Goodyear Tire slides after company releases savings from labor agreement; Loral drops 6 points

By Carlise Newman

Chicago, Sept. 22 - Goodyear Tire & Rubber Co. debt dropped to lower levels Monday after the company said on Monday its new labor agreement with the United Steelworkers of America will save a total of $1 billion over the next three years. In addition, old favorites Global Crossing Inc. and Enron Corp. passed desks slightly higher than Friday.

According to news reports, Goodyear called the pact a "second critical step" in its turnaround plans, following the refinancing of its loans earlier this year.

Goodyear estimated it will have direct savings of $450 million from changes in its pension and medical plans, plus another $700 million in "avoided costs" for wages and retiree medical benefits.

Goodyear's 7 7/8% notes due 2011 were 3 points lower at 78 bid, 79 1/8 offered.

"The bonds were lower because it looks like people may have been looking for more savings," a trader said.

And Loral Space & Communications Inc.'s 10% notes due 2006 were down 6 points to 54 bid. The New York-based satellite operator's Loral Skynet subsidiary said that its Telstar 4 communications satellite, which stopped working on Friday, was a total loss.

The satellite was insured for $141 million. Loral had agreed to sell the satellite along with five others to another operator, Intelsat, for $1 billion, but said on Monday that losing the satellite would reduce the amount Intelsat pays. The size of the reduction will depend on how much insurance it can recover, but it still expects the Intelsat deal to go ahead in a timely manner

Elsewhere Global Crossing Inc. bonds continued to firm after news Friday that President George W. Bush on Friday agreed to permit the company to sell a majority stake to Singapore Technologies Telemedia.

Global Crossing bonds closed Monday's distressed trading session at 8 bid, 9¼ offered, a rise of "about ¾ of a point," a trader said.

The bonds had traded at 6½ bid on Thursday, prior to the news, and had been at levels around 3-4 bid a few weeks before that. The notes had traded at those levels for weeks.

The decision comes after the two companies resolved concerns about a foreign government-owned company acquiring a U.S. company that operates critical infrastructure like a telecommunications network. The U.S. Defense Department had initially opposed the deal and Homeland Security officials had reservations.

STT has agreed to pay $250 million for the stake in Global Crossing, which operates a high-speed fiber optic network in 27 countries and went bankrupt in January 2002 after accumulating $12.4 billion in debt amid sagging demand.

"They had been waiting a long time for this so it's having a lasting effect. I'll bet we'll see (the bonds) in the double digits when the sale actually goes through," one trader said.

Meanwhile, Enron Corp. bonds were still rising Monday. Last Thursday Enron filed an amended reorganization plan that promises a better recovery for unsecured creditors.

The plan increased estimated recoveries for unsecured claims against the three top debtors to 16.6% for Enron Corp., 19.5% for Enron North America and 22.5% for Enron Power Marketing, Inc.

The previous recoveries were 1.4% for Enron Corp., 18.3% for Enron North America and 21.3% for Enron Power Marketing, Inc.

Enron's 8% notes due 2005 rose to 42 bid, 45 offered from 40 bid on Friday, a trader said.

"The notes opened at 40, got as high as 43 bid and gave up some of the gain before the close," a trader said. "There wasn't much movement in anything today, just the same stuff going on."

The court is expected to hold a hearing on the disclosure statement in late October.

Elsewhere, Air Canada Inc. bonds were firmer Monday on news Friday that the company has reached a tentative restructuring agreement relating to aircraft leases for 38 Airbus aircraft. Under the terms of the tentative agreement, rental payments for each aircraft will be restructured consistent with Air Canada's restructuring plan.

Air Canada's 10¼% notes due 2011 were up 1 point to 46 bid, traders said.

"We don't see much Air Canada on this desk. I was kind of surprised that it was even seen. But this is big news for them," one trader said.

Air Canada and its financial advisors are involved in negotiations with aircraft lessors and lenders on revised aircraft lease arrangements consistent with current rates and the company's restructuring plan. The company will resume aircraft lease payments as new agreements are reached.

Meanwhile Adelphia Communications Corp.'s 9 7/8% notes due 2007 were down 1 point to 68 bid, a trader said.

WestPoint Stevens Inc.'s 7 7/8% notes due 2005 were up 1½ points to 22½ bid, 23 offered. At another desk, the 7 7/8% notes were quoted up nearly a point at 25 bid.

Struggling cosmetics manufacturer Revlon Inc.'s 8 5/8% notes due 2008 were seen down 1 point to 52 bid.

(Paul Deckelman contributed to this report.)

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