Solutia bonds firm after court ruling; Galey & Lord bank debt dives

By Paul Deckelman and Sara Rosenberg

New York, July 2 - Bonds of the bankrupt chemical maker Solutia Inc. were quoted solidly higher Friday - albeit in light trading in an abbreviated pre-holiday session.

At the same time, Galey & Lord Inc.'s bank debt has taken a turn for the worse over the last day or so, a trader said, with levels dropping all the way to 35 bid, 45 offered from 48 bid, 49 offered previously.

"There was a private bank call about two days ago," the trader said. "It seems like it's going to go towards liquidation of the company. There's been no news about that, just market sentiment. Type of recovery [for the bank debt] is very much in the air."

The New York-based textile company emerged from Chapter 11 on March 5 with a $70 million exit financing facility from General Electric Capital Corp.

St. Louis-based Solutia - which was spun off several years ago by former corporate parent Monsanto Co. and, its shareholders and creditors complained, saddled with much of the latter's debt and liability from chemical pollution lawsuits - is still in the process of restructuring. It got a boost this week when the U.S. Bankruptcy Court for the Southern District of New York, which is overseeing Solutia's reorganization, gave the company until Oct. 12 to exclusively file a plan of reorganization and until Dec. 11 to exclusively solicit votes for the plan. Those exclusivity rights had been scheduled to run out on July 14 and Sept. 12, respectively.

A trader saw Solutia's 7 3/8% notes due 2027 quoted as high as 61 bid, well up from their recent levels around 56. Earlier in the week, those bonds had moved up to the 56 level from around 54 bid.

Another trader, however, saw the movement more restrained and saw Solutia's notes up a more conservative three points total. Solutia's 11¼% senior notes due 2009 were meantime unchanged at 96 bid.

Although Solutia - which went into Chapter 11 last December - has made what it terms a substantial amount of progress since then, it told the court that it needed more time to refine and implement its business plan, identify and quantify its potential liabilities, evaluate the potential for asset sales, continue working to stabilize its pension plans and work toward a valuation of its domestic and foreign businesses.

Solutia noted its case is large and complex, with nearly 90,000 creditors and more than $3 billion in liabilities.

Adelphia bonds lower again

Adelphia Communications Corp.'s bonds continued to ease on Friday, even though the bankrupt Greenwood Village, Colo.-based cable company won court approval this past week for revised paperwork for its $8.8 billion exit financing facility.

That paper has been steadily coming off recent highs and on Friday was again "slightly lower," a trader said, quoting Adelphia's 10¼% notes due 2011 as having dropped to 100.5 bid from prior levels at 103, while its 101/4s due 2006 retreated to 95.5 bid from 99 - although traders cautioned that it was difficult to put much reliance on such volatile moves as the Adelphia bonds - and the Solutia paper - made in an environment where not many people were trading, which tends to exaggerate the impact of what trades do get done.

"See where they are Tuesday," when the market comes back from its three day break, one advised.

At another desk, Adelphia's 9 7/8% notes due 2007 were seen off more than a point at 98 bid, while its Century Communications Corp. unit's 8 7/8% notes due 2007 were half a point lower at 109.

While the bonds have come off their recent highs, Adelphia's bank debt has remained relatively unchanged despite Thursday's announcement that the revised paperwork for the exit financing was approved.

Adelphia's Old Century paper was quoted at Friday 97 bid, 98 offered and the New Century paper was quoted at 96 bid, 97 offered, according to a trader.

At issue on the exit financing was whether the Colorado cabler could qualify for the facility without pledging the assets of its joint ventures with industry giant Comcast Corp. The companies have three joint ventures.

Adelphia filed paperwork that said it did, although Comcast filed an objection saying that Comcast did not have enough time to carefully review the letters and questioned whether the revised paperwork was obligating the joint ventures in other ways.

In its response to Comcast's complaint that the paperwork required the joint ventures to exclusively use the exit facility's lead bankers, Adelphia said that was only for a securities offering. It added that the four lead banks - JP Morgan Chase, Credit Suisse First Boston, Citicorp and Deutsche Bank - are four of the five largest underwriters and control 49% of the market. If Adelphia and the joint ventures are going to be in the market at the same time, it makes sense for them to use the same bankers, the Adelphia response said.

In his bench decision, Judge Robert Gerber also prohibited Adelphia from having the joint ventures contribute any money toward paying the fees for the facility.

The dispute over the exit facility in relation to the Comcast joint ventures was only the last in a series of contentious issues. Adelphia shareholders and creditors used the exit facility discussions to voice their concern that management's insistence that Adelphia could emerge as a stand-alone company might shortchange the stakeholders. They forced management to say that it would explore the sale of some of the company's assets - or maybe even the whole company itself - as an alternative.

While Adelphia publicly says that a stand alone emergence is still a strong possibility, it is also saying that it is actively pursing Plan B, and shopping assets - and the company itself - around to potential buyers.

Adelphia's penny-stock shares were solidly higher on Friday, up seven cents (14.58%) to 55 cents. The shares trade via the pink sheets.

On a related note, the New York federal court jury trying company founder and former chairman John J. Rigas and several other ousted Adelphia senior executives on securities fraud charges arising from the collapse of the company, wrapped up their first week of deliberations Friday without having reached a verdict in the case.

Loral gains

Elsewhere, a trader saw Loral Cyberstar's 10% notes due 2006 push up to 71.5 bid from 69.

A distressed-debt at another desk saw the New York-based satellite company as one of the week's stronger performers, along with, he said, Solutia, Mirant Corp. and Mississippi Chemical Corp., whose 7¼% notes due 2017 pushed into the lower 60s from prior levels in the mid-50s over several sessions after the bankrupt Jackson, Miss.-based chemical producer announced that it had lined up $182.5 million of debtor-in-possession financing.

The trader saw the week's downsiders including Adelphia, Calpine Corp. and RCN Corp.

There was no further movement in the bonds of Delta Air Lines Inc., which had risen on Thursday after the Atlanta-based air carrier's pilots' union said it expected to sit down with the cost-challenged airline for serious bargaining soon. Delta is demanding a 34.5% concession package from its pilots - the best paid in the airline business - while the captains have so far countered with an offer of concessions totaling about 13.5%.

Delta's 7.70% notes due 2005 ended the week on an up note, having firmed to 68 bid, 70 offered, while its 8.30% bonds due 2029 went home quoted as high as 44 bid.

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