Adelphia bonds, bank debt, converts active on re-org plan; Levi better

By Paul Deckelman and Sara Rosenberg

New York, Feb. 25 -Adelphia Communications Corp.'s bank debt was "trading all over the place" after the company announced its long-awaited plan of reorganization, with everything trading lower and co-borrowers debt trading down more than non co-borrowers debt, according to a bank loan trader. The Denver-based cable operator's junk bonds meanwhile initially rose on news of the plan, but fell back to end essentially unchanged to a bit lower, traders said. Its convertible debt, whose holders are well down the food chain, was down several points.

Adelphia's Old Century bank debt was quoted at 96 bid, 96.25 offered, while the New Century bank debt was quoted at 95.5 bid, 96 offered. And the company's Olympus bank debt was quoted at around 95, according to the trader, who placed all of the paper down by maybe half a point.

"There's a big escrow [under the plan]. They're not paying everybody. They're withholding a lot of cash," the trader explained.

Under the plan, which was filed with the U.S. Bankruptcy Court for the Southern District of New York in Manhattan, Adelphia's debtor-in-possession lenders would be repaid in full with cash, and pre-petition bank lenders would be repaid in full with cash subject to pending litigation.

Some joint-venture partners would be repaid in full with a new preferred security in return for their existing interest, while common stock and/or in some cases interests in a litigation trust would be distributed to holders of unsecured claims, including bondholders.

Those Adelphia bonds were seen having initially firmed after the company released news of its reorganization plan, but then fell back from those highs to end essentially unchanged, junk market participants said.

"They were up two points," a trader said, "but then settled in down a point-and-a-half [from their highs], so net-net, they were only up half [a point]."

He quoted the company's 10 7/8% notes due 2010 as closing only slightly better, at 101.25 bid, 102.25 offered.

Another trader pegged Adelphia's 10¼% notes due 2011 as having initially traded up to 105.5 bid, 106.5 offered, but said that they came off that peak to go home at 103.5 bid, which he called essentially unchanged on the day. The high "would have been a nice gain, but they were unable to sustain it," he said.

Adelphia "reached its highs in the morning" following the release of the plan, a trader said, quoting its 10¼% notes due 2006, which had ended Tuesday at 101.5 bid, 103.5 offered, as having pushed up to 102 bid, 104 offered, before coming off that peak to finish at 90.5 bid, 100.5 offered.

He saw the 10 7/8% notes due 2010 as having initially firmed to 104.5 bid, 105.5 offered, up from Tuesday's 103.5 bid, 105.5 offered, before giving up their gains and then some to end at par bid, 101.5 offered. He saw Adelphia's 9¼% notes pushing up to 101 bid, 103 offered, before falling back to close at 99.5 bid, 101 offered, "lower than [Tuesday]."

Underneath the bondholders and other unsecured creditors on the totem pole are holders of subordinated debt claims, preferred stock, common stock and securities law claimants, who would only receive interests in the litigation trust. That trust is being set up to distribute any proceeds from Adelphia's pending legal action against its former controlling shareholders, the Rigas family, who stand accused of looting several billions of dollars from the company, and against former auditors Deloitte & Touche and financial institutions that allegedly participated in the co-borrowing by founder and ex-CEO John Rigas and his clan. How much the trust will actually recover from these parties - if anything - is at this point still unknown, making the value of the litigation trust interests uncertain at best.

Adelphia convertibles drop, then rise

"They're haircutting the trust," a trader said, noting that while the bondholders are anticipating a full, or almost full recovery, based on the current value of the bonds, at or near par, convertible holders - who would be paid with interests in the litigation trust - aren't expecting much at all, with their securities languishing around 40 cents on the dollar.

A convertibles trader said that Adelphia's 6% convertible notes due 2006 and 3¼% convertibles, after finishing around 41 bid, 43 offered Tuesday, dropped to levels as low as the mid-30s Wednesday after announcement of the reorganization plan, "then popped," to rise off those levels to end at around 39.5- 40.5, still off 10 points in the last two to three days.

Other convertibles market sources told essentially the same tale, although they noted that the convertibles had recently had a huge run-up to the mid-60s and were still the in the mid-50s as recently as Feb. 17 before starting to come back down to earth on investor realization that the convertibles holders would likely get less than they had originally expected. Analysts - both convertible and straight credit - had pegged recovery levels on the converts at anywhere from zero to around the 30s shortly after the bankruptcy was filed in June 2002.

Current shareholders are lowest in the pecking offer, with their shares worth about 42.5 cents a share, even though the company has already said that shareholders would recover nothing; that doubtless reflects the view of some optimists in the shareholder community that the judge hearing the case might take into account their objections to the official company plan, which they say undervalues Adelphia by several billion dollars, particularly if some of Adelphia's current holdings are put up for sale.

Adelphia meantime said it had received commitments for an $8.8 billion fully-committed exit financing package that contains a $5.5 billion senior secured credit facility and a $3.3 billion bridge facility. JPMorgan Chase & Co., Credit Suisse First Boston, Citigroup Inc. and Deutsche Bank AG will lead the financing, with each providing an equal share of the commitment.

Calpine loans rise

Elsewhere, Calpine Construction Finance Co. II LLC's revolver moved higher on Wednesday with levels quoted at 96 bid, 96.75 offered, versus previous quotes more in the 95.5 bid, 96.5 offered area, according to a bank loan trader.

"Knowing the information is better than not knowing," the trader said in explanation of the debt's upward movement. "Also, people weren't pushing it out at the lower levels."

The revolver headed to mid-90 context from around 98 earlier in the week on speculation that the debt would not end up getting refinanced at this time since both the proposed bank and bond deals were heard to be struggling. These rumors proved true on Tuesday, as the San Jose, Calif.-based power company announced that it was canceling the proposed transactions.

Calpine Corp.'s second lien term loan remained pretty much unchanged at 95 bid, 96 offered, according to the trader. This paper had traded lower on Tuesday moving to around 95 from 95.75 bid, 96.75 offered in sympathy with the CCFC II news.

Levi Strauss bonds up

Back among the bond investors, Levi Strauss & Co. junk was quoted "up a little," a market source said, although he had no ready explanation for the rise in the San Francisco-based blue jeans maker's beaten-down bonds.

He pegged Levis' 11 5/8% notes due 2008 as having firmed to 70 bid from 68.5 earlier; its 12 ¼% notes due 2012 as having moved up to 68.5 bid, a two-point rise; and its 7% notes due 2006 at 68 bid, up half a point.

A trader quoted Allegiance Telecom's 12 7/8% notes at 53 bid, 54 offered, up a point on the day.

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