Mirant bank debt retreats after rise; Delta bonds fall on charge, airline industry woes

By Paul Deckelman and Sara Rosenberg

New York, July 13 - Mirant Corp.'s 2003 bank debt was heard to have dropped by a point on Tuesday, giving up Monday's gains, a trader said, after the restructuring Atlanta-based energy company released disappointing monthly numbers.

Another Atlanta-based company was also making waves among distressed-debt investors, with Delta Air Lines Inc.'s bonds heard down at least two to three points across the board after the company announced that it would take a massive non-cash earnings charge - and several other pieces of negative news caused turbulence in the struggling airline industry.

Mirant's bank debt backpedaled to 54 bid, 55 offered after the release of the numbers, according to a trader.

Prior to Tuesday, the paper had been heading higher in response, the trader said, to a report from DebtTraders that came out July 8 putting a buy on the notes. DebtTraders estimated 110.21% recovery on the Mirant Americas Generation notes and 79.77% on the Mirant notes.

According to the numbers released Tuesday, for the month ended May 31, Mirant had about $1.3 billion in cash and cash equivalents, down from about $1.5 billion at the end of April.

It also showed about $395 million in net revenues versus about $336 million in net revenues for April and a net loss of about $52 million - wider than the net loss of about $35 million for April.

For the quarter ended May 31, Mirant had a net loss of about $17.4 million and net revenues of $730.8 million.

Mirant's bonds had also been up on Monday ahead of the release of the notes, particularly those of its Mirant Americas Generation subsidiary. But while the bank debt headed south, a trader in distressed bonds called Mirant's bonds "a little better," quoting the MAGI notes at 80 bid, 82 offered, "up a couple," while the basic Mirant Corp. bonds, like its 7.40% notes, were a point better at 58 bid, 60 offered.

Elsewhere in distressed land, the trader pegged Pegasus Satellite & Communications Inc.'s senior notes up about a point or so, with its 12 3/8% notes and 9¾% notes firming to 52 bid, 54 offered, while its 11¼% notes were at 53 bid, 55 offered.

There was no fresh news seen out on the Bala Cynwyd, Pa.-based satellite television programming distributor, which filed for Chapter 11 protection in early June as part of its ongoing battle to hang on to its exclusive right to distribute DirecTV service to its 1.1 million mostly rural customers - a set up that DirecTV itself has been trying to end for months.

Delta declines

Delta Air Lines' paper was losing altitude Tuesday, after the third-largest U.S. air carrier said that it would take a second-quarter charge of $1.65 billion to cover deferred income taxes and pilots' pensions. It was the latest negative news about the carrier, which has warned that it could conceivably end up in Chapter 11 unless its pilots give it substantial wage concessions - more than a third of their scheduled salaries - and agrees to other concessions.

There was meanwhile more bad news for the whole airline industry, with JetBlue, one of the highest fliers among the emerging low-cost carriers, announcing that it would put a million seats on sale for up to half-off this fall, including $99 one-way fares from New York or Boston to cities in California. JetBlue thus follows the lead of low-cost industry leader Southwest Airlines and other low-cost peers - and analysts fear this may goad the large network carriers, like Delta, into likewise cutting fares to hang onto market share, cutting off their own revenue streams in the process.

And Smith Barney Citigroup downgraded the shares of AMR Corp. - the parent of American Airlines, the largest U.S. carrier - saying rivals who restructured could wind up with lower costs. Delta is looking to follow the lead of AMR, which last year forced their pilots into large concessions in order to keep the airline alive.

Delta's 7.70% notes due 2005 were seen to have traded down on Tuesday to 62 bid, 64 offered from 65 bid, 66 offered previously, while its 8.30% bonds due 2029 lost two points to end at 38 bid, 40 offered.

Another trader saw Delta's 7.90% notes due 2009 slipping to 47.75 bid from 51 previously, while its 9¾% notes due 2021 were down a pair at 44 bid.

Delta's New York Stock Exchange-traded shares meantime swooned 66 cents (9.78%) to end at $6.09.

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