HealthSouth bonds, loans up on court action; Pegasus falls

By Paul Deckelman and Sara Rosenberg

New York, April 15 - HealthSouth Corp.'s bank debt and bonds were seen moving around a bit on Thursday after a state judge dissolved a temporary restraining order which had prevented the Birmingham, Ala.-based company's bondholders from accelerating defaulted payments.

However, Judge Allwin Horn, III of the Circuit Court of Jefferson County, Ala., cautioned the bondholders against taking any rash action to force the financially strapped outpatient surgery, rehabilitation and diagnostic imaging provider to immediately pay up on what they say is a defaulted obligation.

He scheduled a status conference for April 23 to determine the validity of default notices allegedly given by some bondholders, and whether HealthSouth is obligated to pay a "make-whole premium", according to a company news release.

Bondholders have agreed that they would not issue any notice of acceleration for at least 30 days so long as good-faith negotiations take place during that time, something the company said that it would do.

"We certainly will continue to negotiate in good- faith with the representatives of the unofficial committee of bondholders, which hopefully will lead to a consensual resolution which the court indicated it believed would be in the best interests of all involved," said Joel C. Gordon, acting chairman of the board of directors, in the release.

News that the legal roadblock to acceleration had been removed - at least theoretically, if not necessarily in practice - sent the company's bonds higher, with its 6 7/8% notes due 2005 moving up to 100.75 bid from 100.25 previously, and its 7% notes due 2008 also half a point better at 98.5 bid.

At another desk, a trader saw the company's 10¾% notes at 99.75 bid, 100.25 offered.

Healthsouth bonds "were up a little, about a point or so," another trader said, "on better buyers."

A bank debt trader meantime saw the company's paper quoted higher by about half a point on the day at 96.5 bid, 98 offered, possibly in response to the firmer levels seen in the company's bonds.

Pegasus bonds down

Elsewhere, Pegasus Satellite Television Inc.'s bank debt was down about a half a point to a point in the wake of Wednesday's late-in-the-day news that the Bala Cynwyd, Pa. -based diversified media and communications company had been ordered by the court to make a nearly $52 million payment to DirecTV as the outcome of a legal battle between the companies.

Pegasus Satellite's bank paper was quoted at 99.75 bid, 100.75 offered, although corporate parent Pegasus Communications Corp.'s term loan D held steady at 102 bid, 103 offered, a trader said.

On the bond side of the ledger, a market source said that Pegasus bonds "dropped significantly" in response to the company's legal setback.

He quoted the company's 12½% notes due 2007 as having dropped to 85 bid from 89 previously, while its 9 5/8% notes due 2005 and 9¾% notes due 2006 were likewise down four points each at 84 bid and 85 bid, respectively. Pegasus' 12 3/8% notes due 2006 were heard three points lower at 84 bid, while its 11¼% notes due 2010 were heard really down, dropping to 75 bid from 82 previously.

At another desk, a trader saw the bonds "only offered," with the 111/4s offered at 77, the 12 3/8s at 85 and the company's zero-coupon/13½% notes due 2007 offered at 70, all down about six or seven points from levels they held just a few days ago.

Pegasus equity investors were as distressed with the ruling as its bondholders; they took the company's Nasdaq-traded shares down $5.06 (16.75%) to $25.15, on volume of 817,000 shares, nearly four times the norm.

Under the court ruling, DirecTV was awarded $51.5 million in the lawsuit concerning disputed billings under the Seamless Marketing Agreement between Pegasus Satellite and DirecTV. Pegasus distributes DirecTV's programming to its customers in predominantly rural markets.

"We are disappointed in the jury's verdict and believe that our claims in regards to DIRECTV's billings in the Seamless Marketing Agreement are meritorious. We will be giving careful consideration to our legal options respecting the verdict, including our rights of appeal," said Cheryl Crate, vice president of communications for Pegasus, in a company news release.

Levi up again

Bond traders saw Levi Strauss & Co. notes continuing to trade at stronger levels; the San Francisco-based blue jeans maker's bonds have been firming over the past few sessions, pushed up on rumors the company might be bought or might sell off one of its product lines, such as the popular Dockers line of khaki clothing. Short-covering was also seen as a factor. Levi's 11 5/8% notes due 2008 pushed up to 88.25 bid, 89.25 offered from 86 bid, 87 on Wednesday.

Weirton Steel Corp.'s bonds were quoted in the upper 30s, down from prior levels above 40, as news circulated in the market that the bankrupt West Virginia-based steelmaker's board would choose the asset-sale offer of International Steel Group Inc. over a competing offer put together by some bondholders.

Back among bank loan investors, other names seen trading around included Exide Technologies, which was particularly noticeable since it is not a name that has been trading often in the recent marketplace, and Reliant Resources Inc.

Exide's bank debt was quoted at 73.5 bid, 74.5 offered, according to a trader, who said that there was no particular news spurring the activity but the paper did seem to be moving around.

Exide is a Princeton, N.J., manufacturer of lead acid batteries.

Reliant's bank debt was quoted at 98.25 bid, 98.75 offered. Once again, there was no particular news behind the trading activity, the trader added.

Reliant is a Houston electricity and energy services company.

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