Allegiance Telecom soars on Qwest interest; WorldCom higher; Goodyear continues to plummet

By Carlise Newman

Chicago, Nov. 21 - Bankrupt Allegiance Telecom Inc. bonds soared 5 points on a news report that Qwest Communications Inc. has offered to buy the company for $350 million.

The value of the transaction with Allegiance Telecom, a Dallas-based telephone and data company which filed for Chapter 11 bankruptcy protection in May, would include cash and assumed debt.

The report in the Wall Street Journal cited an unnamed source as saying that Qwest is still far away from completing a deal and that at least two other bidders other than Qwest have expressed strong interest in Allegiance.

Allegiance's 11¾% notes due 2008 jumped to 40 bid from 35 bid, while the 12 7/8% notes due 2008 similarly rose to 40½ bid from 35½ bid.

Elsewhere WorldCom Inc. continued to recover after three straight days of losses from a weak monthly operating report late Monday.

WorldCom's 8¼% notes due 2011 were up ½ a point to 36½ bid Friday. The bonds had fallen a ½ point Monday, ahead of the report and a ½ point Tuesday and Wednesday, before recovering Thursday and rising to 36 bid.

WorldCom recorded $1.95 billion in revenue for September versus $2 billion in August 2003. Operating income for September was $88 million, a decline of $50 million from August, primarily reflecting lower revenues. Sales, general and administrative expenses were flat month-over-month, including $47 million in August and $55 million in September for restatement and audit expenses.

The loss contrasts with the $132 million in net income MCI posted in August.

Elsewhere, Goodyear Tire & Rubber Co. was still sliding after it said late Wednesday it had a loss of $105.9 million in the third quarter, and that the Securities and Exchange Commission has launched an informal inquiry into its restatement of earnings for the last 5½ years.

The Akron, Ohio tire maker last month said it would have to restate earnings going back to 1998 because of errors in its internal billing system and the implementation of a new computerized accounting system. In a filing to the SEC late Wednesday, the company indicated the errors caused the company to overstate its earnings by $84.7 million during that period.

Goodyear's 7 7/8% notes due 2011 were seen dropping 1½ points Friday to 74½ bid, 77½ offered, one trader said. The bonds dropped 4 points Thursday. After the restatement announcement late last month, the bonds had dropped 3 points and have been trading at the 81 bid level for the last few weeks.

"This is one company that is in very bad shape. The bonds not long ago were 15 to 20 points higher than these levels. They've just been slammed with bad news," the trader said.

The company, as part of its filing to the SEC, said it had a loss of $105.9 million in the third quarter, or 60 cents a share, compared with a restated net income of $32.7 million, or 20 cents a share, a year earlier. Sales rose to $ 3.91 billion, compared with a restated $3.53 billion a year earlier.

Goodyear also said it is cutting another 1,200 jobs worldwide to help the nation's largest tiremaker cut costs as it battles rising rubber and other raw material prices. The job cuts are in addition to 2,600 jobs eliminated earlier this year and previously announced plans to cut 1,100 positions when the company closes a tire plant in Huntsville, Ala., next month.

In other news, HealthSouth Corp. paper was higher. The 7 5/8% notes due 2012 were quoted up 1 point at 87 bid, 88 offered.

"The less we hear about them the better the bonds get," a trader said.

Likely unrelated, but worth noting was a Reuters story out Friday saying that HealthSouth will make its $50 million interest payment due in December, citing acting Chief Financial Officer Guy Sansone.

HealthSouth, which was unable to repay its $344 million convertible bond that matured April 1 after the accounting scandal, is current on its interest payments and the provider of rehabilitation and outpatient care has been generating cash, Sansone told the Reuters Health Summit in New York.

"We would like to devote 2004 to take care of all the rocks in the road," said Sansone in the report, referring to the company's discussions with creditors and government agencies. The accounting scandal has led to criminal charges against 16 HealthSouth executives.

Air Canada said it received an unsolicited revised investment proposal from Cerberus Capital Management LP. (see story elsewhere in this issue)

Air Canada's 10¼% notes due 2011 were up 2 points to 48 bid, traders said.

"This is interesting. It's a bidding war. We'll see how it goes," a trader said.

The proposal was made after completion of the equity solicitation process, which resulted in Air Canada's board of directors selecting Trinity Time Investments, a corporation controlled by Victor T. K. Li, to be the equity plan sponsor. That agreement includes a $650 million equity investment, which would represent 31% of the common equity in restructured Air Canada.

In other news, International Wire Group Inc.'s 11¾% notes due 2005 were up 1 point to 54 bid.

Satellite operator Loral Space & Communications Inc.'s 10% notes due 2006 were down 1 point at 75 bid. The New York-based company's bonds had fallen several points after reporting a huge third-quarter loss two weeks ago, and had slowly been recovering this week, about a point a day.

(Paul Deckelman contributed to this report)

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.