Leap bank paper hops around, though ends unchanged; Parmalat firmer

By Paul Deckelman and Sara Rosenberg

New York, Aug. 12 - Leap Wireless International Inc.'s bank debt actively traded at basically unchanged levels Thursday, after the San Diego-based communications operator's released financial results that were seen as generally in line with market expectations.

In the bond-trading pits, Parmalat Finanzaria SpA's bonds were seen doing a little better after news reports said that the bankrupt Italian-based international dairy products giant was rejecting at least €1 billion in creditor claims from banks that helped it line up its financing - banks that Parmalat is now suing or intends to sue, and may seek to exclude as much as €5 billion in claims from its reorganization plan. The speculation was this would be good for bondholders, who might get a larger share of the pie in that event.

Leap's bank debt traded actively, a trader said, but at the end of the day continued to hover around the same 118 bid, 119 offered level to which it had moved previously.

He cited the fact that the earnings were more or less in line with what the market had been expecting, with no nasty surprises.

Fir the second quarter, Leap reported consolidated revenues of $205.7 million compared with the $185.6 million for the second quarter of 2003. It had a consolidated operating loss of $15 million versus $227.7 million last year, a consolidated net loss of $18.1 million, well down from $243.7 million last year, and consolidated EBITDA of $61.7 million, a sharp turnaround from the consolidated EBITDA loss of $155.4 million for the second quarter of 2003.

"The improvements in EBITDA performance we have reported to date highlight the major strides we have taken to deliver significant reductions to our cost structure while improving our top-line service revenue," Bill Freeman, chief executive officer of Leap, said in a news release.

"The results of the second quarter show that we will soon emerge from our restructuring as a strong, financially capable company with one of the lowest cost structures in the industry and a differentiated service offering that meets the needs of the value-conscious segments of the market," Freeman's statement continued.

The CEO added that Leap's strengthened balance sheet "will provide us with an excellent foundation for continuing to build the business as we emerge from the restructuring with a significant cash balance and leverage ratios among the lowest in the industry."

Leap expects to emerge from bankruptcy next week with long-term debt reduced to approximately $390 million from more than $2.4 billion. All of the issued and outstanding common stock, warrants and options of Leap will be cancelled on the effective date of the company's plan of reorganization and no distribution will be made to existing stock, option or warrant holders.

Leap's 12½% notes due 2010 meantime remain quoted at 17 bid and its zero-coupon notes due 2010 at 14, "where they've been for a while," a market source said.

Parmalat gains

Back among the bond investors, Parmalat's notes were seen having moved up to about 15.5 bid from prior levels around 13, as the company moved to shut out some of the creditor claims filed against it.

Parmalat - now under the control of administrator Enrico Bondi, following the ouster last year of company founder and chairman Callisto Tanzi - has sued, or has said it will sue, a number of major banks, including Citigroup, UBS, Bank of America and Deutsche Bank, claiming that they helped grease the skids for the company's massive collapse by hiding the company's true financial condition from investors, a contention that the banks vehemently reject. Along with the lawsuits, Bondi has so far swatted away about €1 billion of creditor claims presented by some of those banks. A Reuters news report quoted an analyst who estimated that the amount of rejected claims could reach as high as €5 billion - who said that rejecting those bank claims could in theory add anywhere from one to three points to the value of the company's battered bonds.

Delta decline halts

Elsewhere, Delta Air Lines Inc. bonds were seen having steadied on Thursday after having fallen over three straight sessions on renewed investor concerns following the company's disclosure that it is burning through its cash reserves at an alarming rate - they have fallen to about $2 billion from $2.7 billion at the beginning of the year and may erode by a similar amount for the rest of the year, absent big pay cuts from its pilots or a drop in fuel prices, neither scenario seen as likely at this juncture.

Delta was "sloppy - but no sloppier than they were before," a trader said in quoting the Atlanta-based carrier's 7.70% notes due 2005 remaining that the 41 bid level to which they had recently slid and its 8.30% notes due 2029 still at 26 bid, 28 offered.

Kaiser lower after failed sale

A distressed-debt trader saw Kaiser Aluminum & Chemical's 10 7/8% notes due 2006 at 96 bid, down from around 99 on Wednesday and well down from their recent highs around 107 bid, 109 offered.

The bankrupt Houston-based metals producer's bonds slid after it announced that it had failed to get any qualified bids for its 20% stake in Australian aluminum producer QAL, and would therefore cancel Monday's scheduled auction for the asset and would consider other options. Kaiser had hoped to generate bids of at least $525 million for the QAL stake.

The trader said he saw Kaiser's deeply distressed junior bonds fall to 14 bid, 16 offered on the news, from 22 bid, 24 offered previously.

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