Pegasus bank debt steady despite bankruptcy warning; Delta bonds up

By Paul Deckelman and Sara Rosenberg

New York, May 25 - Pegasus Media & Communications Inc.'s term loan D is being "nursed along", with the paper higher by about a quarter to a half a point, traders said - despite the Bala Cynwyd, Pa.-based diversified media company again warning in a Securities and Exchange Commission filing that it might be forced into bankruptcy as a result of a big legal judgment against the company. Elsewhere, the bonds of Delta Air Lines were seen better, even as the Atlanta-based air carrier rolled back recently instituted rate hikes to stay competitive with its peers - who were also scrapping their fare hikes.

The Pegasus bank debt firmed, according to a trader, as some investors are gaining confidence in the idea that even if the company has to reorganize under Chapter 11 they will still be paid out at par.

The term loan was quoted at 98.5 bid, 99 offered - well up from its levels on Friday, when the paper was quoted at 96 bid, 98 offered.

"There are still bankruptcy fears, [yet] it's up because there are more buyers now. People feel comfortable that they're covered on the bank debt," the trader explained.

Pegasus Satellite Communications Inc.'s bank debt, however, was basically unchanged on the bid side at 95.5 bid, while the offer side widened out a little since the end of last week, moving to 97.5 from 96.5 on Friday, the trader added.

Among bond investors, Pegasus paper was "a little better," a trader said, pegging the company's 9¾% notes due 2006 offered at 57 bid, with the 11¼% notes around that same level. He saw Pegasus' 12 3/8% notes due 2006 at 55.5 bid, 58 offered and its 13½% notes due 2007 at 23 bid, up from recent levels in the 20-21 area. Pegasus' 6½% preferred shares were trading around 34 bid, 36 offered, "all a little better."

Another trader saw the company's 9 5/8% notes due 2005 at 57 bid, 58 offered, with the 111/4s at 55 bid, 56 offered and the 131/2s at 22 bid, 24 offered.

A market source at another shop said it seemed to him like Pegasus was up 1 to 1½ points. He estimated the Pegasus 12 3/8% notes due 2006 at 56.5 bid, the 93/4s at 55.5 and the 13½% notes at 22.

A trader at a distressed-debt house saw most Pegasus issues in the mid-50s, a 56-57 context, up anywhere from three to five points from recent lows - although he noted that this was before the market got the news about the company's 8-K filing with the SEC, containing the details of a $62.6 million legal judgment against Pegasus and cautioning that the company could be forced into bankruptcy as a result of the decision, should it be unable to come up with funding and its creditors be unwilling to waive defaults.

He said: "I don't think [the Chapter 11 warning] is any new news - but you never know what these guys [bond players] will do."

Bankruptcy concerns have been floating around since last week due to a court case involving DirecTV, in which DirecTV won a judgment of $51.5 million against Pegasus, plus interest - money Pegasus says it does not have. Furthermore, DirecTV 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.

Late Monday, 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 saying that the downgrade reflects the belief that probability of default over the nearer-term has increased due to two different judgments against the company.

Delta gains

The distressed-debt trader saw Delta's bonds solidly firmer, "up five points from Friday." He saw Delta's 7.70% notes due 2005 at 66 bid, 69 offered, up from 61 bid, 64 offered Friday, and its 10% notes due 2008 at 56 bid, 59 offered, up from 51 bid, 53 offered.

After having been roiled earlier this month by renewed terrorism fears and rising world oil prices - which translate into higher jet fuel prices - Delta and other air carriers seem to have been on a bit of a comeback of late, as oil prices seemed to edge back from their highs over $40 a barrel on indications Saudi Arabia would increase oil output. The airlines were also seen benefiting from the strengthening U.S. economy, which could see more people - particularly the all-important business traveler - starting to fly again.

Still to be seen, however, is the impact on the air carriers' top line - and ultimately, their bottom line - which the failed attempt to raise fares may have. Delta and other major carriers had just recently put higher fares into practice - as much as $20 on one-way tickets-but were forced to back off.

The rollback of last week's increased fares is the third time in the past six months the airline industry has failed to make a fare increase stick.

Asbestos loans gain

Back on the ground, bank debt of asbestos names seems to be faring better recently, with Owens Corning Inc., USG Corp. and Federal-Mogul Corp. all up by approximately half a point since last week, according to a trader.

Owens Corning's bank debt was quoted Tuesday at 76.5 bid, 77 1.2 offered. USG was quoted at 94.5 bid, 95.5 offered, and Federal-Mogul was quoted at 91.5 bid, 92.5 offered, the trader said.

Owens Corning's bonds were seen unchanged around the 41 bid, 42 offered mark, a trader said, apparently not much moved by the maneuvering going on in the Toledo, Ohio-based insulation maker's Chapter 11 case.

Creditors, including Kensington International Ltd, Springfield Associates, LLC, Angelo Gordon and pre-petition credit facility agent Credit Suisse First Boston have requested the U.S. Bankruptcy Court to appoint an examiner in Owens Corning's Chapter 11 case. In a separate filing with the court, Angelo Gordon and others, as holders of more than $500 million of Owens Corning bank debt, asked the court Tuesday to remove Francis McGovern, who was serving as a mediator and who was an advisor to Judge Alfred Wolin - who himself was removed from the case last week in a dispute over whether he could be impartial (see report on page one of this issue).

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.