WestPoint Stevens bank debt unravels amid covenant move

By Paul Deckelman and Sara Rosenberg

New York, July 20- WestPoint Stevens Inc.'s bank debt continued to tumble on Tuesday in the wake of the bankrupt Georgia-based textile maker's move to amend its lending covenants.

Among bond investors, Loral Orion's notes and those of its parent Loral Space & Communications continued to firm, despite a lack of fresh news about the bankrupt New York-based communications satellite company.

WestPoint's bank debt was seen Tuesday falling to 82 bid, 85 offered, according to a trader. By way of comparison, on Monday the paper had been quoted at 84 bid, 86.5 offered and on Friday it was at 87.25 bid, 88.25 offered.

"They want to amend their covenants," the trader said. "But it sounds like there's some private info that the banks have that's really causing this."

A trader in distressed junk bonds meanwhile saw the company's nearly worthless notes lose fully a third of their value - as they swooned to 1 bid, 2 offered from prior levels at 1.5 bid, 2.5 offered.

On Friday, WestPoint Stevens filed a request with the U.S. Bankruptcy Court for the District of Delaware asking for an amendment to its debtor-in-possession facility that would change the covenant setting minimum levels of earnings before income tax, depreciation and amortization.

The West Point, Ga.-based textile firm is seeking the amendment due to a fear of possible non-compliance resulting from inventory cuts.

Under the proposed changes, WestPoint Stevens' new minimum required EBITDA for the four consecutive quarters ending on the last fiscal day of June would be $95 million instead of $101 million and for the four consecutive quarters ending on the last fiscal day of September $86 million instead of $106 million. It would also lower the minimum EBITDA for the four consecutive quarters ending on the last fiscal day of December to $80 million plus an amount derived from the sale of the inventory. The original minimum EBITDA was $104 million. Finally, the amendment would change the minimum EBITDA for four consecutive quarters ending on the last fiscal day of March 2005 to $80 million from $104 million.

Loral rises

Elsewhere, Loral Orion's 10% notes due 2006 were seen by a trader as having gained a point to close at 76 bid.

At another desk, the Loral notes were being quoted at levels as high as 78 bid, up a point or two on the session.

Traders said there had been no fresh news that they saw out on the company, instead attributing the rise to recent move by a shareholders' group that claims the company improperly undervalued itself in Chapter 11 in order to leave them with nothing for their holdings.

The equity group, led by shareholders Tony Christ and Jeffrey Swarts, claims to hold about 3.5% of the company's shares. It said in court papers filed earlier this month with the U.S. Bankruptcy Court in New York that that Loral's market value should be at least $19 a share.

The group said it hired a patent expert who claimed Loral's patents and trademarks alone are worth more than $500 million, while the company said the value of such intellectual property is not known.

The group also claimed Loral undervalued its orbital satellite slots, proprietary satellite designs and other assets in an effort to leave out common stockholders.

The dissident holders, who call themselves the Loral Stockholders Protective Committee, said plan to argue in a court hearing next week that they should be accorded "official" status, which would let them hire legal and financial advisors at company expense to press their claims.

Loral filed for bankruptcy in July 2003; it has said in its regulatory filings that its equity will likely be worthless after its reorganization is submitted to the court.

Mirant loans, bonds gain

Mirant Corp.'s 2003 bank debt was stronger on Tuesday by about a point and a half, according to a trader, with the paper quoted at 56.5 bid, 57.5 offered.

No specific news was seen as a potential impetus behind the Atlanta power company's move.

Mirant's corporate bonds were also firmer, its 7.90% notes due 2009 pushing up to 60 bid from prior levels at 58.5, although its Mirant Americas Generating Inc. bonds were seen little changed, the MAGI 7.20% notes due 2008 at 80 bid.

Another trader also saw the parent company's bonds firmer, its 2½% convertible notes pushing as high as 58.375 bid, 59 offered from 56 bid, 58 offered earlier. He saw the MAGIs up a point across the board, at 79.

Adelphia loans steady, bonds slip

Adelphia Communications Corp.'s Century bank debt stabilized Tuesday after dropping off by about a half a point to three quarters of a point during the previous day's activity, according to a trader.

The Old Century bank debt was quoted unchanged on the day at 96.5 bid, 97.5 offered and the New Century bank debt, also unchanged, was quoted at 96 bid, 97 offered.

On the bond side of the ledger, a trader saw the company's 10 7/8% notes due 2010 losing a point to end at 96 bid. Its 9 5/8% notes due 2007 were also down a point at 95.

The bankrupt Greenwood Village, Colo. cable company did not put out any news to cause the downturn seen on Monday - especially since most investors have been happier with the name since UBS Investment Bank LLC and Allen & Company LLC were hired last week as financial advisors and Sullivan & Cromwell LLP as legal advisors for the sale of the company.

Bondholders and bank debt investors had for weeks scoffed at management's stated intention of emerging from Chapter 11 as an independent company, arguing that they would get a greater return were Adelphia to be sold - either piecemeal or in one fell swoop to some other cable giant.

Leap Wireless' bank debt also took a nice little jump, with levels moving to 126 bid from 124 bid, 125 offered on the open, according to a trader.

The San Diego-based telecommunications company's paper "got a kick to it in the afternoon," the trader added.

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