newfoundland and Western Canada.

Airlines level

News that the bankruptcy judge overseeing United Airlines' restructuring had okayed the Elk Grove Village, Ill.-based corporate parent, UAL Corp.'s reorganization plan didn't give much lift to the company's bonds, which remained at 22.5 bid, 23.5 offered.

Bankrupt rival airlines Delta and Northwest's bonds remained at 22.5 bid, 23 offered for Delta, with Northwest's notes at 36 bid. "There was a whole lot of blah there," a market source said.

He said that with the big move downward by equities, "that kept the lid on most stuff" in junk.

SunCom drops

SunCom Wireless Holdings/Triton PCS'S 8¾% notes were seen off four points, finishing at 61 bid, 62 offered, said a trader, who noted that the struggling Berwyn, Pa.-based telecommunications company's issue "started the week in the low 70s," and was thus down 10 points over the course of the week.

The company's New York Stock Exchange-traded shares, meantime, were off 30 cents (12.88%) to $2.03. Volume of 1.6 million shares was about five times the norm.

SunCom said that said it expects to post a fourth quarter EBITDA loss of $14 million - a sharp reversal from previously released guidance that projected a fourth-quarter profit of between $5 million and $10 million. It said that it would issue no further guidance, citing the "unpredictable nature" of its business.

And the company announced the hiring of Lazard Freres & Co. as its financial advisor, and Weil, Gotshal & Manges as a legal advisor.

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