New World Pasta debt attracts interest; United Air a bit firmer

By Paul Deckelman and Sara Rosenberg

New York, Feb. 10 - New World Pasta Co. seems to be on the menu that investors in distressed bank debt are looking at these days, with some inquiries about its levels coming in the wake of expectations the troubled food company will soon file financial statements - as well as the news that it will be unable to make upcoming bond interest payments.

Elsewhere, United Airlines asked for - and will probably receive - an extension of more than three months of the time in which it has the exclusive right to file a reorganization plan with the bankruptcy courts. The giant carrier's bonds have recently been gaining a little bit of altitude, traders say.

A bank debt trader said that there have been some inquiries on New World Pasta Co.'s bank debt levels, now that people expect the Harrisburg, Pa.-based pasta producer to file financial reports with the Securities and Exchange Commission for the year ended Dec. 31, 2002, its third quarter of 2002 and restated financial reports for the year ended Dec. 31, 2001, by March 15.

The market for the bank paper is currently quoted wide at 88 bid, 91 or 92 offered, the trader said, adding that he hasn't "seen much activity in it."

Besides revealing on Monday that financial statements are soon to come, the company also announced that it would not make the coupon payments due Feb. 15 and Aug. 15 on its 9¼% notes due February 2009. It said that it was in talks with holders about exchanging the notes for new notes.

New World Pasta said it currently estimates that the cash it will generate from operations will not be enough to fund its liquidity in 2004 and added that it does not have access to the additional funds that it will need.

Under the proposed exchange, the company would issue new 10% notes due August 2008. The new notes would pay interest in kind through 2005 and would be subject to new or additional terms.

Bank debt levels were pretty much unchanged and unfazed by the bond news in both as the announcement was probably not a big surprise to the bank group, according to the trader.

Buyers for United

Elsewhere, UAL Corp. asked the bankruptcy court overseeing its reorganization effort to extend for another 16 weeks the air carrier's exclusivity period, during which only the company itself can propose a reorganization plan - the third such extension the company is seeking. Currently, the exclusivity period is slated to expire on March 8; UAL wants to extend it to June 30.

In its filing with the U.S. Bankruptcy Court in Chicago, dated Feb. 6, UAL said that while it remains on track to meet its stated goal of emerging from Chapter 11 during the first half of the year, certain of its key remaining restructuring initiatives are still up in the air - particularly the bankrupt airline's application to the federal government's Air Transportation Stabilization Board for a $1.6 billion loan guarantee.

Federal approval of the loan guarantee request is considered virtually essential for the Chicago-based air carrier to emerge from bankruptcy, where it has been since December 2002.

A distressed-debt trader said that UAL's bonds are currently trading around 15, a little higher than they had recently been.

"There's been buyers around the 15 level all day," he noted, although he added that the gain was really not that much.

"I think with UAL there's no real institutional following. And it's too big for any distressed player to come in and take it all. And I don't think anyone's done anything yet" in terms of actually outlining what the stricken carrier intends to do if and when it emerges from bankruptcy.

"They're up from a low of six [cents on the dollar], to 15 - but they're a slow, trudging movement up. There's nothing that propels them up five points or 10 points, like the rest of the stuff."

The key reason why UAL has not attracted more buyers - despite the impressive percentage gains the bonds have notched since coming off their lows - is that "nobody knows what the workout is going to be," the trader said.

Regarding United's request for more time to exclusively file a plan, he said "they'll probably get it. Nobody's banging on the door, saying we've got a better plan than they do" - as has recently happened in the case of bankrupt cable operator Adelphia Communications Corp., where shareholders - including members of the founding Rigas family, the company's ousted management - have objected to the current management's plan, which would freeze the stockholders out completely.

This has not occurred in United's case, so "they'll probably get this extension," the trader said. "And if they ask for another one, they'll probably get that as well."

Adelphia holds firm

And speaking of Adelphia, the trader said the bonds "are still firm," all around or slightly over par, on expectations that the Denver-based cabler will be out of bankruptcy within the next few months and might then become an acquisition target - good news for the debtholders who presumably will get most of the restructured company's equity, bad news for the shareholders left holding the bag, which prompted some of them to petition the court overseeing Adelphia's restructuring to set aside the management plan and let the shareholders put forward their own plan, which certainly would value the company differently.

In the interim, "there's trading going on, but it's just people moving paper back and forth."

A market source quoted Allegiance Telecommunications bonds firmer, citing market speculation that another bidder may have emerged for the bankrupt Dallas-based company. In December, Qwest Communications International Inc. agreed to purchase Allegiance network assets in 36 markets for $300 million cash and $90 million in new convertible debt.

He quoted its 12 7/8% notes due 2008 and 11¾% notes due 2008 both north of 39 bid, well up from 36 previously.

A trader acknowledged that Allegiance debt was now around the upper 30s or maybe even 40, from the lower 30s before - but said nobody could know if the market buzz about a possible second bidder are true, adding "over here, we tend to discount such rumors."

© 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.