Tropical Sportswear bonds tumble as company swings to loss

By Paul Deckelman and Sara Rosenberg

New York, Jan. 14 - Tropical Sportswear International Inc. bonds got cut to ribbons on Wednesday, market participants said, after the apparel manufacturer reported a swing into the red in its most recent quarter.

A market source quoted the Tampa, Fla.-based clothing company's 11% notes due 2008 as having slid to about "the mid 50s" from prior levels around 80 following the earnings, which "weren't positive, that's for sure."

He was being kind.

In the fiscal fourth quarter ended Sept. 27, Tropical Sportswear reported a loss of a $96.5 million ($ 8.73 a share) - a sharp turnaround from a year earlier, when it earned a profit of $1.33 million (12 cents a share).

Sales for the quarter fell 33% to $78.2 million from $117 million a year ago.

Besides the sharp fall-off in sales, the company said that the loss was worsened by what it termed "significant" increases in reserves for excess inventory and a higher-than-normal returns and sales allowances.

A trader at a distressed-debt shop said that Tropical Sportswear's bonds had traded all the way down to 48 bid from offered levels around 75 seen in Tuesday's session, "a pretty good drop."

Back on Jan. 7, the bonds had been seen around 72 bid, although they had crept up to offered levels around 80 by Monday, before retreating modestly on Tuesday and completely falling out of bed on Wednesday.

Equity investors apparently found the company's numbers as unfashionable as bond players did; Tropical Sportwear's Nasdaq-traded shares lost 35 cents (15.62%) to close at $1.89, on volume of 537,000 shares, more than six times the usual activity in the name.

United little changed

Elsewhere, the distressed-debt trader noted little movement in the bonds of United Airlines, which he said were unchanged in the 13.5 bid, 14 area.

The bankrupt air carrier, a unit of Chicago-based UAL Corp., said that it would try to cut its costs and ensure continued payment of at least some health benefits to its 35,000 retirees by asking those former workers to pay a greater share of their healthcare costs

"We are taking the difficult but necessary step of asking retirees to pay a greater share of the costs," said Peter McDonald, executive vice president of operations. "This change will bring the medical benefits provided to current retirees more in line with those available to future retirees and offered by other large U.S. corporations."

UAL's unions did not see it quite that way and most sharply criticized the move.

United, the nation's second-largest air carrier, is trying to trim its costs in hopes of getting a $1.6 billion federal loan guarantee as part of its efforts to emerge from bankruptcy by mid-year.

Exide still moving up

Exide Technologies Inc., the bankrupt battery maker, has been strong of late in the bond market, after a judge overseeing the Princeton, N.J.-based company's reorganization turned down its restructuring plan and told it to keep talking with its bondholders in hopes of coming up with a valuation that gives them more of a recovery than the company's plan did.

That helped send its 10% notes into the upper 20s from levels around two cents on the dollar just before New Year's, and on Wednesday, its bonds hovered around 29.5 bid, 31, "continuing to improve," a trader said.

There was no real improvement Wednesday in the bonds of WorldCom Inc., still hanging in around 36.5 bid, while Adelphia Communications Corp.'s debt stayed in the low 90s as the company restructures in hopes of coming out of bankruptcy soon.

Adelphia's 10¼% notes due 2006 were at 92.5 bid, while its 10 7/8% notes due 2010 were unchanged at 93.5.

Parmalat's bonds were seen "firm around the 24-25 area," a trader said, as some of the Italian dairy products producer's U.S. bondholders contemplated trying to push the company into an involuntary U.S. bankruptcy filing, rather than take their chances with the current Italian insolvency proceedings - especially because recent changes in Italy's bankruptcy laws give more power to the industry minister and the commissioner appointed to oversee the restructuring, Enrico Bondi, and less power to the courts there and the bondholders.

And Loral Space & Communications' 10% notes due 2006 were up two points at 78 bid, as the space satellite company sought to reassure investors about one of its satellites, the Telstar 14/Estrela do Sul communications satellite.

The company said in a filing with the Securities and Exchange Commission that the satellite "fully deployed its South solar array but only partially deployed its North solar array. Space Systems/Loral, Inc., the manufacturer of the satellite, is in the process of collecting data prior to the initiation of available corrective actions to complete deployment of the North array."

While it said that incomplete deployment of a solar array, if not corrected, reduces a satellite's power, the Telstar 14 "is in safe mode and has more than sufficient power to maintain satellite health."

In any event, the company said, the satellite "is insured for partial and total losses up to a maximum of $250 million."

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