Metris spikes up on replacement financing news; WorldCom firms slightly

By Carlise Newman

Chicago, Sept. 17 - The usual suspects were active in distressed debt trading Wednesday, including WorldCom Inc., NorthWestern Corp. and Telewest Communications plc; however, Metris Cos. made an appearance after a long hiatus from trading desks.

Metris said after the close Tuesday that it had sold $590 million of credit card assets and refinanced $610 million of secured debt.

Metris' 10% notes due 2004 were quoted at 75 bid, well up from recent levels in the high 60s, while its 10 1/8% notes due 2006 were seen having risen to 80 bid, from levels in the low 70s.

"The deals are good for the company. They're clearing the way to get out of this mess and the paper reacted accordingly," a trader said.

The Minnetonka, Minn.-based company, which issues credit cards to customers with dubious financial histories, said it will take a $75 million to $85 million third quarter pre-tax charge from the sale, which will be largely offset by a previously announced sale of other products and operations.

Separately, Metris has to come up with a tangible plan by the end of September to refinance $610 million of secured notes in order to draw other financing obtained in March. The notes that were refinanced would have matured in January 2004. The new financing matures on February 28, 2004.

Fitch Ratings on Wednesday revised the outlook for Metris and its bank unit to stable from negative.

Elsewhere, WorldCom Inc. came out with its monthly operating figures for the month of July on Tuesday. Revenue rose 2% to $2.116 billion from $2.075 billion in June.

The bonds did not react to the news Tuesday, but were up slightly Wednesday at 33¼ bid, 34½ offered, up "about ¾ of a point" according to a trader.

"WorldCom paper was a bit higher, nothing really new. It moves between ½ point to a point every day or so," he said.

Ashburn, Va.-based WorldCom said last week it reached an agreement with its creditor groups. Traders have said the new agreement brings WorldCom one step closer to emerging from bankruptcy, possibly earlier than expected.

NorthWestern Corp. debt was unchanged Wednesday after gaining for 2 consecutive sessions. The company announced it had filed for Chapter 11 bankruptcy protection on Monday.

The Sioux Falls, S.D.-based natural gas provider said it obtained a commitment for $490 million in debtor-in-possession financing, consisting of a revolving loan of $100 million and, upon satisfying certain conditions, a term loan of $390 million. Bank One N.A. is the agent.

If the conditions are not met, the maximum commitment for the DIP will be $100 million. NorthWestern asked for - and obtained approval for - $50 million of the revolver to be made available immediately.

A trader said the 8¾% notes due 2012 and the 7 7/8 % notes due 2007 were quoted as having stabilized at 85¼ bid, 86 offered.

"The bankruptcy is starting to weigh on the bonds," a trader said. "At first it was a relief and now it's sinking in. They're in bad shape."

Elsewhere, Telewest Communications plc's bonds were up again on Monday's news that the company has reached agreement in principle on its financial restructuring with the ad hoc committee of its bondholders, who will receive 98.5 % of the company.

Telewest's 9 5/8% notes due 2006 were 1 point better at 47¾ bid, 49 offered, a trader said.

Holders of the U.K.-based cable company's existing share capital will receive the remaining 1.5 % of the equity.

Elsewhere, "we saw bits and pieces of things, some major hitters of late like Goodyear crossing the desks," a trader said.

Goodyear Tire & Rubber Co.'s bonds firmed again Tuesday. Earlier in the week, the United Steelworkers of America said its members have approved a three-year contract that cuts wages and benefits and closes a plant in exchange for increased job security and a board seat.

The union said 70 % of members approved the pact, more than a 2-to-1 margin. It represents nearly 19,000 workers and 22,000 retirees.

Goodyear's benchmark 7 7/8% notes due 2011 were up an additional 1.5 points to 87½ bid, 89 offered, according to traders.

"I'm surprised the glow hasn't worn off. Union news doesn't usually have a huge lasting impact. But the sector has been doing better lately. It tends to pick up after the summer," one trader noted.

Also seen on desks Wednesday was Horizon PCS. Its 12¾% notes due 2011 were quoted at 23 bid, 23½ offered, up slightly, a trader said.

Global Crossing Inc., awaiting news on whether a sale of its assets to Singapore Telemedia, was traded actively, a market source said. The source quoted the bonds at 4¼ bid, 5 offered, up ¼ point.

In other news, Enron Corp.'s 8% notes due 2005 rose to 34 bid from 30 bid, according to a trader, who had no reason for the spike.

New York-based satellite operator Loral Space & Communication Inc., which filed for Chapter 11 in July, saw its 10% notes due 2006 up 3 points to 60½ bid.

(Paul Deckelman contributed to this report)

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