Doman bonds up on Interfor offer; Adelphia loans trade actively

By Paul Deckelman and Sara Rosenberg

New York, Feb. 27 - Doman Industries Ltd. bonds firmed smartly on Friday, after the bankrupt Duncan, B.C.-based forest products company's announcement late Thursday that it had received an offer from International Forest Products Ltd. to acquire four coastal sawmills and more of Doman's assets for C$280 million.

Doman's 8¾% notes coming due on March 15 were quoted as having gained as much as 4½ points on the session, to move up to about the 30 bid level.

Another trader, though, saw them only up to around the 28 level. However, he noted that he hadn't seen them trading in several weeks before Friday, when activity was spurred by the news about the Interfor bid.

Another trader saw them up about three points on the session, to 28.5. Doman's 9¼% notes due 2007 were seen having firmed a point, to 27 bid.

Under the terms of the offer, as outlined by Doman, Interfor would get the sawmills, Doman's remanufacturing plant and certain timberlands and forest tenures representing an annual cut of about 2.7 million cubic meters. Doman would keep the balance of its wood products business and pulp operations. Interfor would also lend Doman C$25 million for working capital.

The C$280 million from Interfor would be used to repay Doman's secured noteholders. Doman shareholders would receive 825,000 Interfor class A shares in exchange for their Doman shares.

Late in the day on Friday, Doman submitted an application for an extension to the Canadian court overseeing its reorganization, seeking time to work on the Interfor proposal and another plan with the unsecured noteholder group based on the noteholder group's term sheet. Its request will be heard on Tuesday March 2.

The company's goal is to develop a consensual plan for presentation to the company's unsecured creditors.

Under the plan, the restructured Doman would emerge with no long-term debt. Its unsecured creditors would get securities in a restructured Doman which could include notes and 90% of the stock, Interfor warrants worth C$25 million and an opportunity to participate in an Interfor equity offering on a priority basis.

Vancouver, B.C.-based Interfor said in a news release Friday that it does not see its plan to acquire the Doman assets running afoul of efforts by the British Columbia provincial government to restructure timber rights on the province's Pacific coast.

It also expressed optimism that it can win the support of Doman's creditors, some of whom have been struggling to develop their own restructuring plan for the lumber and pulp producer.

However Doman also disclosed that its unsecured noteholders are opposed to the Interfor plan (see report elsewhere in this issue).

Doman has been operating under court protection since 2002

Adelphia loans trade

Elsewhere, Adelphia Communications Corp.'s bank debt was seen as relatively active on Friday, with the company's revolver trading down and then heading back up and the Old Century paper quoted higher by about half to three quarters of a point on the day.

The revolver traded down to 92.75 earlier in the day, but by late afternoon was quoted at 93 bid, 93.75 offered.

On Thursday the revolver went out at 92.5 bid, 93.5 offered, according to a trader.

Meanwhile, "old" bank debt of Adelphia's Century unit was stronger, with quotes around 94.75 to 94.5 bid, 95.75 to 95.5 offered, according to the trader. On Thursday the paper was seen at 94.75 bid, 95.75 offered.

Adelphia's bank debt moved down over the second half of this past week following the company's announcement of its plan of reorganization. The emergence plan left some stakeholders feeling disappointed, since the company intends to withhold cash and maintain a big escrow rather than paying everybody, a source previously explained to Prospect News.

Under the plan, debtor-in-possession lenders would be repaid in full with cash; 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; common stock and/or in some cases interests in a litigation trust would be distributed to holders of unsecured claims; holders of subordinated debt claims, preferred stock, common stock and securities law claimants would receive interests in the litigation trust; and a "convenience class" would be created for creditors with smaller claims who will receive payment in cash.

On Thursday, the company's pre-petition bankers filed documents with the U.S. Bankruptcy Court for the Southern District of New York asking for an end to Adelphia's exclusive periods. The group of bankers believes creditors should have a choice of reorganization plans since they see this plan as one-sided benefiting a group of subordinated creditors, who, if the plan is approved, would become the new shareholders.

In its own motion, Bank of America, agent for the Century Cable Holdings LLC facility, said the plan is "nonconfirmable" and wants Century auctioned off to maximize recovery for creditors.

Meanwhile, Credit Lyonnais' New York branch said in a different filing that Adelphis'a reorganization plan hands the post-reorganization company over to the bondholders while withholding some payment to the lenders until the litigation is resolved.

A hearing is scheduled for March 2. The Greenwood Village, Colo. cable television company and substantially all of its debtor subsidiaries filed for 11 on June 25, 2002.

Adelphia's bonds, meantime, "were mostly down" said a market source, who quoted its 10¼% notes due 2006 as having dipped a point to 96. bid.

Century Communications' 8 7/8% notes due 2007, after having firmed several points on Thursday, gave it all back and were seen three points lower, at 113.5 bid.

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