Aquila, Northwestern active on earnings; AMR improves; Global Crossing breaks out of range

By Carlise Newman

Chicago, May 15 - Two earnings reports, from Aquila Inc. and Northwestern Corp., drove most of distressed debt trading Thursday, with occasional noise from Global Crossing Inc. and AMR Corp.

Aquila on Thursday posted a quarterly net loss after absorbing hefty impairment charges and losses from discontinued operations. The company reported a first-quarter loss of $51.9 million, (27 cents/share) on revenue of $579.3 million. The quarter was primarily hurt by costs associated with the company's decision to exit energy trading, the company said in a news release.

Aquila's bonds were up "one point across the board," a trader said. The 7 5/8% notes due 2009 were seen at 82¼ bid/84 offered, while the 11 7/8% notes due 2012 were quoted at 102¾ bid/103¾ offered, the trader said.

"Overall there wasn't a whole lot of movement, but they were up, and that was something to pay attention to," he said.

The Kansas City, Mo.-based utility and power generator also said that earnings from the domestic networks division grew 53%, the results of cost controls and rate adjustments that took effect in two states following the year-ago quarter.

In the first quarter of 2002, the company posted net income of $44.4 million, or 32 cents a share, on revenue of $767.4 million.

Northwestern reported earnings of $9.9 million (26c per share) for the quarter ended March 31. That compared with a loss of $52.4 million ($1.91 per share) for the first quarter of 2002.

Northwestern's 7 7/8% notes due 2007 were quoted at 78 bid/80 offered, up two points from Wednesday, when they were seen at 76 bid/78 offered. The 83/4s due 2012 were in the "low 80s" according to a trader, "pretty much unchanged" from levels it has seen all week.

The earnings include a gain of $27.3 million or 73 cents a share from the extinguishment of a subordinated note of Expanets, NorthWestern's communications services business on March 13.

The Sioux Falls, S.D.-based utility and natural gas provider also said it is likely to defer cash distributions on its five series of trust preferred securities (see story elsewhere in this issue).

NorthWestern has a right to defer interest payments for up to 20 consecutive quarters unless a default under the subordinated debentures underlying the trusts has occurred and is continuing. If the company defers interest payments on the subordinated debentures, cash distributions on the trust preferred securities will also be deferred.

"Northwestern can be a big mover. Today wasn't an example of that," said a distressed debt trader.

Following in the energy and utility section, NRG Energy Inc.'s bonds, which were not exceptionally active Wednesday after filing for Chapter 11 bankruptcy protection, were somewhat lively Thursday. The 8¼% notes due 2010 were seen falling 2½ points to 39.5 bid/42.5 offered, a trader said, from levels of 42 bid/45 offered Wednesday.

"They fell right back to the levels they opened at Wednesday so it wasn't too much of a move, but it is strange that yesterday the bankruptcy seemed to bid them up a little and not today," said the trader.

NRG filed in the U.S. Bankruptcy Court for the Southern District of New York. Under the its proposed reorganization plan, NRG's creditors will receive a combination of cash, $500 million in new senior notes and all of the reorganized company's common stock.

Included in the plan is settlement between NRG, Xcel Energy and NRG's major credit groups that includes payment of up to $752 million by Xcel to NRG and its creditors, of which up to $200 million can be in Xcel stock.

NRG also obtained a $250 million debtor-in-possession financing facility with GE Capital Corp. as lead agent.

American Airlines parent AMR Corp. brightened a bit Thursday after reporting it had come to an agreement with aircraft lessors and other suppliers. AMR said it will issue up to 3 million common shares to suppliers, lessors and other creditors in return for concessions (see story elsewhere in this issue).

AMR's 9% notes due 2012 were quoted at 58 bid/61 offered, "up about three points" from Wednesday's levels of 55 bid, a trader said.

AMR Corp. said the agreement will save the company in excess of $175 million a year and more than $1 billion cumulatively.

The company said the action caps its $4 billion-a-year cost-reduction effort. During the past two years, AMR has identified $2 billion a year in cost savings, and last month AMR's three major labor unions ratified new agreements which, when coupled with changes in pay plans for management and non-union employees, will reduce the Fort Worth-based air carrier's costs by an additional $1.8 billion a year.

And a name that has popped up quite frequently in distressed trade, Global Crossing Inc., finally moved from levels it has been at for weeks.

Global Crossing's bonds were seen up to 5 bid during the session, ending at 4¼ bid/5¼ offered. The bonds had been hovering at 3½ bid for more than a month.

"That was a pretty good move for them," said a distressed debt trader.

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