Dana bonds zoom on cost-cutting plan; W.R. Grace bank debt gains

By Paul Deckelman and Sara Rosenberg

New York, Nov. 9 - Dana Corp.'s bonds were seen up between 5 and 7 points Thursday, as the bankrupt Toledo, Ohio-based automotive components maker announced plans to close eight additional plants in the United States and Canada - this on top of previously announced plans to shift some production or close several North American facilities.

Also in the junk bond market, Technical Olympic USA Inc.'s bonds - which plunged on Tuesday but which were then seen having bounced nicely on Wednesday, recovering about half of their losses - were up a little more on Thursday, although the rebound's momentum seemed to be tapering off.

In the bank debt market, W.R. Grace & Co.'s loan headed higher on Thursday; traders said that the bankrupt Columbia, Md.-based chemical company's paper has been coming into focus of late, now that Owens Corning and Armstrong World Industries Inc. paper has "been called away," as one put it, with those formerly asbestos-challenged companies' recent exits from Chapter 11.

Dana outlines cost cuts, bonds soar

Dana's bonds were "all up substantially," a trader said, with its 6½% notes due 2008 at 77.25 bid, 78.25 offered, up sharply from Wednesday's closing levels at 70.5 bid, 71.5 offered, while its 5.85% notes due 2015 climbed to 72 bid, 73 offered from prior levels at 67.5 bid, 68.5 offered. Even the company's long-dated issue, its 7% notes due 2029, was well up from the previous day's levels, at 74.5 bid, 75.5 offered versus 68.5 bid, 69.5 offered.

A trader at another desk pegged the company's 6½% notes due 2009 at 77 bid, 78 offered, which he called a 5 point gain on the session.

A market source at yet another desk called the Dana 9% notes due 2011 up 3 points at 74.25, while its 10 1/8% notes due 2010 were about a point up at 77.

Dana's Pink Sheets-traded shares were meantime up 25 cents (18.80%) to $1.58, on volume of 2.39 million, about 2½ times the norm.

The Dana bonds and shares climbed after the company - which sought protection from its junk bond holders and other creditors this past March via a Chapter 11 filing with the U.S. Bankruptcy Court in New York - outlined a sweeping package of further cost-cutting moves, on top of those announced earlier in the year.

Dana said in a filing Wednesday with the Securities and Exchange Commission that it plans to close eight additional plants in the United States and Canada and downsize three others, and will also try to obtain price increases on parts from its customers and extract wage and benefit cuts from its employees, in hopes of improving its pretax income by $405 million to $540 million per year.

Dana did not identify the facilities slated for closing, nor the number of jobs that might be eliminated. It said that it would shift production from those factories to lower-cost countries, such as Mexico. It expects to cut expenses by between $60 million and $85 million annually with those production changes.

Dana warned in the filing that its U.S. operations continue to burn cash at a significant rate and said that situation will not improve in 2007 without further cuts on top of those which have been previously announced. The company's finances, it said, have been further squeezed by the major recent vehicle production cuts announced by its core customers, the "Big Three" U.S. automakers, particularly for sport-utility vehicles and pickup trucks. Demand for its parts from the carmakers is expected to remain soft in 2007, the company cautioned.

It raised the possibility of having to dip into cash from asset sales and overseas operations to meet its liquidity needs in the coming year, particularly if it cannot realize anticipated savings from the production shifts and other methods.

Dana envisions improving annual pre-tax earnings by $175 million to $225 million by rejecting unprofitable deals - something it can legally do under the bankruptcy laws - and otherwise dragooning higher prices out of its customers, although many of these have their own financial problems to deal with and are likely to resist such a course.

It also hopes to save between $60 million and $90 million annually via wage and benefit cuts and further looks to its workforce for between $70 million and $90 million of annual savings via changes in its pension structure, including freezing defined-benefit plans. Dana looks to save another $40 million to $50 million annually by cutting overhead costs.

Traders said that while Dana was up on the turnaround strategy, they saw little in the way of coattails carrying other troubled parts suppliers up along with it, quoting Dura Automotive Systems Inc.'s 8 5/8% notes due 2012, for instance, unchanged at 26 bid, 27 offered, while Tower Automotive Inc.'s 12% notes due 2013 were actually down a point at 14 bid, 16 offered.

W.R. Grace going great

In the bank debt market, W.R. Grace's loan closed out the day quoted at 148.25 bid, 149.25 offered, up about 3 points from previous levels, a trader said.

He noted that Grace's paper has now found favor with investors who formerly had played in Owens Corning's bank debt and that of Armstrong World Industries. All three companies were driven into Chapter 11 early in the decade under a flood of lawsuits related to medical claims arising from asbestos exposure from the companies' products.

Armstrong, a Lancaster, Pa.-based floorcovering maker and Owens Corning, a Toledo-based insulation maker, each emerged from Chapter 11 in recent weeks, having set up mechanisms to take care of any remaining current and anticipated future asbestos claims.

Le-Nature's bank debt tightens

Also in the bank debt market, Le-Nature's, Inc.'s term loan B saw levels tighten up a bit on Thursday as the bid moved somewhat closer to the offer, according to a trader.

The term loan B closed out the day quoted at 42 bid, 45 offered versus Wednesday's closing levels of 40 bid, 45 offered, the trader said.

Le-Nature's, a Latrobe, Pa., manufacturer of flavored bottled water and other beverages, is currently in Chapter 11 after having an involuntary Chapter 7 bankruptcy converted over last week.

The involuntary Chapter 7 had been filed by creditors amidst claims that the company falsified documents, showed discrepancies in financial results, diverted funds and destroyed documents.

The company's 9% notes due 2013, meantime, fell to 11 bid, 13 offered Thursday, down about 2 points.

Those bonds had been trading around par bid at the beginning of last week, then plunged as low as the 9-10 area last Wednesday on the revelations about the company's problems, before coming off those lows and getting as good as 14 bid when the Chapter 7 involuntary liquidation proceedings were converted to a standard Chapter 11 reorganization.

Technical Olympic rebound slows

Also in the junk market, Technical Olympic USA's bonds - which fell as much as 6 points on Tuesday and then gained half of that back on Wednesday - were up again on Thursday, although less definitely.

A trader saw the Hollywood, Fla.-based homebuilder's 10 3/8% notes due 2012 up perhaps a ¼ point on the session at 87 bid, 88 offered. The bonds had firmed by 3 points the session before.

"The fall was two days ago and the bounce was yesterday [Wednesday]," another trader said, "That was pretty much it, and they were pretty much unchanged" Thursday, he said.

The bonds and shares had nosedived Tuesday after Deutsche Bank, the lead bank for a group of lenders to Technical Olympic's troubled Transeastern homebuilding venture, said that "TOUSA has an obligation to undertake funding initiatives to stabilize the borrower."

However, Technical Olympic rejected the demand, saying that it is in talks with the lenders about the situation, but does not believe any obligations related to financing the venture have been triggered.

It blamed Transeastern's problems on heavy debt and a weak Florida housing market rather than on anything for which it might be held responsible.

Transeastern's term loan has recently been trading in the 75 bid, 80 offered area.

Winn-Dixie unseen, despite plan

Traders said they saw little or no activity in the 8 7/8% notes due 2008 of Winn-Dixie Stores Inc., even as the U.S. Bankruptcy Court for the Middle District of Florida okayed the Jacksonville, Fla.-based supermarket operator's plan of reorganization.

"I saw the news about the plan," one said, "but the bonds did nothing." He said they had last been seen around 75.

Winn-Dixie aims to emerge from Chapter 11 within 30 days after having spent more than a year in reorganization. It will have 522 stores in Florida, Georgia, Alabama, Mississippi and Louisiana, after having shed several hundred others in non-core markets elsewhere in the Southeast and in Bermuda.

Imax plunges on earnings

Imax Corp.'s bonds gyrated at sharply lower levels Thursday, a day after the installer of big-screen technology at movie theaters reported a third-quarter loss versus a year-earlier profit, and said it has still not found a buyer for the company, although it has been looking for quite some time.

A trader saw the company's 9 5/8% notes due 2010 plunge as much as 10 points initially, before coming off the lows to end only down 4 at 89 bid, 90 offered.

Its Nasdaq shares swooned $1.45 (29.97%) to $3.39. Volume of 5.2 million was more than five times the norm.

Movie Gallery off, Adelphia up

Elsewhere in distressedland, Movie Gallery Inc.'s 11% notes due 2012 were seen down another point at 62 bid, 64 offered, on top of Wednesday's 2 point loss. Traders saw no news on the Dothan, Ala.-based video rental store chain operator.

Adelphia Communications Corp.'s bonds were up another point Thursday, with the bankrupt Greenwood Village, Colo.-based cable operator's 10¼% notes due 2006 firming to 80 bid, 82 offered, and its 10¼% 2011 notes at 84 bid, 86 offered, a trader said.

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