Parmalat still swaying to a degree; Revlon mixed on news of effort to strengthen balance sheet

By Carlise Newman

Chicago, Dec. 16 - Parmalat Finanziaria SpA's bonds continued their up-and-down ride Tuesday but had an easier time compared to the big swings of previous sessions.

Parmalat's bonds were quoted at 60 bid, 62 offered, essentially unchanged after first moving 2 points higher, then 2 points lower on the session.

Moving the securities Tuesday were various reports, including the knowledge that another financial deadline is looming.

Parmalat must either pay $400 million by Wednesday to minority shareholders of its Brazilian unit, or renegotiate the deal that requires this payment. News reports were out Tuesday saying the Parma, Italy based long-life milk producer is trying to delay the deadline.

That followed news Monday that chairman and chief executive officer Calisto Tanzi stepped aside in favor of turnaround expert Enrico Bondi, which was deemed positive, traders said.

Before that announcement Monday, the bonds slid to levels in the mid-50s, but the bonds appeared to steady at levels around 62 bid, 64 offered by the close. The bonds also had a wild day Friday when they fell to the low 50s, recovered to levels around 70 bid, and then fell back from peaks to levels around 61 bid.

Friday's activity occurred after the company belatedly paid a €150 million bond that matured the previous Monday.

"It's not really surprising that the bonds didn't react more positively on the CEO news, because what they're facing is a pretty desperate situation no matter who's in charge," one trader commented. "This is definitely paper that moves around a lot though."

Elsewhere, Revlon Inc.'s paper was somewhat mixed. Its 8 5/8% notes due 2008 fell to 43 bid from 46 bid. The 8 1/8% notes due 2006 were up 1 point at 67 bid, 68 offered, according to a trader.

The 8 5/8 issue had risen 2 points Monday after dropping 1½ points on Friday.

"The lower-priced paper fell, but the higher issues were mostly unchanged," he said.

The New York-based cosmetics maker said in a press release on Tuesday that it is looking at ways to strengthen its balance sheet and may issue additional common stock or debt securities in exchange for cash or old debt.

The company also said its board approved $125 million of previously announced loans from its 83 percent owner, financier Ronald Perelman's MacAndrews & Forbes Holdings Inc., aimed at helping ease its cash crunch.

The loans include a $25 million unsecured term loan available immediately at an interest rate of 12% annually, with no interest payable until final maturity on Dec.1, 2005, and a $100 million senior unsecured term loan available from Jan. 1, 2004 at 12% annually with no interest payable until the final maturity on Dec.1, 2005.

Both loans are on substantially the same terms as the $100 million term loan extended by MacAndrews & Forbes earlier in 2003.

The $100 million loan also requires consent of the banks included in Revlon's credit agreement. The company expects to obtain this consent with an amendment and waiver of the credit agreement, which it anticipates executing before Jan. 31, 2004.

In other news, WorldCom Inc.'s 7½% notes due 2011 saw a modest loss of ¾ of a point to 33½ bid, 34 offered. The bonds had been trading in the mid-30s for several weeks.

After the market close Monday, WorldCom said that for October it recorded $1.977 billion in revenue, essentially flat with September revenue of $1.951 billion. The company had a net loss in October of $194 million.

"The bonds are just sort of stagnant now. Not much is going to revive them until the holidays are over," one trader remarked.

The net loss reflects a $102 million increase in miscellaneous expense primarily from prior period transactions, as well as a decline in the company's operating income.

In October, WorldCom reported an operating loss of $35 million.

Meanwhile, Avado Brands Inc. confirmed that it will use 30-day grace period for the interest payment on its 11¾% senior subordinated notes due Dec. 15.

Avado's 11¾% notes due 2009 were oblivious, unchanged at 11 bid.

The company is in covenant default on provisions of its secured credit facility and is negotiating with its secured lenders to address those defaults, Avado said in a filing with the Securities and Exchange Commission.

The company said previously that there was substantial doubt it would be able to maintain compliance with the terms of the secured credit facility.

Madison, Ga.-based Avado is the parent company of Don Pablo's Mexican Kitchen and Hops Grillhouse & Brewery.

In other news, Loral Space & Communication Inc.'s 10% notes due 2006 were up 1 point to 75 bid. The New York satellite operator's notes had wavered 1 point lower for several days, but are now back trading at the same level from 2 weeks ago.

Restaurant chain Sbarro Inc.'s 11% 2009 continued to ease after losing two points Monday; down half a point to 78½ bid. The Melville, N.Y.-based company, which operates its restaurants mainly in food courts, has struggled since 9/11 terrorist attacks on the U.S. dampened traffic at malls and airports.

(Paul Deckelman contributed to this report)

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