Salton bonds jump; Horizon bank debt continues rise

By Paul Deckelman and Sara Rosenberg

New York, June 15 - Salton Inc.'s bonds were heard to have firmed smartly in Tuesday's trading, after the Lake Forest, Ill.-based maker of the popular George Foreman home hotdog and hamburger grills and other small appliances announced that it had reworked its credit facility to give it more financial flexibility.

On the bank debt front, Horizon Natural Resources Co.'s bank debt continued to firm, as an investor group led by financier Wilbur Ross took another step toward making its proposed acquisition of the Ashland, Ky.-based coal producer a reality.

Salton's 10¾% senior subordinated notes due 2005 were seen having pushed up to 86 bid from prior levels around 79, while its 12¼% senior subs due 2008, which trade 10 points behind the 103/4s likewise followed suit by rising to 76 bid from 69.

A trader at another shop quoted the 103/4s at 84 bid, 87 offered and the 121/4s at 76 bid, 78 offered, and said that was "as close as they got." He said that he "did not see a lot of activity in it."

Besides the reworked $275 million revolving credit agreement with Silver Point Finance LLC, which gives Salton more flexible financial covenants and will let the company borrow about $30 million more than its previous facility, the trader said the Salton bonds also got a boost from the company having made the $6.7 million June 15 interest payment on the 10¾% notes, as allowed by the forbearance agreement the company and its senior lenders entered into last week.

A trader quoted the Salton bonds "up five or six points on the day, depending on the coupon," with the 103/4s at 85 bid, 88 offered and the 121/4s at 75 bid, 78 offered.

Under the terms of Salton's reworked credit facility with Silver Point, which expires in three years, Salton will have more flexible financial covenants and borrowings under the agreement. Interest is at 500 basis points above Libor, with a minimum rate of 7%.

While the facility will initially limit total borrowings to $207 million, it will allow Salton to borrow $30 million more than under its previous bank credit agreement. The agreement includes the ability to refinance tranches of the loan to reduce borrowing costs.

Salton's New York Stock Exchange-traded shares were up 18 cents (2.86%) on the news to $6.48, on volume of 496,000, about two-thirds of the usual turnover.

Horizon bank debt firms

Elsewhere, Horizon Natural Resources bank paper felt a little stronger on Tuesday, with the paper seen quoted in the Street at 48.25 bid, according to a trader - and the trader said that that might even be too low.

"I bet it's really 49 [bid], 50 [offered]," he added.

On Monday the paper had traded at 48 and last Friday, it was being quoted at 43 bid, 44 offered.

The trader explained that the uptick in quotes is probably due to the recently announced increased bid for the company.

"People were expecting some news about the bid to come out shortly," the trader added, in explanation of why the rise in bank debt levels started as early as mid-last week.

The W.L. Ross-led group of holders of a majority of Horizon Natural Resources' second-lien notes raised their bid for the company on Monday to $277.35 million from $240 million previously.

After that move, Deutsche Bank, the unsecured creditors committee and other creditors withdrew their earlier objections and supported the designation of the Ross Group as the preferred bidder at the scheduled Aug. 17 auction.

If another bidder were to step forward and prevail at the auction, the Ross group probably wouldn't be too distressed - it stands to get a breakup fee of $7.2 million in that event.

Adelphia weak on fee fears

Meanwhile fees have recently become a bone of contention among the creditors and exit facility lenders of Adelphia Communications Corp., possibly delaying the Greenwood, Village, Colo. -based cable operator's planned exit from bankruptcy - and that's got some debt holders worried.

The company's Olympus term loan A and Century revolver bank debt saw a little bit of trading activity on Tuesday, with both tranches quoted in the 96.5 bid, 97 offered context, according to a trader - down from recent levels.

"The Century revolver was as good as 97.5 bid - but it's moved down over the past few weeks. The longer the [bankruptcy] process takes, the worse off lenders are," the trader explained

The planned hearing on Adelphia's proposed $8.8 billion exit facility via Deutsche Bank Securities, which was to have taken place this past Monday, has now been put off till June 21 because of the dispute.

The company has been receiving objection after objection to the non-refundable fees, which are estimated to range from $20 million all the way up to $80 million.

Opponents argued that if Adelphia committed to paying the fees it would send the wrong signal to potential buyers of the company's assets. Adelphia had originally insisted that it would reorganize and emerge from bankruptcy some time this year as a stand-alone company but was forced by angry creditors to at least look at the option of selling some of its assets - or even the whole company - as a means of maximizing return to its creditors.

Adelphia's bonds have meantime eased from stronger recent levels more of less in tandem with its bank debt. After having pushed as high as the 105-108 area some weeks back, depending on coupon and maturity, they've recently come in a bit and they continued to mostly ease on Tuesday amid new creditor objections to the exit facility fees.

Adelphia's 9 3/8% notes due 2009 were seen having fallen back to 103.5 bid from prior levels at 104, while its defaulted 9½% notes, which were to have matured on Feb. 15, lost half a point to close at 102.5, as did its 9 7/8% notes due 2005 and 9 7/8% notes due 2007. Adelphia's 10½% notes due later this year were off a quarter-point at 106, while its 10 7/8% notes due 2010 were a full point lower at 104.

Pegasus bonds gain

Also among distressed communications names, a trader said that Pegasus Satellite & Communications Inc.'s bonds were "up a point or two, depending on the coupon," with most of the Bala Cynwyd, Pa.-based satellite television programming distributors' senior notes hovering in the 48 bid, 50 offered area, about two points better than recent levels and well above their recent lows around 40. The company's subordinated 13½% notes due 2007 continued to languish around 20 bid.

The company's bank debt, and affiliate Pegasus Media & Communications Inc.'s term loan D have not been trading of late, despite the rash of activity in Pegasus' junk bonds.

The Media term loan D was being quoted Tuesday at 98.25 bid, 99.25 offered and the Satellite paper was seen at 98 bid, par offered, with no trades taking place in that context, a trader said.

Late Monday, Pegasus Satellite - which recently sought Chapter 11 protection - revealed that it had filed a lawsuit against the National Rural Telecommunications Cooperative, the cooperative's officers and directors and corporate nemesis DirecTV Group Inc.

That suit, filed with the U.S. Bankruptcy Court for the District of Maine, which is overseeing Pegasus' restructuring, charged that the defendants were "acting independently and in concert in an effort to destroy Pegasus and steal its business for their own enrichment in violation of substantial fiduciary, contractual and other duties owed to Pegasus", according to a statement released by Pegasus.

The complaint seeks actual and punitive damages, as well as rescission of various agreements entered into by NRTC - a group of program distributors serving rural areas, of which Pegasus had been the largest member - and DirecTV, whose programming Pegasus distributed to its customers in mostly rural markets, until the arrangement blew apart last month.

Pegasus' president, Ted Lodge, said in the release that "The adversary complaint we have filed [Monday] has been made necessary by the conspiracy between NRTC, its Board and DirecTV to steal our valuable business and by NRTC's and the NRTC Board's egregious violation of their fiduciary and contractual obligations to us."

Pegasus is asking the court to "enjoin these unlawful actions, to award us both actual and punitive damages against NRTC and DirecTV, to rescind the agreements between NRTC and DirecTV that purport to terminate our rights and for the appointment of a receiver to administer the NRTC so as to prevent further bad acts by NRTC against us.

"Regrettably, the intervention of the court is necessary in order to restore our exclusive rights so that we may preserve for our employees, customers, business partners, creditors and shareholders the value we have created over the last 10 years at Pegasus," Lodge said in the release.

The NRTC fired back at Pegasus on Tuesday, calling its lawsuit "completely without merit.

"Pegasus' legal attack on NRTC and its board members and management is absurd and unfounded," said president and chief executive Bob Phillips in a news release issued by the cooperative.

Pegasus has for some months been locked in a multi-faceted legal dispute with El Segundo, Calif.-based DirectTV, feuding over the value of the Pegasus subscribers to DirecTV.

In late May, after a court socked Pegasus with a $62.5 million judgment, including interest costs, arising out of a breach-of contract suit, DirecTV and the NRTC announced an end to NRTC's and Pegasus' exclusive rights to distribute DirecTV's programming in their respective territories, effective Aug. 31.

While DirecTV said it was willing to offer NRTC members other than Pegasus the chance to continue to serve their territories on a non-exclusive basis, it gave Pegasus no such option and merely handed Pegasus a take-it-or-leave it offer to buy its subscribers for $675 a head, or about $750 million total - enough perhaps to pay Pegasus' bond debt, but not its other obligations.

Pegasus denounced this as a highhanded attempt by DirecTV to steal its customers, claiming DirecTV and NRTC had no right to unilaterally terminate Pegasus' rights. It sought Chapter 11 protection in a June 2 filing to preserve its rights to exclusively distribute DirecTV. The latter company fought back by trying to go over Pegasus' head and directly approaching potential customers in markets Pegasus serves.

Last Thursday, the Portland bankruptcy court issued a half-a-loaf decision- thwarting Pegasus' efforts to stop DirecTV from trying to poach on Pegasus' territory, but also ordering that DirecTV cannot use Pegasus' subscriber data to try to woo away its 1.1 million customers.

Both sides were claiming a victory following the judge's order.

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