Kaiser Aluminum up on Alpart auction results; Exide soon to emerge

By Paul Deckelman and Sara Rosenberg

New York, April 21 - Kaiser Aluminum & Chemical Corp. bonds were being quoted at firmer levels Wednesday after the bankrupt Houston-based aluminum producer announced that Russian-based metals producer Rusal Group was the successful bidder for Kaiser's interests in Alpart, a partnership that owns bauxite mining operations and an alumina refinery in Jamaica.

On the bank loan front, Northwest Airlines Corp.'s revolver was heard by traders to have headed lower by about 1½ points after the air carrier released disappointing first-quarter numbers.

Kaiser's 10 5/8% notes due 2006 were up some five points on the session to better than 95 bid, after the company announced the results of the auction.

Rusal came through with an offer providing a base purchase price of $295 million prior to certain adjustments - well up from the $215 million "stalking horse" bid submitted earlier in the month by Rual Trade Ltd., a part of Rusal.

Kaiser owns 65% of Alpart and its partner - Norwegian-based 35% owner Hydro Aluminium as - has the right to elect to purchase Kaiser's interests at the price specified in any agreement approved by the U.S. Bankruptcy Court in Wilmington, Del., which is overseeing Kaiser's restructuring. It must exercise that right within 30 days of Kaiser's receipt of court approval of any sale transaction.

Kaiser, which sought Chapter 11 protection from its junk bond holders and other creditors in February, 2002, made its determination in consultation with its unsecured creditors committee and other stakeholders at the conclusion of Tuesday's auction, which had been ordered by the court. Kaiser expects the court to rule on the agreement on April 26. It has targeted a closing date on the transaction near the end of the second quarter of 2004.

Kaiser is currently working with its lenders under its post-petition credit agreement to obtain an amendment to the agreement that would, among other things, permit the sale of the company's interests in Alpart.

Weirton Steel edges up

Elsewhere, a trader in distressed bonds said that he had seen Weirton Steel Corp. 10% notes due 2008 having moved up slightly to around 20 bid, "in the mid range" between the levels seen Tuesday when the bankrupt West Virginia-based steeler's bonds had finished at a wide 17 bid, 27 offered.

The Weirton bonds have been volatile, rocketing up and down over the past few weeks between the high teens and the 50s, on investor bearishness or bullishness over whether the company's assets would fetch more money than offered in a stalking horse bid put forward by a newly formed steel conglomerate.

There was no definitive news out on the company, although Wednesday was the second day of a two-day hearing before the federal bankruptcy court in Wheeling, W.Va., which will make the final decision on whether to follow the wishes of the company's management and the union representing its workers and award Weirton's assets to International Steel Group Inc., or listen to pleas by a bondholder committee that its higher bid should be the winning offer.

In Wednesday's session, steel industry consultant Edward Lehner, hired by the bondholders, testified before Judge L. Edward Friend II that Weirton could show anywhere from $60 million to $120 million of annual EBITDA as an independent company owned by the bondholder group

That contradicts the assertions of company management that Weirton's only chance at survival, and the preservation of some 3,000 union jobs, is as a part of International Steel Group, the steel conglomerate formed over the past few years by financier Wilbur Ross, who bought the assets of Bethlehem Steel Corp., LTV Corp. and other failed steelers at fire-sale prices.

Lehner said that the creditors were committed to investing an additional $30 million a year for three years in the company to get it back on its feet.

Cleveland-based International Steel bid $237 million for Weirton's assets, well below the last-minute bid cobbled together by the bondholders' group, which said that Ross's offer undervalued Weirton and did not offer them a sufficient recovery; although the bondholders' bid of $364 million is far larger, Weirton's management told the court during Tuesday's hearing that the board of directors chose the lower offer because they believe International Steel can consummate the sale by the end of April, while there remain too many uncertainties about the bondholders' bid.

Among them is the fact that while the bondholders bid about $127 million more than International Steel, around $130 million of their bid is in credit - applying money Weirton owes them to the selling price.

Another potential roadblock to the bondholders' effort is the opposition of the Independent Steelworkers Union, which has already negotiated an agreement with International Steel but which has dismissed the bondholders' chances of reaching a similar arrangement with the union as virtually nil.

Exide little changed

Also on the bankruptcy front, Exide Technologies Inc. said that the Wilmington bankruptcy court had confirmed the company's plan of reorganization, and the Lawrenceville, N.J. -based maker of automotive batteries expects to emerge from Chapter 11 in the next few weeks.

However, there was little movement seen Wednesday in the company's 10% senior notes, which have lately been anchored in a low 20s bid range.

Exide's plan envisions the elimination of $1.3 billion of debt, with 90% of the revamped company's new stock to be issued to its pre-petition secured lenders. The company's existing 10% unsecured notes and its 2.9% convertible notes will be cancelled, and their holders will share in the 2.5 million shares of common stock and warrants to purchase 6.25 million shares of common stock at $32.11 per share that will be issued to the all of the unsecured creditors. It should be noted, however, that 13.4% of the stock and warrants will be reserved for distribution to the holders of disputed claims under the plan's claim reconciliation and allowance procedures. Common shareholders will receive no distribution.

Mirant lower

Mirant Corp.'s 2003 bank debt was quoted around 56.5 bid, 57.5 offered on Wednesday, down about a point, as some investors were apparently still experiencing feelings of dissatisfaction with company's latest financial numbers, which were released this past Monday.

A bond trader also noted that the company's notes were "down a couple of points," quoting its 2½% convertibles as having declined to 58 bid, 58.5 offered from prior levels around 60 bid, 62 offered, with other Mirant notes down about two points across the board.

The Atlanta-based power company's 2003 financial results included a net loss of $3.8 billion ($9.47 per diluted share), sharply wider than the loss of $2.4 billion ($6.06 per diluted share) for 2002. Total operating revenue was $5.2 billion, versus $4.1 billion for 2002, due to higher market prices for power.

Mirant's results incorporated a $2.1 billion impairment of goodwill recorded in the second quarter and $1.6 billion impairment related to long-lived assets recorded in the fourth quarter, according to a company news release.

Northwest revolver up

Also on the earnings front, Northwest Airlines' revolving credit debt was quoted at 93 bid, 94 offered after the Eagan, Minn.-based major airline carrier released its results, showing some progress - but still a lot of red ink. That was down from previous levels of 94.5 bid, 95.5 offered, a bank loan trader said.

For the quarter, operating revenues were $2.6 billion, an increase of 9.6% versus the same period last year. Operating expenses increased to $2.7 billion, up 0.4% from a year ago. And, there was a net loss of $230 million ($2.67 per common share), compared with a net loss of $396 million ($4.62 per common share) last year.

"While our relative unit revenue performance during the quarter was better than many of our competitors, this was another difficult quarter for Northwest. We did see some revenue recovery, but that recovery was offset by aircraft fuel prices, which are near their highest levels in 20 years," said Richard H. Anderson, chief executive officer, in a company news release.

"We still face the same challenge. Our costs remain higher than the revenues we generate. In addition, we did not have the benefit of non-core asset sales or federal government reimbursements reported in several recent quarters. Until we achieve competitive labor costs, we will be unable to generate a sustainable profit," Anderson added.

Motor Coach higher

Elsewhere, Motor Coach Industries International Inc.'s bank debt rebounded a bit on Wednesday as some speculated that its refinancing effort may not, in fact, be breaking down, as was thought on Tuesday, but rather there are just some documentation issues to go through, a trader said, adding that this theory has not yet been confirmed as fact.

The Schaumburg, Ill.-based motor coach company's bank debt was seen trading at 96.5 during market hours, up from 95 on Tuesday.

A different trader had quoted the paper Tuesday at 95 bid, 96 offered, down from 97 bid, 98 offered on Monday on news of trouble with the refinancing.

Leap Wireless International Inc.'s bank debt was seen "firming up" during market hours, with quotes moving to 98 bid, 98.5 offered from around 97.5 bid previously, a trader said.

"The business has been pretty stable. They keep adding subscribers," the trader said, in explanation of the improved secondary performance by the San Diego-based communications services provider's debt.

Back among the bond investors, bankrupt Dan River Inc.'s notes were heard to have floated down to 25.5 bid, 26 offered from prior levels around 27 bid, 28 offered, although there was no fresh news out on the bankrupt Danville, Va.-based textile maker.

And Adelphia Communications Corp.'s convertibles - the 6% and 3.25% issues - firmed to 48 bid, 50 offered after having fallen back down to the mid-40s earlier in the session Wednesday. On Tuesday, a distressed bond trader said the Adelphia converts moved up to 47 bid from prior levels at 44.

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