ATA Holdings nosedives on loss warning; Mirant bank debt up despite weak numbers

By Paul Deckelman and Sara Rosenberg

New York, July 15- ATA Holdings Inc. bonds were seen losing altitude Thursday after the Indianapolis-based upstart air carrier warned that it would likely not make a profit this year due to the woes besetting the airline industry.

Among bank debt investors, Mirant Corp.'s 2003 paper was seen half a point higher on Thursday - even in the wake of disappointing monthly numbers released earlier in the week by the Atlanta-based power- generating company.

ATA - one of the relatively young low-cost air carriers that have been grabbing an ever increasing chunk of market share away from established old-line airlines like AMR Corp.'s American Airlines, bankrupt UAL Corp.'s United Airlines and the troubled Delta Air Lines Inc., as well as Northwest Airlines Corp. and Continental Airlines - has found that even lower cost structures and increasing revenues cannot protect the star-up carriers from the same industry dynamics that have hobbled their older rivals.

ATA said in an 8-K filing with the Securities and Exchange Commission that it "does not expect to earn a profit in2004. This updated guidance is a result of rising jet fuel costs and weak revenues caused by aggressive pricing in the industry."

ATA said it was "implementing cost-cutting measures to reduce the expected 2004 loss."

A trader quoted the 12 1/8% notes due 2010 at 40 bid, 45 offered - well down from levels in the 60s at the beginning of the week and even further below the prices in the 70s to 80s only a couple of weeks ago. He saw the company's 13% notes due 2009 offered at 45, with no bid seen.

Another trader saw the carrier's bonds having augured in to around 44 bid, 47 offered from prior levels at 50 bid, 52 offered.

Atlas, Enron unchanged on progress

Also in the air, some better news from Atlas Air Worldwide Holdings Inc., which saw its plan of reorganization approved Wednesday by the U.S. Bankruptcy Court for the Southern District of Florida. That clears the way for the Purchase, N.Y.-based air cargo operator to emerge from Chapter 11 somewhere around July 26. It had sought protection from its bondholders and other creditors on Jan. 30. Atlas' bonds were quoted in the high 40s, but a trader said he had seen little recent activity in them.

Also getting court approval for its restructuring plan was Enron Corp. The fallen Houston-based energy trading giant's own corporate paper was unchanged at 26.5 bid, while its Osprey Trust 8.31% notes due 2003 and 6 3/8% notes due 2003 were likewise steady at 36 bid and 35 bid, respectively.

Telewest plc, which completed its restructuring, was seen about a point better, its 11% bonds due 2007 at 58 bid.

Loral rises again

There was some upside activity in Loral Space & Communications for a second consecutive session. A trader quoted the bankrupt New York-based satellite company's 10% notes due 2006, which were up more than two points on Wednesday, as having pushed up to 76 bid, 78 offered Thursday, up another two points, while its 9½% subordinated notes were at 31 bid, 32 offered, also up a pair.

The trader also quoted Adelphia Communications Corp.'s bonds up half a point to a point, with the Greenwood Village Colo.-based cable operator's 9 3/8% notes due 2009 at 96 bid and its 10¾% notes due 2011 at 98. Adelphia earlier this week announced that it had chosen advisors who will help it sell the company - something the bankrupt company's bondholders and other creditors had been urging it to do for some time.

Mirant loans rise

Back in the bank debt sphere, Mirant's paper was quoted at 54.5 bid, 55 offered, according to a trader. That paper had moved down to 54 bid, 55 offered on Tuesday after the restructuring company released disappointing monthly numbers.

But the trader noted philosophically that "in this business, month-to-month is hard to make an investment decision on. I think people realized the long-term story looks OK.

"The whole market just felt a little better in general," the trader added.

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.

The Mirant Americas Generation bank paper was also said to have been quoted around 77 bid, 79 offered, also stronger on the day, according to the trader. The paper was quoted at 77.5 bid, 79.5 offered on Monday, after a four- or five-point run-up due to a report from DebtTraders that came out July 8, putting a buy on the paper.

But then, it too took a bit of a fall on the monthly numbers.

A bond trader meanwhile actually saw Mirant - which had firmed earlier in the week - "a little lower, kind of settling down, with the MAGI paper at 78 bid, 79 offered, down from 80 bid, 82 offered earlier. "But there was no activity," he said.

Leap Wireless' bank debt was also stronger with trades taking place in the 124 bid, 125 offered context, according to a trader, compared with Wednesday's levels of 122 bid, 123 offered.

This two-point rise in the San Diego-based telecommunications company's debt was also attributed to an overall stronger distressed secondary bank debt market.

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