Weirton bonds offered 3-4 points lower on auction uncertainty; Levi buyers bid bonds up by 4-5 points

By Ronda Fears

Nashville, April 6 - Chatter of a competing bid for the assets of Weirton Steel Corp. was not good enough Tuesday to support the bonds in the face of the scheduled bankruptcy auction set to proceed next week. Thus, sellers emerged, offering the paper 3 to 4 points lower.

It was still a very thin market in distressed bonds, however, due to the Passover holiday.

Otherwise, there were a few tidbits of news and market chatter, with still little activity.

Lucent Technology Inc. bonds were a little stronger at the long end, gaining about a point from last week to the 85 level, with one trader commenting, "There is some strength there, but nothing crazy." Lucent shares dropped 2.26% on Tuesday in reaction to Nokia's warning about first quarter sales not meeting expectations.

Federal-Mogul Corp. bonds were said to be unmoved at 25-26 after the postponement of a hearing next week related to its objection-riddled reorganization plan, the latest of which puts asbestos claims in contention and also raised the possibility that liquidation rather than reorganization may be a better alternative to settle obligations.

News emerged that Finova Group Inc. will prepay $237.5 million of its 7½% senior secured notes due 2009 with contingent interest due 2016 on May 15. A distressed trader pegged the bonds at 63-64.

Air Canada bonds were still in a holding pattern after the pilots union said it would consider further cuts and would seek another bid for the bankrupt airline after Trinity Time Investments Ltd. pulled out of the process.

But, without news, there were buyers for Levi Strauss & Co. and sellers in WestPoint Stevens Inc.

WestPoint Stevens bonds were described as down a little bit, offered at 43/4.

Weirton sellers in front of sale

Sellers of Weirton bonds were seen ahead of the bankruptcy auction for the steel maker's assets, suggesting a bird-in-the-hand attitude toward the process. Yet, traders said there were takers for the paper.

The 10% bonds were offered at 35, down 3 or 4 points, with no bid.

The bankruptcy court has rejected requests for an extension to the scheduled auction on Monday to provide time for potential rival bids to the International Steel Group bid of $255 million, which includes $158 million in cash plus assumed debt.

There were reports Tuesday that noteholders had prepared an offer that would be "substantially better" than the International Steel Group bid, but nothing specific.

Because of the uncertainty, traders said some holders just decided to bail out.

"Nobody knows" what, if any, competing bid will actually be presented, one trader said.

So, another trader added, "Everyone is proceeding as if what's on the table is as good as it gets."

Holders of the 10% bonds and pollution bonds had asked for more time to prepare a bid and stand-alone plan of reorganization, having hired International Steel Associates Inc. and John Correnti, former chief executive officer of Nucor Steel and chief executive officer of Birmingham Steel, to put together an offer.

Weirton Steel said in a statement that it does not plan to disclose the number of bids or bidders submitted, but said any qualifying bids will be considered in the auction process. Then, the company plans to present a recommended bid to the bankruptcy court next Wednesday.

Bids were due by Tuesday, however, and must start at $261.24 million.

Levi's bonds pressed higher

Following up on a slight rise in the bids for Levi bonds, traders said the talk of buyers brought out buyers indeed and that pushed the bonds up 4 to 5 points on the day.

Levi's bonds were quoted a tad better at one shop on Monday with the 11 5/8% issue 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.

"Levi was all I was working on today," said one distressed trader.

"There was no news, just rumors of buyers," he added, saying it appeared to simply be a matter of someone taking a position in the name.

All three Levi bond series were active and up sharply, the trader said, using the 12¼% issue as an example, with it moving to 80 on Tuesday from 76 on Monday.

The Levi 7s opened the day at 75 bid, 77 offered and closed at 78.5 bid, 79.5 offered, another trader said, and the 11 5/8s opened at 76.75 bid, 77.75 offered and closed at 80 bid, 82 offered.

The San Francisco-based jeans maker's bonds steadily have been climbing back from the 67-68 area in early March when the bonds dropped in reaction to disappointing earnings.

Air Canada bonds holding

Air Canada bonds were still holding at the 32-33 levels, traders said, while potential bids for the bankrupt airline remain unsettled. Pilots broke ranks with other unions late Monday, according to reports, saying they would be open to further cuts in order to keep the airline's restructuring plan from falling apart.

The pilots union also said it would seek another bid for the airline, since the Trinity Time Investments Ltd. bid was withdrawn, but distressed bond traders said there apparently were no believers.

The company is asking for an extension to the April 15 deadline to find new sources of financing, and a hearing is scheduled for next Wednesday just ahead of the cutoff date.

Air Canada's unions over the weekend had decided they would not budge on any further labor cutbacks and, as expected, that caused Trinity to pull its C$650 million rescue deal off the table. The unions had asserted their concessions, C$850 million in job and pay cuts, were enough.

Chatter about rival bidders includes mention of the pension funds Caisse de Depot et Placement du Quebec and the Ontario Teachers Pension Plan Board, New York-based buyout firm Cerberus Capital Management LP, Toronto conglomerate Onex Corp. and U.S. investment firm Texas Pacific Group.

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