A high-yield buy-side and a sell-side analyst see continued pressure on the bonds of Collins & Aikman in the wake of recent selling pressure. During the two-week period ending last Wednesday, the auto parts manufacturer saw its 10.75% senior notes of '11 (B1/B) drop from par to a bid of 94.
Investors are likely concerned that the company's fourth quarter results will be weak, as was the case in the two previous quarters, according to Nate Hudson, analyst at Banc of America Securities. He sees further pressure on the bonds, due to the risk of continued margin deterioration, poor customer mix, ineffective operating management and difficulty integrating recent acquisitions. Hudson has no formal recommendation, however, and declines to name a fair value target.
An East Coast buy-side analyst characterizes the numbers as "a bit of a black hole," with numerous charges for asset impairment and inventory write-downs that may or may not reflect poor management decision making. He also speculates that negative information about the company may have been leaked to investors, possibly at a recent auto show in Detroit.