ATA bonds languish at lower levels as company denies plans to quit Midway; Mirant loan paper firmer

By Paul Deckelman and Sara Rosenberg

New York, Aug. 25 - ATA Holdings Corp. bonds were being quoted Wednesday unchanged on the session, but down from recent levels, as the troubled Indianapolis-based low-fare airline company was denying published media and financial community speculation that it might end operations at Midway Airport in Chicago, where ATA is the biggest operator. Meantime, Delta Air Lines Inc. notes, which had been bouncing around during the previous several trading sessions, were seen little changed.

In bank debt trading, Mirant Corp.'s 2003 bank paper was seen stronger on Wednesday, ending the day around 59 bid, 59.75 offered, a trader said, up from 58 bid, 59 offered in Tuesday's dealings.

The trader said that no specific news was seen as an impetus behind the Atlanta-based energy company's rise.

Back among distressed-bond investors, ATA Holdings' 12 1/8% notes and 13% notes were seen clinging to levels around 35 bid, 40 offered - little changed on the session but down from levels in the lower-to-mid 40s around the middle of the month.

ATA's bonds had slid down to those lows over several sessions last week after the company warned in its 10-Q filing with the Securities and Exchange Commission that it that it likely will run out of cash in early 2005 and said it might sell some assets or restructure.

But on Wednesday, it was denying published reports that it might pull out of Midway Airport in Chicago, where ATA has 14 gates, the most of any operator. The airport is the second largest in the Windy City, behind the giant O'Hare International, and handles mostly domestic flights.

ATA said in a statement on Tuesday night that while the carrier is busy restructuring its finances, and considering asset sales, "we are not abandoning Chicago Midway, nor are we canceling any flights."

However, analysts speculated that the cash-strapped airline might sell some of its 14 gates, or takeoff and landing slot rights, which could be worth many millions of dollars. ATA leases those gates from the municipal authority which operates the airport.

In its Aug. 16 filing with the SEC, ATA warned that "under current operating assumptions and absent any changes to existing aircraft lease obligations, the company does not expect to have sufficient cash to meet its cash obligations in the first quarter of 2005."

ATA had $150 million in cash on hand at the end of the quarter - down from $186 million at the same time last year.

It blamed higher fuel costs and declining military charter business for its losses, which totaled $90.7 million during the first half of the year.

Delta quiet after recent moves

Also on the airline front, Delta Airlines - whose volatile bonds have bounced crazily up and down last week and this week - was seen little changed in a generally quiet session, with its benchmark 7.70% notes due 2005 at 45 bid, 46 offered, its 10% notes due 2008 held steady at 35 bid, 37 offered, while its 8.30% bonds due 2029 were unchanged at 27 bid, 29 offered.

Delta's paper had risen, in some cases dramatically, for most of last week, given wings by the news that the carrier and its pilots were again at last talking, with hopes that the company could convince the captains to sign on to a $1 billion annual pay cut as Delta tries to bring its bloated cost structure in line with those of its rival carriers. Delta also benefited from the long-awaited conclusion of its much-ballyhooed strategic review of all aspects of the way it does business, the details of which were presented to the company's board of directors by chief executive officer Gerald Grinstein in a closed-door meeting last Wednesday.

But the bonds came back down on Friday, especially hurt by a Standard & Poor's downgrade after Delta unveiled plans to ask some bondholders to okay changes in their notes' indenture - a step seen by some analysts as precursor to an effort by the company to strong-arm its bondholders into swallowing less favorable terms in a note exchange, something S&P warned that it would consider tantamount to a default.

This week, however, the bonds were once again seen headed skyward, with the 7.70s up the most, about four points, the majority of it in Tuesday's trading, and the other bonds up about two points, helped, analysts said, by the continued slide in crude oil prices, which last week had been steadily escalating and had threatened to crack the psychologically potent $50 per barrel mark.

Crude has been on the slide this week, tumbling to below $44 a barrel, mostly on profit taking from last week's gains. Light crude for October delivery settled at $43.47 on the New York Mercantile Exchange on Wednesday, down $1.74 on the day. The price of Nymex-traded oil futures has fallen by 11% since last Thursday, when they settled at $48.70 - the highest Nymex settlement on record. Airline-industry observers closely watch crude prices, which are seen as a leading indicator of price movements in the various products distilled from crude, particularly jet fuel. Delta has cited the escalating cost of fuel as one of the major reasons why it is in the financial hole it is in.

Air Canada down

A trader saw Air Canada's bonds down a point on the session, with its U.S dollar-denominated 10¼% notes at 20 bid, 22 offered and its Canadian dollar-denominated bonds at 17 bid, 19 offered.

Those bonds had firmed slightly earlier in the week on the news that the Canadian courts had approved the Montreal-based state-controlled air carrier's plan for reorganization under that country's Companies Creditors' Arrangement Act, which is Canada's equivalent of Chapter 11. Air Canada expects to exit bankruptcy by Sept. 30.

RCN dips

A trader saw RCN Corp. bonds, which had firmed to around the 54 bid, 56 offered level earlier in the week when the Princeton, N.J. -based telecommunications company filed its bankruptcy reorganization plan, "settled back down" at 53 bid, 55 offered.

The plan, filed with the U.S. Bankruptcy Court for the Southern District of New York, envisions reducing RCN's total debt by $1.2 billion through a debt-for-equity swap. RCN expects to emerge from bankruptcy in the fourth quarter.

The trader also saw AEI Resources bonds continuing to trade around "a 3-5 or 4-6 context." The bankruptcy court handing the restructuring case of the Ashland, Ky.-based coal producer - now known as Horizon Natural Resources - will decide whether to confirm the company's restructuring plan on Aug. 31 and will consider the results of its recent asset auction. The court is expected to approve the sale of the company's assets to billionaire financier Wilbur Ross' Newcoal LLC, Oldcoal LLC. The Ross company, in partnership with A.T. Massey Coal Co., won the court-mandated auction with a $786 million bid, split between $304 million in cash and $482 million in second-lien notes - plus the assumption of the company's liabilities.

The trader noted that the bonds began the year bid at around one cent on the dollar and moved as high as 15 bid prior to the auction on the hopes that the sale might produce a competition between potential buyers that would yield a greater recovery for debtholders.

But "ever since Wilbur won, they've been trading in the 3-5, 4-6 context, since that's what the recovery for bondholders is expected to be, about four cents on the dollar," he said, noting that those levels hold unless it gets changed.

"It's never a deal till it's a deal and the check is in the bank," he concluded.

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