Dura Automotive Systems' bank debt fell to 96 7/8 from close to par, where it was trading a week ago on concerns the value of the collateral backing the loans may not be as high as expected. Its 9% '09 bonds, which are trading much lower than the bank debt, fell two-and-a-half points to 12.
Concerns about the value of Dura's collateral comes amid speculation it is close to filing for bankruptcy (CIN, 9/11). Signs of the company's distress were reinforced in August when the beleaguered auto supplier hired restructuring firm Miller Buckfire & Co. to reduce its debt burden. This followed a 19 point drop in its bonds at the end of July after it posted a $131.3 million net loss (7/31). The company's results have been weakened by lower North American and European automotive production, a bad vehicle platform business mix and the loss of a seat adjuster business.
In July, Moody's Investors Service downgraded Dura Automotive's corporate family rating to Caa1 from B3. At the same time it downgraded Dura Operating Corp.'s second-lien bank debt to Caa1 from B3 and its senior unsecured notes to Caa3 from Caa2. The ratings agency said in a release that it expected lower production levels from its main customers and increasing raw material prices to continue to harm its performance. In a research report, Gimme Credit said Dura's senior bonds could be worth as little as 50 to 70 cents. A Dura spokeswoman declined to comment on the trading of the company's securities.