Pegasus bonds, bank debt, tumble on court ruling

By Paul Deckelman and Sara Rosenberg

New York, June 22 - Pegasus Satellite Communications Inc. bonds and bank debt and the term loan D bank debt of Pegasus Media & Communications Inc. were lower Tuesday, pushed down by

Monday's after-market announcement that the U.S. Bankruptcy Court in Portland, Me., which is handling Pegasus' reorganization, had denied its request for a temporary restraining order against DirecTV Group Inc. Pegasus, which - for the moment - distributes DirecTV's programming to about 1.1 million mostly rural customers, had sought to keep DirecTV from marketing its service directly to consumers in areas served by Pegasus.

The news was announced by El Segundo, Calif.-based DirecTV too late to affect Monday's trading - but on Tuesday, Pegasus Satellite's bonds "suffered a significant drop," a market observer said.

He pegged the Bala Cynwyd, Pa.-based satellite TV programming distributor's senior notes, such as its 12 3/8% notes due 2006, 9 3/8% notes due 2005, 9¾% notes due 2006 and 12½% notes due 2007, as having all swooned to around the 41-42 bid level from prior positions in Monday's trading at 47.

The observer also saw Pegasus's badly beaten junior bonds languishing at sharply lower levels, with its 13½% notes due 2007 dropping to 10 bid from 13.5 offered and its 12¾% notes due 2007 eroding to three cents on the dollar from five cents previously.

A trader at another desk saw the seniors at about 41 bid, 43 offered, well down from 46 previously, while the junior bonds tumbled to 6 bid, 8 offered, from prior bid levels around 10-12.

DirecTV's 8 3/8% notes due 2013 were unchanged on the day at 113.5 bid.

Pegasus Media & Communications' term loan D bank debt was meantime seen off by about half a point at 97.5 bid, 98.5 offered, according to a trader, although he saw Pegasus Satellite Communications' bank debt unchanged at 97 bid, par offered.

"A lot of people are trying to figure out what to do with Pegasus," the bank loan trader said. "In terms of the bank debt, most holders still think they'll get paid out at par."

The bottom line of Monday's decision by U.S. Bankruptcy Court judge James Haines, DirecTV said, is that it can continue to market its service and activate new customers in Pegasus territories.

While Pegasus has been distributing DirecTV programming for a number of years, it appears that the marriage is over; the two companies have been feuding for some time over just how much those customers should actually be worth to DirecTV.

After months of legal wrangling, DirecTV and the National Rural Telecommunication Cooperative - a TV programming distribution industry group of which Pegasus was the largest member - agreed to end the exclusive right of NRTC members like Pegasus to sell DirecTV in their territories, effective Aug. 31. While DirecTV said that non-Pegasus members could arrange to continue to distribute its programming in their service areas on a non-exclusive basis, it gave Pegasus no such option, instead making a take-it-or-leave it offer of $675 per customer, which Pegasus rejected as grossly inadequate.

Pegasus alleged that DirecTV and NRTC were conspiring to destroy its business, and it filed for bankruptcy protection in Portland on June 2.

In response, DirecTV began marketing its service in Pegasus' formerly exclusive territories, sparking the latest court confrontation.

Kaiser rises

Elsewhere, Kaiser Aluminum & Chemical Corp.'s 10 7/8% notes due 2006 were seen up more than a point at 103.5 bid, while its junior bonds were seen having firmed to 17 bid from prior levels around 14 bid, 15 offered.

A distressed bond trader saw the senior notes at 101 bid, 103 offered, up from par earlier.

The bankruptcy judge overseeing the Houston-based metals company's reorganization on Monday approved a motion that describes bidding procedures regarding the previously announced sale of the company's Gramercy, La. facility to a joint venture of Century and Noranda.

Kaiser, which sought Chapter 11 protection in a February 2002 filing with the U.S. Bankruptcy Court in Wilmington, Del., said that the bidding procedures would come into play only if it were to receive at least one competing qualified bid by July 6. If so, Kaiser would then conduct an auction on July 8. It already has the $23 million stalking horse bid as the one to beat.

Kaiser said that it expects the court to rule on the winning bid at the regularly scheduled hearing on July 19.

Separately, Kaiser senior subordinated noteholders Monday announced the formation of an ad hoc committee to discuss "certain issues of mutual interest. "

United bonds quiet

A trader said that United Airlines parent UAL Corp.'s bonds were "very quiet," trading in the 9 bid, 10 offered area, after having bounced around at lower levels for a day or so following the decision last week by the Airline Transportation Stabilization Board to reject the Elk Grove Village, Ill.-based air carrier's request for a $1.6 billion federal loan guarantee as it tries to line up $2 billion of private financing to fund its reorganization.

News reports Tuesday said that United was working on revisions to its request and might present the federal board with a sharply reduced loan guarantee request shortly.

The trader also saw Delta Air Lines Inc.'s bonds "about two points off yesterday's [Monday's] levels, with the Atlanta-based air carrier's 7.70% notes due 2005 at 62 bid, 64 offered, off from 64 bid, 66 offered.

On the upside, he saw Mississippi Chemical Corp.'s 7.17% bonds about two points better at 56 bid, 58 offered, although there was no fresh news seen out on the bankrupt Jackson, Miss.-based chemical maker.

He also saw Trico Marine's bonds having moved up to 51 bid, 53 offered from the 48 bid, 50 offered that the Houma, La.-based offshore oil drilling services provider's bonds have recently languished at.

Back on the bank debt front, Reliant Energy Inc.'s paper was higher by about a quarter of a point on Tuesday, trading in the 99.75 bid, 100.5 offered context, according to a trader.

"There was no specific reason" for the Houston-based energy company's debt to trade up, he said, other than that "all utilities have been better."

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