Delta bonds firmer as pilots look to talks; Pegasus paper up again

By Paul Deckelman and Sara Rosenberg

New York, July 1 - Delta Air Lines Inc. bonds were seen up a point or two Thursday even as the troubled airline's pilot's union said that it expects formal negotiations with the company on changes to its contract to begin soon. Also firmer was Pegasus Satellite & Communications Inc.'s bonds, despite a dearth of fresh news out from the bankrupt Bala Cynwyd, Pa. -based satellite television programming distributor.

Delta's bonds were "a little bit better," a trader said, quoting its 7.70% notes due 2005 as having firmed to 68 bid, 70 offered from prior levels around 66 bid, 68 offered, while the Atlanta-based air carrier's 8.30% bonds due 2029 were up even more, both nominally and on a percentage basis, rising to 44 bid from 40 bid, 42 offered previously.

Another trader called Delta "slightly higher," on less dramatic movement, estimating that the 8.30s had risen to 43.25 bid from 41.75 offered. He saw the company's 9¾% notes due 2021 gaining altitude to 46 bid from 43.5 previously.

Delta shares failed to follow the bonds higher, its New York Stock Exchange-traded equities actually ending down eight cents (1.12%) at $7.04, with volume about half the usual.

Delta, with the highest pilot costs in the U.S. airline industry, has been trying to jawbone the Air Line Pilots Association into accepting a huge package of wage and work-rule concessions, with chief executive officer Gerald Grinstein and other Delta executives warning that unless the company got agreement on a 34.5% concession package from the captains, Delta would not even be able to sustain itself in competition with other old-line "legacy carriers" like American Airlines, the bankrupt United Airlines, and Continental and Northwest airlines, let alone against the lower-cost carriers such as JetBlue, AirTran, ATA and Southwest Airlines which now hold one third of the U.S. air travel market - and looking for more.

The captains have countered with a 13.5% concession offer, which Delta says is clearly inadequate.

On Thursday, the pilots' union said that it expects the formal talks with Delta on changes to its contract to begin soon.

The pilots are trying to come up with a response to Delta's demands and said on a statement on their union website Thursday that over this past week "the negotiating committee held problem-solving discussions with management in the areas of scheduling and work rules.

"This process will continue and we expect formal negotiations to begin in the near future."

The union has said that any pilot concessions it chooses to make must be contingent on a larger restructuring plan that includes all parts of the third-largest U.S. air carrier.

Pegasus rising again

Elsewhere, Pegasus Satellite's bonds continue to firm even though there is no new news out about the company's bankruptcy restructuring, being heard by the federal bankruptcy court in Portland, Me., or about its continuing struggle with former partner-turned-corporate-nemesis DirecTV Group Inc.

On Thursday, a trader saw Pegasus' 11¼% notes due 2010 push up to 51.5 bid from 49 previously.

Another trader, who saw the bonds having risen about two points Wednesday to 50 bid, pegged the Pegasus paper at 51 bid, 52 offered, up a point.

Pegasus distributes DirecTV's service to about 1.1 million mostly rural customers, but the two companies have been feuding for some time over just how much those customers should actually be worth to DirecTV, which led ultimately to Pegasus's June 2 Chapter 11 filing.

In May, after months of legal wrangling, El Segundo, Calif.-based 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.

The court recently refused to grant Pegasus' motion for a court order to stop DirecTV from trying to market its services to new customers in Pegasus' formerly "exclusive" territory.

Pegasus's parent company, Pegasus Communications Corp., did not join its subsidiary in Chapter 11, and its shares have been going up great guns recently, spurred by heavy buying by hedge fund Peninsula Capital, as well as by investor feelings that Pegasus Communications won't be sucked into the bankruptcy mess and will retain its assets, including several TV stations and spectrum licenses.

But after sharp gains of more than 20% in each of the previous two days the stock binge was over Thursday as the Nasdaq-traded shares fell $2.09 (8.54%) to $22.37 on apparent profit-taking.

Adelphia lower

Another bankrupt communications operator, Adelphia Communications Corp., had some good news for its investors Thursday - but the Greenwood Village, Colo.-based cable operator's bonds were off "at least a point," a trader said. "I don't know why."

Adelphia's 10 7/8% notes due 2010 dipped to 100.75 bid from 101.5 previously, while its 10¼% notes due 2011 retreated to 102 from 103.5.

At another desk, Adelphia's 9 7/8% notes due 2007 were seen half a point lower at 99.25, while the bonds of its Century Communications subsidiary were also off half a point, the latter's 8 7/8% notes due 2007 ending around 109.

Adelphia on Thursday said that it had it won court approval for an $8.8 billion financing package it will use to finance its exit from bankruptcy.

The exit financing package from J.P. Morgan Chase & Co., Credit Suisse First Boston, Citigroup Inc. and Deutsche Bank AG will be used to finance the cash payments to be made under the Colorado cabler's proposed reorganization plan.

Approval of the loan by the U.S. Bankruptcy Court for the Southern District of New York came despite complaints by creditors and shareholders that the company should not pursue a loan as a precursor to bringing the company out of bankruptcy as an independent company - especially with the fees originally imposed; they felt that Adelphia would provide a greater return to creditors by selling some or all of its assets. Adelphia subsequently obtained a lower price from its banks for arranging the loan.

Adelphia, however, said it is "vigorously pursuing" the sale of the company - although it is also preparing for emergence from Chapter 11, if circumstances warrant it, as a stand-alone company.

Mississippi Chemical Corp., which this week gained approval for $182.5 million of debtor-in-possession financing, continues to firm, its 7¼% notes due 2017 up for a second straight session to 62 bid, 64 offered, from 60 bid, 62 offered previously.

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