Weirton players back off to study new bid; United Airlines clipped on March traffic figures

By Ronda Fears

Nashville, April 7 - Movement in Weirton Steel Corp. bonds paused Wednesday, traders said, as attentions focused on an 11th-hour bid submitted to compete with the vulture bid of International Steel Group Inc. in the bankruptcy auction on Monday.

It being a holiday-shortened week, traders emphasized that trading is thin anyway.

Still, there were a few markets to make in the distressed quarters.

Westpoint Stevens Inc. bonds traded at 41/2, off a half-point from Tuesday. And one trader mentioned Trico Marine Services Inc. bonds at 53-54, which would be up about 1 point from 52-53 two weeks ago when the bonds were last seen moving.

Levi Strauss & Co. bonds pressed on, moving up on average 2 points Wednesday with activity in all three bond issues in the 80 to 82 area.

Revlon Inc. bonds were also seen moving, up about 1 point, a distressed bond trader said. The stock was up 1% to $3.03 on Wednesday, with volume about 4 times the normal flow, following a report that Howard Gittis, a director of Revlon and long-time associate of Revlon principal Ronald Perelman, bought 150,000 shares. It was the first insider buying in two years, according to Thomson Financial.

Air Canada bonds were still holding in the 32-34 levels as the bankrupt airline seeks to get more time to revive the bidding for its operations, and meanwhile, the company announced Wednesday that its chief restructuring officer had resigned.

United Airlines nipped

UAL Corp. bonds were off a smidgen, traders said, following traffic figures released by United Airlines that one bond trader said showed good overall results but weakness in North America.

The United Airlines bonds dropped to 111/2-13, which another trader described as "a nip lower" from the 121/2-13 area a few days ago.

UAL stock reacted similarly, dropping 4.5% to $1.40 on Wednesday following the traffic report late on Tuesday.

For March, United posted a 6.4% gain in systemwide load factor and a 2.6% gain in North America. Year to date, the airline systemwide load factor was up 3.6% and saw a 1.2% gain in North America.

In March, revenue passenger miles gained 9.9% systemwide and gained 6.2% in North America. Year to date, revenue passenger miles were up 5.6% systemwide and were up 3.8% in North America.

Weirton players take timeout

Activity in the Weirton bonds was idled Wednesday on the heels of a last-minute bid for the bankrupt steelmaker's assets, but traders noted that the bid-ask spread on the bonds widened sharply.

The 10% bonds were offered at 35 on Tuesday, losing 3 or 4 points on the day, but there were no takers for the paper.

On Wednesday, the offer still stood at 35 but the bid had dropped to 25. That is down sharply from the 45 area two and a half weeks ago just after the noteholders expressed interest in getting a bid put together.

An informal committee of Weirton senior secured noteholders submitted a $261.24 million bid for the company - $138.74 million of cash, $97 million of assumed liabilities and a credit bid of $25.5 million.

On the face of it, terms and conditions of the new bid are similar to the stalking horse offer from International Steel Group at $255 million.

But traders said those involved in the situation are taking time out to study the new bid and assess its realistic chances of winning at the auction scheduled for Monday.

"They have backed way off," one trader said. "They are processing data right now."

Another distressed bond trader noted that there was an unusual amount of activity in Weirton's stock in over-the-counter trading.

The micro-penny stock dropped more than 15% to 1.1 cents with 634,473 shares changing hands, versus the three-month running average of 384,090 shares.

"I'm not sure what that means, but it might be something," the trader said, adding, "It certainly caught my attention as something noteworthy."

The minimum for qualifying bids for the Weirton auction was set at $261.24 million by the bankruptcy court. Following the auction on Monday, parties anticipate a winner to be chosen at a hearing next Wednesday.

The noteholders' bid would be financed with a $200 million secured revolving credit facility, $50 million secured senior note facility and a $15 million unsecured line of credit.

Weirton "would have a strong balance sheet and possess the financial resources to both re-invest in the existing facilities and to seek out new avenues of growth," said the noteholders committee in a prepared statement announcing their bid. Committee advisers are Imperial Capital LLC and Hatch Consulting.

Traders said it is yet unclear what recovery levels would be under the noteholders' bid, but they assumed it to be better than the 20% estimated under the offer by Wilbur Ross' International Steel Group.

Air Canada executive departs

Air Canada bonds were still holding at the 32-33 levels, traders said, while potential bids for the bankrupt airline remain unsettled and the company announced Wednesday the resignation of Calin Rovinescu, executive vice president and chief restructuring officer, effective immediately.

Rovinescu will remain available as an adviser to the company for several weeks to ensure an orderly transition, Air Canada said in a statement.

The offer on Air Canada's bond firmed about 1 point to 34, one trader said, but noted that the bid on the bonds, although not alive, is stuck at 32 from earlier this week.

Air Canada said Rovinescu's responsibilities will be assumed by members of executive management with an expanded role for Ernst and Young Inc., monitor in the bankruptcy case, but Paul Brotto, executive vice president of planning and cost management will assume responsibility for much of the day-to-day restructuring matters.

Rovinescu said in a prepared statement that Air Canada has secured financing for 90 regional jets, raised debtor-in-possession financing and advanced a substantial rights offering for creditors. He said the company still has about $950 million in cash and is tracking to its 2004 revenue targets.

Ernst & Young has recommended a 30-day extension to the stay of proceedings be granted to allow Air Canada to stabilize its restructuring efforts and to develop a detailed process for soliciting new equity or other post-emergence financing.

That comes after Trinity Time Investments Ltd., an investment vehicle for Hong Kong investor Victor Li, jerked its C$650 million so-called rescue deal off the table following the refusal of unions to agree to further pay cuts. The unions said they had made C$850 million in concessions already.

Pilots have broken away, however, and said they would be open to further cuts to keep the airline's restructuring plan from falling apart. The pilots union also said it would seek another bid for the airline.

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.

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.

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