Telecoms gain on AT&T earnings; energy companies still popular; AMR tentatively stable

By Carlise Newman

Chicago, April 24 - Amid a slew of earnings reports, Revlon Inc. and Level 3 Communications, Inc. stood out Thursday, with Revlon's bonds plunging after the company reported a wider first-quarter loss. Level 3 had better news of a profit and its bonds reflected accordingly.

AT&T Corp.'s good news on Wednesday lifted the telecom sector, including WorldCom Inc. Nortel Networks lifted on its own, boosted by its first profit in three years.

"AT&T's earnings moved up WorldCom, and others went up in sympathy," said a distressed debt trader.

He said WorldCom's bonds were bid "as high as 293/4" and ended the session near those levels, a point better than Wednesday.

AT&T posted a better-than-expected quarterly profit of 571 million, or 73 cents a share, including income from an accounting change. That compared with a year-earlier net loss of $975 million, or $1.32 a share

Level 3's 9 1/8% notes due 2009, early in the day were bid at 83½ and offered at 841/2, up from 82 bid and 83 offered Wednesday, according to a trader.

"Typically we don't see any news - good or bad - bringing that one back in. But the report was good. They're strong. They've had a good recovery."

The Broomfield, Colo.-based high-speed communications company backed by investor Warren Buffett on Thursday posted a first-quarter profit as revenues jumped due to acquisitions. Net income for the quarter was $119 million, or 22 cents a share, compared with a loss of $90 million, or 23 cents a share, a year ago.

However, Level 3 cut its revenue outlook for the year, citing weakness in its information services business, which is comprised of software companies it acquired last year.

It was a different story for Revlon. The New York-based cosmetics maker's 8 1/8% notes due 2006 fell to 55 bid from prior levels around 58.

Revlon, which is more than 80% owned by financier Ronald Perelman's MacAndrews & Forbes Holdings, posted a net loss of $48.7 million, or 93 cents a share, compared with a loss of $46.1 million, or 88 cents a share, in the year-ago period.

During the quarter, Revlon said it incurred expenses of about $11 million associated with implementing its growth plan. It expects the plan and related actions will result in charges of up to $160 million, $115 million of which has been recognized to date.

Also out with earnings, Nortel Networks Ltd. saw its bonds rise Thursday. The Brampton, Ont.-based telecom equipment maker's 6 1/8% notes due 2006 at were quoted at 91 bid/92 offered, up a point from Wednesday's levels, according to a trader.

Nortel's bank debt was said to be quoted in the high 90s Thursday

Nortel reported its first profit in three years. Its first-quarter profit was $54 million, or 1 cent a share, versus a loss of $841 million, or 26 cents, a year earlier.

Nortel has cut thousands of jobs, closed operations, written off unpaid customer contracts and marked down the worth of assets whose value has declined. Those cost cuts have helped to stabilize its business after three years of a downward spiral.

News on the upcoming bond sale by AES Energy Corp. lifted the energy sector. The Arlington, Va. power company announced a $1 billion bond deal early Thursday. The roadshow begins Friday for the Rule 144A offering of second priority senior secured notes due 2013 (B+).

As a result, Calpine Corp.'s 8½% notes due 2011 were a half-point higher on the session, at 64 bid bid/65 offered. The San Jose, Calif.-based independent power operator's bank debt was quoted bid at 95.

"Everyone is after the yieldy paper," said a distressed debt trader of the recent healthy interest in energy companies. "They're willing to take more risks."

Debt of American Airlines' parent AMR Corp. was seen "stabilizing" in the low 30s. Specifically its 9% bonds due 2012 were seen bid at 31 and offered at 33.

"AMR was in the teens a few weeks ago after being as high as the 40s. This isn't so bad," said a trader.

Troubled American has had a hellish few weeks, negotiating and re-negotiating with unions on wage concessions after it was revealed that top executives would receive bonuses.

Late Wednesday, AMR director David Boren told the Tulsa World newspaper that he would ask the board to fire Carty, who he said "has lost the credibility and trust necessary to effectively lead the company through challenging times."

Late Thursday, the Associated Press reported that negotiators for American Airlines and its unions reached a tentative deal to keep the company out of bankruptcy, citing a union official. The president of the pilots' union said the deal would change the pay cuts approved by unions last week and would shorten the nearly six-year term of the concessions.

© 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.