Adelphia keeps gaining on sale prospects; Trico Marine continues fall

By Paul Deckelman and Sara Rosenberg

New York, April 23 - Adelphia Communications Corp.'s bank debt and bonds continued to be a major focus in the distressed market Friday, extending the gains seen on Thursday after the bankrupt Greenwood Village Colo.-based cable operator said it would consider selling some operations - or even the whole company, although it is at the same time hoping to remain independent. Elsewhere, Trico Marine Services Inc. bonds continued to retreat.

A bank loan trader saw Adelphia's co-borrower paper up about a quarter of a point on the session, with its Old Century paper quoted at 97.5 bid, 98.5 offered, while the New Century paper was at 97 bid, 98 offered.

"Since the news [Thursday], it's up about a point and trading has been more or less focused on Adelphia," the trader added.

Among bond investors, a market source pegged Adelphia's 10¼% notes due 2011 at 109.5 bid, half a point better, while its 10¼% notes due 2006 rose to 106 bid from 105.25 previously. However, he also saw Adelphia's 10 7/8% notes due 2010 ease to 106.75 bid from 107.25.

The Adelphia bonds had jumped anywhere from two to four points pretty much across the board on Thursday, on the idea that the company, or parts of it might be sold - a step that bondholders say would give them a better recovery on their investment.

Adelphia - which sought Chapter 11 protection last spring amid a giant-sized accounting scandal involving alleged irregular borrowing against company assets by company founder John Rigas and members of his family - said Thursday that the possible sale of part or even all of the company will be explored as part of a plan of reorganization.

Adelphia chairman and chief executive officer Bill Schleyer, who heads the management team that replaced the ousted Rigas clan at the top of the company, said in a company statement that Adelphia had been "pursuing a plan of reorganization that called for an independent Adelphia because we believed it was in the best interests of our bankruptcy constituents." But, he added: "Increasingly, in our continuing dialogue with constituents after filing the plan, it became clear that a broad range of constituents preferred to allow the market to determine the appropriate value for Adelphia."

Bondholders and other creditors have objected to the company plan to stay independent on the grounds that breaking Adelphia up by selling its assets - or even the whole company - would likely yield a greater recovery to its creditors than the company plan to swap much of its billions of dollars in debt for cash and equity in a restructured, independent company.

Even so, Schleyer added that "while we will explore the possible sale with full vigor, we also intend to continue to pursue a plan for an independent company upon emergence. We will compare the value created in both approaches and do what is in the best interests of our constituents."

Adelphia's statement also said that the company would continue to seek approval of an $8.8 billion exit financing package that would let Adelphia remain independent.

Adelphia's convertible bonds were quiet after a busy day Thursday, traders said, but the preferreds were seeing some buying action Friday.

"We were crazy busy with those [Adelphia convertible bonds] yesterday," one convertible dealer said.

The Adelphia 6% and 3.25% convertible bonds, along with their straight debt, firmed nicely on the possible asset sale news. The convertible bonds rose to as high as 56 bid before falling back to the 54 bid, 56 offered level, after bouncing up and down in the 40s for most of the week.

The Adelphia 5.5% convertible preferreds were quoted Friday at 30 bid, 30.5 offered.

Trico hit hard

Elsewhere, Trico Marine "really got hammered [Friday]," a trader exclaimed, quoting the company's 8 7/8% senior notes due 2012 as having dropped to 44.5 bid, 45.5 offered from Thursday's levels around 47 bid, 48 offered.

The bonds have been steadily easing in the past couple of weeks, from levels in the upper 50s to their present position, but the trader said that Friday's slide was aggravated by bearish news.

He said that "[Credit Suisse] First Boston issued a report" about the Houma, La.-based provider of marine services to the off-shore oil drilling industry, "saying they may not make it and they're looking for alternatives, and that they may not pay their coupon" on the bonds; the $11.09 million interest payment on the company's $250 million of notes comes due on May 15.

"They really got it [Friday]," the trader reiterated.

Another trader agreed that Trico's bonds "just fell out of bed, again" Friday, quoting them as having fallen to 44.5 bid, 45.5 offered from 48.5 bid, 49.5 offered previously.

Polaroid lower

The trader also saw Polaroid Corp. 11½% notes due 2006 "a little weaker," finishing the week at 24 bid, 25 offered, after having begun the week at 24 bid, 25 offered.

"There was no news out" on them, he said of the Waltham, Mass., instant and digital imaging company's notes, "but they were pretty actively traded by more sellers out there, for the first time in a while."

The trader also saw Allegiance Telecom Inc.'s 12 7/8% notes dip to 42 bid, 43 offered from prior levels around 44 bid, 45 offered.

Winn-Dixie rises

Among other distressed credits trading around on Friday, a trader called Winn-Dixie Stores Inc. "the bond that continues to move up from its recent lows," despite a lack of fresh news out about the troubled Jacksonville, Fla.-based supermarket operator.

He saw the company's 8 7/8% notes up half a point at 93 bid.

"This is well off their highs" several points above par about a month or so ago, before the company unexpectedly reported a quarterly loss, he pointed out, "but now they're recovering nicely to 93-4."

He also saw the company's 7.807% notes due 2017 - which are passthrough certificates secured by company-owned real estate - at 85 bid, 86 offered, "up another point or so."

He said that the secured notes were benefiting from a continued investor desire for real estate-secured bonds because "the real estate market is hot right now." He called it "in a weird way a flight to quality" - i.e. demand for bonds secured by tangible assets rather than just a company pledge to stand behind the securities.

Kmart higher

Another retailing company whose real-estate-secured bonds are suddenly a hot item, he said, is Kmart Corp.

"Those bonds are on a tear across the board," he declared, "because real estate is hot. Everybody is looking for them."

He quoted the Kmart 8.99% lease bonds due 2010 as having firmed from 44 bid, 45 offered to 50 bid in the past week.

Kmart's D-R structured paper is likewise in demand, he said, with its 6.66% notes trading at 70 bid, up two points, and its 8 3/8% notes, which traded at 71-72, up three or four points.

"In general, there is insatiable demand right now for all of the Kmart structured paper that is securitized by Kmart leases and real estate, because the real estate market is so hot right now," he explained. "It's like a mortgage-backed security. As you sell the properties or get rentals, the bondholder participates. They forgo the coupon interest for the pay-down. The real estate market is still hot, and what [Kmart] is leasing these buildings [to other tenants] for is so much more than when they went into bankruptcy."

Troy, Michigan-based discount retailing giant Kmart, battered by competition from the still-larger Wal-Mart, sought Chapter 11 protection in early 2002 and closed several hundred of its roughly 2,000 pre-bankruptcy locations. The company emerged from Chapter 11 last May.

RCN down, Foamex up

A market source saw RCN Corp.'s notes "off a little," although he saw no fresh negative news out on the Princeton, N.J.-based telecommunications and broadband operator, which is currently in talks with its bondholders and bank lenders on what it hopes will be a consensual restructuring under Chapter 11 protection.

RCN's 9.80% notes due 2008 dipped to 46.5 bid from prior levels at 48, while its 11% notes due 2008 went down to 45 bid from 47.5

But he saw Foamex LP's 9 7/8% notes due 2007 move up to 71 bid from 68 previously, while the Linwood, Pa.-based plastic urethane foam products maker's 13½% notes due 2005 pushed up to 95 bid from 93.5.

Also on the downside, Pegasus Satellite's 13½% notes due 2007 lost three points to 55 bid although there was no fresh news out on the company, a unit of Bala Cynwyd, Pa.-based TV programming distributor Pegasus Communications.

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