Collins & Aikman bonds fell seven points on fears that the proposed joint venture between Lear Corp. and WL Ross & Co., which would combine Lear Corp.'s European interiors business with Collins & Aikman's European business, would fall apart. Collins & Aikman's 10.75% '06 bonds fell to 39.75.

Investors' concerns that Lear would pull out of the joint venture were sparked by an 8K the company filed with the Securities and Exchange Commission in which it said it would take an additional $342 million impairment charge in the fourth quarter of 2005 for its interior products division (see story, page 6).

During an investors' meeting at the Detroit Automotive Conference in Dearborn, Mich., Lear executives said the company is still in discussions to form the joint venture with billionaire investor Wilbur Ross, who bought Collins & Aikman's European business in November. But David Wajsgras, cfo, added that the timing of the ultimate proposed joint venture "represented a significant unknown that directly affects our near term outlook."

Bob Rossiter, ceo of Lear, told investors that according to the way the joint venture is structured, the deal would probably not go ahead if Ross does not acquire Collins & Aikman's North American business, which is under bankruptcy protection. He added, "We believe we should go ahead with the joint venture and we are exploring that."

It is still unclear whether Ross will go ahead with plans to acquire the North American business. According to a bankruptcy court document filed with the United States Bankruptcy Court for the Eastern District of Michigan, he has only discussed participation in a potential bid for the U.S. assets with Lear, Franklin Mutual Advisors and Ross' limited partners.

Rossiter said Ross is confident he is in a good position to acquire the business. Wajsgras said the company has discussed further acquisitions with WL Ross, including the possibility of buying Collins & Aikman's North American business. Ross did not return calls.

A spokesman for Collins & Aikman said the company is not yet in the final stages of a sale to WL Ross. He said there are a number of parties considering buying the business and one option would be to sell parts of the company. Two possible units it would seek to sell are its fabric making unit and its convertible roof plant. "To create value for creditors we are looking to determine if it is more beneficial to sell all or part of our assets," said the spokesman.

Speculation that Ross was planning to take control of the auto supplier was sparked over the summer when it was learned that he had begun accumulating debt in Collins & Aikman (CIN, 8/8). Ross holds approximately 6.7% of Collins & Aikman pre-petition senior secured credit facility and approximately 10% of its debtor-in-possession financing. He is also the sole provider of an administration loan to the debtors' European affiliates.