Atlas Air, Pegasus, bonds firmer; CalGen bank debt firms on junk rise

By Paul Deckelman and Sara Rosenberg

New York, May 24 - Atlas Air Worldwide Holdings Inc. bonds were quoted firmer Monday in the wake of Friday's announcement by the bankrupt Purchase, N.Y.-based air cargo operator that it had reached an agreement with the unsecured creditors committees of its Atlas Air, Inc. and Polar Air Cargo, Inc. subsidiaries. Elsewhere, Pegasus Satellite Communications Inc. bonds were quoted higher, in line with a surge in its stock, although there was no fresh news out on the Bala Cynwyd, Pa.-based satellite TV programming distributor.

On the bank debt front, Calpine Generating Company LLC's loans were quoted better, apparently in line with a rise in the high-yield market.

Atlas Air's 9¼% notes due 2008 were seen two points better on the session at 47 bid.

At another desk, however, the company's bonds were seen unchanged, though at higher levels, with the 91/4s quoted at 49 bid, the company's 10¾% notes due 2005 at 48 bid, and its 9 3/8% notes at 48, also both unchanged.

The agreement between Atlas and the creditors committees of its subsidiaries puts on hold all litigation, pending final documentation of the settlement terms and submission of an amended disclosure statement and plan of reorganization to the U.S. Bankruptcy Court for the Southern District of Florida.

Under the settlement, Polar's unsecured creditors will receive a 60% cash dividend on their claims.

Atlas said it estimates the total amount will be $30 to $40 million, which it will fund with cash on hand and proceeds from a rights offering of up to $20 million to be underwritten by some members of the Atlas Air, Inc. creditors committee.

The common stock previously allocated to Polar unsecured creditors will be reallocated to the Atlas Air, Inc. unsecured creditors or sold as part of the rights offering.

A hearing on the disclosure statement was been tentatively set for June 7.

Air Canada steady at higher levels

A trader meantime saw Air Canada's dollar-denominated 10¼% notes due 2011 hanging in around 31 bid, up from last week's lows around 27 bid, pushed up in the wake of the news, announced last Thursday evening, that the insolvent airline - currently under the protection of Canada's Chapter 11 equivalent, the Companies Creditors' Arrangement Act - had reached an agreement on cutting its cost structure with the last of its five unions, completing its efforts to get the labor groups to agree to a total of C$200 million of givebacks and other belt-tightening measures the airline said it needed to remain in business. With the union approvals now locked up, Air Canada can proceeds with a financing plan being offered by Deutsche Bank and GE Capital Aviation Services, a unit of General Electric Corp.

The Ontario court overseeing Air Canada's reorganization also extended its protection through Sept. 30. Creditors could vote on a reorganization proposal by mid-August, which would let the carrier emerge from insolvency proceedings at the end of September.

Pegasus bonds rise

Meanwhile a trader was quoting the Pegasus bonds as better, although he said he had seen no fresh news - or even rumors - to justify a move.

He pegged the Pegasus debt "up a bit," with the company's 12 3/8% notes due 2006 as having moved up to 51 bid, 53 offered from prior levels at 49 bid, 51 offered.

However, he noted a sharp move upward in the company's New York Stock Exchange-traded shares, which were up $1.25 (8.99%) in Monday's dealings to $15.15. Equity investors may have been heartened by the news which came across the ticker late Friday that Peninsula Partners, a large Pegasus Communications Inc. shareholder, had upped its stake in the company and now holds 59.99% of the stock. On internet investment message boards Monday, this was seen as either proof that the company is not about to go bankrupt, or a sign that it may put the Satellites unit into proceedings to shield cash at the parent company.

But Pegasus still must contend with notable negatives. DirecTV, which recently won a judgment of $51.5 million against Pegasus, plus interest - money Pegasus says it does not have - said Monday that Judge Lourdes Baird of the U.S. District Court for the Central District of California had entered a judgment in favor of DIRECTV, Inc. against Pegasus Satellite Television, Inc. and Golden Sky Systems, Inc. (Pegasus) of some $62.6 million, which includes prejudgment interest. DirecTV is also entitled to recover its legal costs.

And Moody's Investors Service lowered the senior implied rating for Pegasus Satellite Communications to Ca from Caa1, and the senior secured bank debt rating for subsidiary Pegasus Media & Communications to Caa1 from B3. Moody's also assigned a Caa1 rating to the $300 million senior secured term loan D that was put in place in October 2003.

Moody's said that all other existing ratings, which correlate to most of the company's debt and preferred stock obligations, were confirmed and remain unchanged as they had already been substantially pegged to ultimate recovery levels given an assumed medium-term default scenario previously.

The ratings agency said its actions "specifically reflect Moody's belief that the probability of default over the nearer-term has increased, stemming mainly from two very recent judgments against the company which will accelerate the erosion of its already dwindling liquidity, and which have been further exacerbated with the mere passage of time given looming maturities of public securities and portions of its senior secured bank credit facilities."

Calpine loans move upward

On the bank debt front, Calpine Corp.'s CalGen unit's first and second lien term loans were up on the day primarily in reaction to the high yield market being higher, according to a trader.

The trader said the second lien paper rallied by about two or three points to end the day quoted at 95.5 bid 96.5 offered.

The first lien did not react as strongly, only moving up by about half a point to 99 bid, 99.5 offered, the trader added.

CalGen is a wholly owned subsidiary of Calpine, a San Jose, Calif. power company.

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