Reliant, Mirant bank debt up; Pegasus Satellite loses altitude

By Paul Deckelman and Sara Rosenberg

New York, May 5 - Traders in distressed bank debt spent their day focused on the energy/utility sector Wednesday as Reliant Energy Inc.'s term loan headed higher on earnings news and Mirant Corp.'s 2003 paper jumped up, probably on court proceedings regarding Pepco Holdings Inc.'s contracts.

Elsewhere, bond traders saw a general retreat in Pegasus Satellite, pushing the Bala Cynwyd, Pa.-based TV programming distributor's bonds solidly lower.

Houston-based energy operator Reliant's term loan was quoted up by about a quarter to a half a point on the day, a bank debt trader said, following the release of first-quarter numbers. Interestingly, the trader saw the company's 9¼% notes due 2010 and 9½% bonds due 2013 lower on the day in response to the same financial results.

"There might be different expectations between bank debt and bond guys," the trader explained.

At another desk, however, Reliant's 12% notes due 2010 eased slightly to 122 bid from 122.5 earlier, but the 9¼% notes were half a point better at 105 and its 9 ½% notes were unchanged at 105.75 bid.

Reliant's term loan was quoted at 98 bid, 98.75 offered, compared to 97.75 bid, 98.5 offered on Tuesday, the bank loan trader added. A second trader had the bid side quoted a little higher at 98.25.

For the quarter, the company reported a loss from continuing operations of $46 million, or 15 cents per share, compared with a loss from continuing operations of $52 million, or 18 cents per share, for the same period of 2003.

Retail gross margin was $162 million, compared to $185 million in the first quarter of 2003. Wholesale gross margin was $325 million, compared to $281 million in the first quarter of 2003. Operation and maintenance expense was $250 million, compared to $225 million in the same period last year. Other general and administrative expenses were $54 million, compared to $58 million for the first quarter of 2003. And, interest expense, net for the quarter was $105 million, compared to $83 million for the same period last year.

"First quarter results were consistent with the 2004 outlook we provided last quarter. While wholesale market conditions were weaker than the first quarter of 2003, we are seeing indications that the wholesale market is firming. Increasingly, we are using our improved liquidity to reduce our exposure to short-term market volatility and capture economic benefits where we see market improvements," said Joel Staff, chairman and chief executive officer, in a company news release.

"In our last earnings call, we identified strategic goals that will position us for future success and growth," Staff added. "During the first quarter we made significant progress toward achieving these goals by streamlining the organization and beginning to redesign our processes and systems. To date, we have identified over half of our announced $200 million cost reduction program and remain confident we will achieve that goal" (see related story elsewhere in this issue).

Mirant loans gain

Reliant rival Mirant's 2003 bank debt was meantime quoted at 54.75 bid, 55.5 offered, up about a point on the day, according to a trader.

On Wednesday, there were some media stories that reported hesitation by judges in the federal appeals court regarding the need to reach a decision on whether Mirant should be locked into contracts with Pepco before a bankruptcy court rules on the matter.

Atlanta-based energy operator Mirant sought Chapter 11 protection from its creditors in 2003.

Pegasus lower

Outside the energy sphere, a trader quoted Pegasus Satellite's 13½% notes due 2007 as having fallen to 54 bid, 56 offered from prior levels around 57 bid, 59 offered.

He said there was no news out on the company, whose bonds have been limping along for months and then were sent reeling after a recent court decision in favor of Pegasus's legal adversary, DirecTV, in which Pegasus was ordered to pay the satellite giant $52 million.

Pegasus' other bonds were meanwhile down anywhere from one to three points "across the board," the trader said, quoting its 12 3/8% notes due 2006 down two points, at 68 bid, 70 offered.

Telewest sinks

Also among communication names, Telewest plc "got mowed," a trader said, with the United Kingdom-based cable and broadband operator's 11% notes due 2007 falling to 59 bid, 61 offered, down from 62.5 bid, 63.5 offered.

In the lack of any other news out about the company, he cited an announcement that the company's acting CEO, Barry Elson, would return to the United States for the time being for medical reasons.

At another desk, the 11s were quoted at 60 bid, down 3½ points, while the company's 9 5/8% notes due 2006 were at 58 bid, off from a recent 62. TeleWest's 9¼% notes due 2009 were heard to have dipped to 48.5 bid from 52.5 previously.

Levi Strauss & Co,'s bonds were "up a little," the trader said, quoting the San Francisco-based apparel maker's 12¼% notes due 2012 as having risen to 90 bid, 91 offered from prior levels around 88.75 bid, 89.75 offered.

"There was no news on them," he said, "but there was activity."

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