Pegasus bonds hold generally higher levels in quiet market; Galey & Lord bank debt tightens

By Paul Deckelman and Sara Rosenberg

New York, July 6 - Pegasus Satellite & Communications Inc. bonds were seen pretty much holding on to the higher levels to which the Bala Cynwyd, Pa.-based satellite television programming distributor's bonds had moved last week, despite the lack of any firm new news Tuesday. Other distressed-bond names were likewise steady in generally dull post-holiday trading, even if there was news out about the companies, traders said

Among bank-loan investors, Galey & Lord Inc.'s debt moved a bit higher on the bid side but lower on the offer side, with players seeing the company's levels beginning to tighten up from last week.

That bank debt, which was given out to investors as recovery upon the company's emergence from Chapter 11 in March, was quoted at 38 bid, 43 offered, according to a trader. At the end of last week, the paper had been quoted at 35 bid, 45 offered - well down from 48 bid, 49 offered previously.

But "there's no real trading. We're just trying to get a feel for where it is and where we can get a transaction done," the trader said.

Last week, the bank debt plummeted after the New York textile company held a private investor call that sparked rumors of a possible liquidation.

Back among the bonds, a distressed-debt trader saw Pegasus as basically "unmoved," quoting the company's senior paper around 51 bid, 53 offered.

At another desk, where those bonds had obviously been quoted somewhat lower last week, they were seen having now moved a little higher to levels like 50 bid for Pegasus' 9¾% 9 5/8% and 11¼% notes, up from 48.5 previously, while the company's 12½% notes due 2007 was seen having improved to 51 bid from 439.5.

Pegasus - for now - distributes DirecTV 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 Group Inc.

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 Me. on June 2.

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.

But while Pegasus bonds are worth less than half of their par value, the stock of corporate parent Pegasus Communications Corp. remains firm after several sessions of solid gains at the end of June. Equity investors apparently feel that Pegasus Communications won't be sucked into the bankruptcy mess and will retain its assets. They have also been heartened by active recent buying by a hedge fund, Peninsula Capital.

Those Nasdaq-traded shares, however, finished slightly lower at $21.42 on very light volume on Tuesday.

Parmalat unchanged despite exit hopes

Elsewhere, Parmalat Finanzaria SpA's bonds were unchanged around 16 bid, 18 offered, a trader said, with "nothing" doing in them - this despite indications that the bankrupt Italian-based dairy products producer is getting closer to its goal of emerging from bankruptcy.

Italy's minister for industry, Antonio Marzano, said on Monday that expects to give the green light to Parmalat's restructuring plan within a matter of days. Government-appointed turnaround administrator Enrico Bondi gave a final draft of the plan to the government a week ago.

While the minister is optimistic, the plan is by no means a done deal. Under fast-track Italian insolvency laws passed late last year when Parmalat's house of cards started to collapse, the five-member oversight panel that was set up to oversee Bondi's actions must first clear the plan before Marzano can give it the final go-ahead.

Under terms of the plan that have been released so far, creditors will take shares in a newly chartered company in exchange for canceling much of Parmalat's €14 billion debt. Parmalat creditors indicated Friday that they are likely to approve the rescue plan even though they may get only 15% of what they are owed, bondholders said on Friday.

Parmalat sought insolvency protection in the Italian courts after it revealed a multi-billion-euro hole in its accounts.

Air Canada, OM steady

Other distressed names seen holding steady on Tuesday, even if there was news out on them included Air Canada, continuing to hover around the 29-30 bid altitude level even though the Canadian national air carrier announced that the Ontario Superior Court overseeing its reorganization had given its OK for Cerberus Capital to invest C$250million in the company.

OM Group's 9¼% notes 2011 were seen unchanged at 102.5 bid, even as the Cleveland-based chemical company said it was talking with major debtholders, trying to convince them to not speed up repayment of their notes after OM defaulted on the debt by not filing its full-year 2003 and first-quarter 2004 financial reports on time.

The company said that the largest holders of the bonds have waived their rights to accelerate payments after the company delayed its Securities and Exchange Commission filings. OM expects the majority of noteholders to waive the terms of the notes as well.

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