UAL up on news it may leave bankruptcy early; AMR higher; Adelphia brightens on investor rumors

By Carlise Newman

Chicago, May 21 - A major announcement from United Airlines' parent UAL Corp. pushed the company's bonds and bank debt higher and gave a lift to the airline sector as a whole in distressed debt trading Wednesday.

A report in the Wall Street Journal Wednesday morning said that UAL Corp. is weighing whether to emerge from bankruptcy months ahead of schedule and as early as this fall, according to chief financial officer Jake Brace.

Bruce was also quoted in the Journal as saying the company expected to achieve April and May financial goals tied to the bankruptcy financing package.

UAL's 9¾% notes due 2021 rose to 8¾ bid, 9 offered on the news, a trader said, up over a point from 7½ bid/8 offered.

"For UAL, that's a pretty big move," the trader said.

"We see no impediment to an early exit," Brace told the Journal. "But we want to come out a completely fixed company, not a partially fixed company."

He said the airline was weighing the pros and cons of emerging from Chapter 11 bankruptcy protection in the fourth quarter of this year or the first quarter of next year, the Journal reported.

Chicago-based United and parent UAL in December filed the largest ever U.S. airline bankruptcy, hurt by a drop-off in demand following the Sept. 11, 2001 attacks and economic weakness that also led to cutbacks in business travel.

At the end of April, a U.S. bankruptcy judge approved a $2.56 billion annual concession package from labor unions, a development which Brace said at the time was a "huge step" toward emerging from bankruptcy.

Fort Worth-based American Airlines parent AMR Corp. rode UAL's wave Wednesday. Its 9% notes due 2012 were up a point to 58 bid/59 offered from 57 bid/58 offered.

Another Journal report moved Adelphia Communications Corp.'s debt.

Private-equity firm Blackstone Group is taking a significant position in the bonds of the Coudersport, Pa.-based bankrupt cable company, the Wall Street Journal reported.

Adelphia's 10¼% notes due 2006 rose three points early in the day to 52 bid/54 offered, but slid back to close the session at 49 bid/51 offered, unchanged from Tuesday.

Adelphia's "old" Century term loan debt was bid at 82¼ and offered, at 84, unchanged from Tuesday, and the Century term loan "new" debt was seen bid at 81 7/8 and offered at 83 7/8, also unchanged.

"The bonds got up there but couldn't sustain the bid and ended back where they've been trading for a while now," said a trader.

The Journal reported that Blackstone's stake, the size of which it did not specify, is leading to some market discussion that Blackstone intends to take control of the company by acquiring enough of Adelphia's distressed debt.

The Journal reported that Blackstone confirmed that the company had joined Adelphia's committee of creditors, but would not make further comment.

The newspaper also quoted an Adelphia spokesman as saying, "Given their track record and deep knowledge of the industry, Adelphia would certainly welcome Blackstone as part owners of the company."

"It's not surprising," said a distressed debt market source. "Interest has been growing in Adelphia for a while."

Traders have told Prospect News that in recent weeks the company's debt has traded actively and has steadily risen. In early April, the old Century term loan was quoted at 75 bid/76 offered and the new Century loan was quoted at 72 bid/73 offered, and had been trading in the mid- to high-60s in mid-March. The company's bonds have risen from levels in the low 40s in recent weeks, traders said.

Within the sector, WorldCom Inc., which had fallen briefly in distressed debt trading Tuesday, was back up to levels seen previously in the week. The long distance telephone and Internet provider's bonds were seen rising a point from Tuesday to 29 bid/30 offered, close to levels from Monday.

One distressed debt trader said he saw some slight movement in Conseco Inc.'s bank debt. The company's bank debt was seen losing "about an eighth of a point" to end the session at 84½ bid/87 offered. The Carmel, Ind.-based insurer said it now expects to emerge from Chapter 11 bankruptcy in July.

Conseco said the U.S. Bankruptcy Court in Chicago approved its request to extend a deadline for creditors to vote on its second amended reorganization plan to June 6 from May 21, and to reschedule the start of the hearing to confirm the plan to June 13 from May 28.

Conseco said it requested the extensions so that it can resolve some non-economic issues with several objecting parties. It said this should cut the amount of time needed to conduct the plan confirmation hearing.

"That wasn't much of a move so I wouldn't say the reason was them saying they needed more time," said a trader of the bank debt.

Conseco filed for Chapter 11 protection last December after years of aggressive expansion, in particular its 1998 takeover of mobile home lender Green Tree Financial Corp., left it with too much debt and too many bad loans.

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