Levi bonds firmer; Adelphia plan continues to roil debt market

By Paul Deckelman and Sara Rosenberg

New York, March 3 - Levi Strauss & Co. bonds were seen up solidly from recent lows, despite disappointing earnings results reported earlier in the week by the San Francisco-based blue jeans maker.

Meanwhile, controversy continues to swirl around Adelphia Communications Corp.'s plan of emergence from Chapter 11, as banks remain annoyed at the prospect of being paid out of an escrow account. But despite all this negativity and uncertainty, bank debt levels have strengthened since Monday and held steady over the course of the day Wednesday.

Levi's bonds "really moved up," a market observer said, quoting the company's 12¼% notes due 2012 at 72 bid, up from prior levels at 67.5. He saw Levi's 11 5/8% notes due 2008 at 72.75 bid from 68 previously and its 7% notes due 2006 at 71 bid, well up from 68.

"People are using it as an opportunity to cover shorts," said another trader, who quoted the 11 5/8s as having moved up to 73 bid, 74 offered.

On Monday, Levi reported its results for the end of the year, which a trader characterized as "terrible, as expected."

Levi said that full-year net sales were $4.091 billion, versus $4.146 billion in fiscal 2002, representing a decline of 1% on a reported basis and 6% on a constant-currency basis.

"2003 was a disappointing year for the company," said chief executive officer Phil Marineau. "Our business performance deteriorated during the year in the face of tough U.S. and European retail markets, unrelenting price deflation and our own missteps."

However, the Levi's chief said the company was pleased with the strong results of its Asia Pacific division and the introduction of its new Levi Strauss Signature brand in the United States, Canada and Asia.

However, he added, "these bright spots could not completely offset the revenue declines in our U.S. Levi's and Dockers brands and a weak European business."

Bank market argues more over Adelphia

Elsewhere, bank debt investors continue to argue over the impact of Adelphia's plan of reorganization.

"Everybody hates the plan," a trader said. "Even the agents have come out and said that they hate it.

"This is the bondholders attempt to put a plan on the table and the company basically rolling over. Bank debt is going fight against it. Unless they pay us out at par and then there won't be any fight."

Basically, Adelphia, a Greenwood Village, Colo.-based cable operator, expects to pay its banks out of an escrow account that will be established while litigation of the company's claims against founder and former chief executive officer John Rigas and members of his family is ongoing.

In response to this proposal, non-agent banks representing over $3 billion of debt have organized a group to oppose the plan, according to various market sources.

Upon announcing the reorganization plan, the company said that it hopes to emerge by the end of this year.

But, when asked whether all this contention would hold up the company's emergence from bankruptcy, the trader responded: "I definitely think it is."

On Wednesday, Adelphia's Old Century bank debt was quoted at 96.5 bid, 97.5 offered, the New Century was quoted at 95 bid, 96 offered and the revolver was quoted at 94 bid, 94.75 offered, all basically unchanged on the day, according to the trader. By comparison, on Monday the Old Century bank debt was quoted at 95.5 bid, 96.5 offered and the revolver was seen trading in the 93.5 context.

Adelphia and substantially all of its debtor subsidiaries filed for Chapter 11 on June 25, 2002.

Back on the bond side of the ledger, Adelphia's 9 7/8% notes due 2007 were down half a point at 96 bid. Its Century Communication Inc. 8 7/8% notes due 2007 were off more than a point to end at 111.

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