Investors are hedging against the fall in Dura Automotive Systems' bonds by buying into the second-lien loan, said a dealer. Dura's bank debt has fallen less steeply than the bonds, which have dropped 30 points over the past three weeks. The second lien still lost ground, however, falling to 87-88 from the mid-90s the prior week (CIN, 9/25). The dealer said the hedging activity in the bank debt has stopped it from falling as precipitously as the bonds.
Dura's 8 5/8% '12 bonds fell a point to 43, while its 9% '09 bonds dropped two points to 4. Dura's bonds and bank debt have been on a steady decline over the two past weeks on concerns the auto supplier is close to filing for bankruptcy. The second lien was trading around par Sept. 11. JPMorgan leads the second-lien loan. A Dura spokesman did not return a call seeking comment.