More activity in Collins & Aikman bonds; Calpine bonds, debt higher

By Paul Deckelman and Sara Rosenberg

New York, July 11 - Collins & Aikman Corp.'s bank debt was very active for a third consecutive session on Tuesday, as investors were seen continuing to await news on potential bids for the company.

There was also some activity in the bonds and the bank debt of bankrupt San Jose, Calif.-based power generating company Calpine Corp., traders in those markets said.

A sector peer of Calpine, Mirant Corp., was seen down about two points across the board as bond investors reacted with some dismay to the Houston-based company's plans to sell assets but then use the proceeds to benefit stockholders, rather than for debt reduction.

Collins & Aikman's bank debt - which began actively trading around on Friday and continued to do so on Monday - was once again busy Tuesday, even though at the end of the day it was trading in a 94.5 bid, 95 offered context, unchanged from Monday's closing levels, a trader said.

The Troy, Mich.-based automotive interior components company is currently mired in Chapter 11 reorganization proceedings after having filed for bankruptcy in May of last year. There is some market scuttlebutt that a couple of interested parties that might wish to purchase its assets have emerged - but market participants note that a bid of $1 billion is needed in order for the bank debt to get paid down at par.

One potential buyer whose name has been bandied about is billionaire financier Wilbur L. Ross, whose International Automotive Components holding company has already bought Collins & Aikman's European business, and along with partner Lear Corp., is studying the domestic operations as well.

Ross has an impressive track record of going into battered industries and successfully melding the shattered pieces into a working entity again. He has already successfully consolidated the steel and coal industries by buying up assets of bankrupt companies, forming them into one company and negotiating more favorable labor agreement with their unions so as to operate profitably. Ross turned around and sold his International Steel Group assets to Mittal Steel Co., believed to now be the world's biggest steel producer.

Delphi little moved on earnings

Also on the automotive front, there seemed to be little real junk market reaction to the not-unexpected news that bankrupt Troy, Mich.-based automotive electronics manufacturer Delphi Corp. lost $2.4 billion ($4.21 per share) last year. Bad as that was, it represented an improvement of sorts over 2004 when the company recorded a net loss of $4.8 billion ($8.59 per share) - although it should be noted that the 2004 loss included a $4.7 billion tax write-off in the fourth quarter. Revenue fell 6% to $26.9 billion last year, compared with $28.6 billion in 2004.

Delphi losing loads of money is apparently no real cause for activity in the junk market. While one trader saw its bonds down about a point at 84 bid, 85 offered, another saw its 6.55% notes coming due this year at 83.5 bid, 84.5 offered, unchanged on the day. Its 6½% notes due 2013 were ¼ point higher, he said, at 78.5 bid, 79.5 offered, and its 7 1/8% notes due 2029 were actually up ¾ point at 79 bid, 80 offered, "but don't ask me why," he added.

GM lower

The trader also saw the benchmark 8 3/8% notes for Delphi's former corporate parent, General Motors Corp., down 3/8 point at 80 bid, 81.5 offered, while the giant carmaker's General Motors Acceptance Corp. financing arm's 8% notes due 2031 were "pretty much unchanged" at 95.5 bid, 96 offered.

Calpine higher

A bond trader saw Calpine's notes up about 2 points, although he said this was on "no news - but they still traded higher." He pegged Calpine's 8½% notes due 2011 at 47 bid, 48 offered, which he called a "a nice little move."

A market source at another desk saw Calpine's 8¾% notes due 2007 also up a deuce, at 73 bid. Yet another source saw most of Calpine's bonds unchanged on the day - although the 83/4s were a point better there at 71 - but also saw the Calpine Canada Energy Finance II ULC 8½% notes due 2008 2 points better at 63.

In the bank debt market, Calpine second-lien loan paper traded up during Tuesday's market hours, again on no particular news, according to a trader.

He saw the bank debt closing out the day quoted at 97.75 bid, 98.5 offered, up ½ to ¾ point.

Mirant lower

Back in the bond market, Calpine sector peer Mirant's notes were seen down about two points, a trader said, after the company announced plans to repurchase common stock in a Dutch auction tender offer; it will concurrently sell its Philippine and Caribbean businesses but plans to return those proceeds to the shareholders rather than cutting debt. He saw its 8.30% notes finishing the session at 98.75 bid, 99.75 offered.

Mirant - which emerged from Chapter 11 reorganization in January - is looking to boost its stock price, which was hammered down after its recent abortive attempt to acquire another rival, NRG Energy Corp.

But Standard & Poor's is not too thrilled with the idea, saying that the planned share buybacks will use up the company's cash, while unloading the Philippine and Caribbean businesses will reduce future cash flow and make Mirant less diversified than it presently is.

"The share repurchases and divestitures are both negative for credit quality," S&P warned, "and could lead to a downgrade of company ratings," currently at the B- minus level.

Elsewhere, a market source saw Werner Holding Co.'s 10% notes due 2007 having fallen almost 3 points on the session to 26.875. However, no fresh news about the bankrupt Greenville, Pa.-based metal ladder manufacturer that might account for the drop was immediately seen.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.