Mirant debt continues to firm; Pegasus up on rumors

By Paul Deckelman and Sara Rosenberg

New York, July 16- Mirant Corp.'s bank debt was seen higher for the second day in a row Friday, this time moving up by about three quarters of a point as the overall distressed bank loan market once again felt stronger.

On the bond side of the ledger, Pegasus Satellite & Communications Inc. bonds continued to improve, pushed up, a trader said, by market rumors about the bankrupt Bala Cynwyd, Pa.-based satellite television programming distributor.

Mirant's 2003 bank paper was quoted at 55.25 bid, 55.75 offered, according to a trader, up from Thursday's levels of 54.5 bid, 55 offered.

That paper had moved down to 54 bid, 55 offered on Tuesday after the restructuring Atlanta-based power generating company released disappointing monthly numbers.

Its Mirant Americas Generating Inc. bonds were seen around 78 bid, steady on the day but off the highs for the week at 80 bid, 81 offered, while Mirant Corp. notes stayed in the upper 50s.

Also in the upper 50s: Pegasus, whose 11¼% notes, along with most of the rest of the company's senior notes, were seen at 59.5 bid, 60.5 offered, well up from the levels at which they started the week, at 53 bid, 54 offered.

"It was an admirable showing for a piece of garbage," a trader declared.

Pegasus - for the moment - distributes DirecTV service to about 1.1 million mostly rural customers, but its exclusive franchise to do so is scheduled to come to an end on Aug. 31.

The two companies have been feuding for some time over just how much those customers should actually be worth to El Segundo, Calif.-based DirecTV. 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. It filed for bankruptcy protection in Portland on June 2, charging that DirecTV and NRTC were conspiring to destroy its business, and saying that the filing was the only way to preserve the value of its distribution agreement. Pegasus said DirecTV and NRTC had no right to unilaterally abrogate its exclusive contract.

In response to the bankruptcy filing, DirecTV recently began to market its services to new customers in Pegasus' formerly "exclusive" territory - and the Portland court ruled last month that DirecTV was within its rights, and refused to grant Pegasus a court order to stop the practice.

The trader said that "the rumor is that DTV is going to make a legitimate bid to buy the assets - the subscribers - versus just stealing them or taking them away, and that's seems to be the rumbling.

"Will it get you par on these bond? I doubt it. But does it get you 65 or 70? Probably."

Whether that's a good thing or a bad thing, of course, depends entirely on when a bondholder got into the issue. Long time holders who rode the bonds down from their former higher levels will end up getting their hair cut - but vulture investors who swooped down and got in after Pegasus had declared bankruptcy and the bonds were languishing in the 40s, will profit handsomely.

Loral, Adelphia valuations

Another big gainer this past week, the trader said, has been Loral Space & Communications, particularly Loral's 10% notes due 2006. Those bonds began the week at 71 bid, 73 offered - and ended at 75 bid, 76 offered.

A trader attributed the strength in the bankrupt New York-based satellite company's bonds to market perception that the company might actually be worth more than had originally been estimated.

And the question of how much a bankrupt company's assets are really worth will be at the center of thinking for Adelphia Communications Corp. debtholders, now that the Greenwood Village, Colo.-based cable company is moving forward in its efforts to sell the company - a step that debtholders had long been urging management to consider as the company's primary option, rather than trying to emerge from Chapter 11 as an independent operator.

On Wednesday, Adelphia announced that it had hired UBS Investment Bank LLC and Allen & Company LLC as its financial advisors and Sullivan & Cromwell LLP as its legal advisors for the sale of the company. The selections are still subject to review and approval by the U.S. Bankruptcy Court for the Southern District of New York.

Adelphia chairman and chief executive officer Bill Schleyer said that the selection of the advisors "paves the way for a robust and organized sale process. Although the selection was slowed somewhat by the constraints of the bankruptcy process, the company has been working diligently for the past several months preparing all the necessary information and documentation to facilitate the sale and accelerate the auction process. "

Willkie Farr & Gallagher LLP will continue as Adelphia's lead legal counsel for the Chapter 11 process. Lazard Freres & Co. LLC will continue to provide financial advice to the Colorado cabler on its potential reorganization.

Adelphia's 9 7/8% notes due 2007 were seen down about a quarter point Friday, to 95.5 bid.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.