Air Canada bond action timed out after weekend events, lack of new bid; Levi, Foamex bonds better

By Ronda Fears

Nashville, April 5 - Air Canada bonds were pretty much stalled out Monday, as the weekend brought no resolution to union objections to Victor Li's white-knight bid for the bankrupt airline. Yet with several potential rival suitors in the wings, one distressed trader said that could change suddenly.

Moreover, distressed traders were scarce.

The Jewish holiday took a lot of people physically out of the market. For the remaining traders manning desks, the men's college basketball tournament and, of course, the opening of baseball season provided ready distractions.

"It was just a dead day," said one distressed bond trader.

Essentially, the handful of traders that were tracked down said there was not a clear catalyst for activity in the distressed bond market, no overwhelming move in the stock market and little to no news on names in the distressed market.

Only a couple of names were rounded up, even.

Foamex International Inc. bonds were described as better bid, but there was no news out on the Linwood, Pa. manufacturer of polyurethane and foam products. One trader noted that the bond might have simply firmed on the gain in the stock, which rose 18 cents, or 5.5%, to $3.45 on Monday.

Levi Strauss & Co. bonds were mentioned, too, in mixed fashion.

Air Canada bonds in limbo

There was no firm indication as to the next phase of Air Canada's fate; thus, traders said there was little to no action in the bonds, which were pegged at the 32-33 level.

"If somebody came in and made a bid [for Air Canada], it would move the bonds," one distressed trader said.

Meanwhile, it's a day-to-day situation that will be unfolding over the next couple of weeks as deadlines in and out of court approach.

Air Canada's unions met on Sunday and collectively decided they would not budge on any further labor cutbacks, leaving little hope that the C$650 million rescue deal from Hong Kong investor Li, via Trinity Time Investments Ltd., would fly.

"There are not going to be any more concessions," Bill Trbovich, a spokesman for the International Association of Machinists, told Reuters as union leaders exited a three-hour meeting Sunday.

The Trinity bid is set to expire April 30, but Li said on Friday he would walk away from the deal unless unions backed down from what he referred to as a "confrontational" attitude to cost cuts.

The five main unions, which represent nearly three-quarters of Air Canada's 33,000 employees, argue they have already agreed to C$850 million in job and pay cuts.

Air Canada on Friday said it would look for alternative equity investors and chattering about rival bidders turned up several potential rivals to Trinity.

The Globe & Mail newspaper was reporting Monday that there have been preliminary talks between the Caisse de Depot et Placement du Quebec and the Ontario Teachers Pension Plan Board about a joint bid for the airline if Li abandons his plans. Also mentioned was New York-based buyout firm Cerberus Capital Management LP, which is a creditor in the bankruptcy case.

Toronto conglomerate Onex Corp. and U.S. investment firm Texas Pacific Group also have been mentioned in reports.

Court-appointed bankruptcy monitor Ernst & Young asked in a report filed late Friday for an extension of time from the current expiration date of April 15 for the airline to seek new sources of financing.

The Montreal-based carrier filed bankruptcy right at a year ago, listing some C$12 billion of debt. The airline posted a net loss of C$1.9 billion for 2003, but as of last week said it still had C$900 million in available cash.

Levi's 11 5/8s firm, sans news

Levi's bonds were mixed, without reason, as there was no news on the story.

The San Francisco-based jeans maker's bonds generally have been on a firming trend the past month or so, and the 11 5/8% issue was quoted a tad better at one shop at 77.5 bid on nothing more than "more buyers than sellers."

At another desk, however, the Levi bonds generically were referred to as softer to unchanged on Monday.

Levi bonds dropped to levels as low as the 67-68 area in early March when the company released disappointing earnings, but have been steadily climbing back.

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