Delta bonds little changed as debt-consent effort hits snag; Dan River off

By Paul Deckelman and Sara Rosenberg

New York, Aug. 26 - Delta Air Lines Inc.'s bonds were seen little changed in Thursday's dealings - even as the troubled Atlanta-based carrier continued its efforts to get certain noteholders to approve indenture changes that would ease the way for Delta to try to take out the bonds through a debt swap.

Elsewhere, bankrupt Danville, Va.-based textile maker Dan River Inc.'s bonds were lower.

Trading in distressed bank debt was virtually non-existent, traders noted. About the only name that anyone saw was Mirant Corp., whose 2003 bank debt was unchanged at 59 bid, 59.75 offered.

Separately, the Atlanta-based power generator said on Thursday that it hopes to emerge from bankruptcy in the first half of next year. It also said that it had expanded recently hired chief financial officer Michele Burns' duties, so that Burns will now serve also as the company's chief restructuring officer, overseeing the bankruptcy process.

Back among the bond investors, things were likewise extremely quiet, a trader said, saying that he saw "no change" in the bonds of Burns' former employer - Delta Air Lines - from their prior levels - quite a change from their volatile recent trading history .

Delta's benchmark 7.70% notes due 2005 were at 45 bid, 46 offered, its 10% notes due 2008 held steady at 35 bid, 37 offered, while its 8.30% bonds due 2029 were unchanged at 27 bid, 29 offered.

Delta's bonds had bounced around last week, first moving higher on indications that the union representing Delta's 7,500 pilots would come back to the bargaining table and might be persuaded to go along with the Atlanta-based air carrier's request for a 35% cut, equivalent to $1 billion in annual savings for Delta, which has probably the most expensive labor cost structure in the airline business. Delta was also presenting a turnaround business plan to the company's board of directors.

But that initial euphoria gave way to renewed downside movement, after Standard & Poor's downgraded Delta's bonds, warning its proposal to the company' secured bondholders for indenture changes might be laying the groundwork for a "coercive" note exchange on unfavorable terms for the noteholders.

The bonds traded back up this week off recent lows, helped by continued profit-taking in crude oil prices after their hefty recent run-up - a decline that is seen as a positive sign for customers of large amounts of petroleum distillates, such as jet fuel.

But even as oil prices gave fragile signs of beginning to moderate, the ailing airline faced further trouble.

Aircraft investor skepticism

A majority of the holders of the $1.7 billion in pass-through certificates and equipment trust certificates secured by liens on the company's aircraft expressed some skepticism about the company's effort to get them to agree to change the paper's indenture, saying they wanted more information about the company's turnaround business plan presented to the board of directors last week, and more information about what Delta planned to do if it were to be given those proposed indenture changes.

They also said that they would need time to study this information, so Delta's request that the certificate-holders approve the desired changes by an Aug. 31 deadline was a dead letter.

In response, Delta on Thursday released a series of questions - and answers - aimed at better explaining its plans for the certificates, and a convertibles market buyside source opined that the questions Delta included in the materials, as well as its answers, did shed some light on the situation.

The source said that he had read that "they only need consent from a handful of the ETC, PTC holders because apparently some of the ETC and PTC issues don't have the specific language restricting a restructuring" - one of the questions on the company's Q&A.

"Also, the fact that Delta will not be able to vote [any consents] should make the transaction more acceptable to the holders," he said.

But on Thursday evening, the group representing the majority of the ETC and PTC holders - now calling itself it the committee of senior secured aircraft creditors - said it would not agree to Delta's plan to restructure its debt because, it said, the company has refused to provide information it has requested. The committee said Delta had not presented data it needs on the airline's business plan, financial condition and restructuring plan. It called the Q&A released earlier in the day "totally inadequate to address Delta's restructuring plan."

Dan River declines

Apart from Delta, not much was happening among distressed bond issues, a trader said. He surmised that "something must be going on" with Dan River, although he did not know what it was. As evidence, he pointed to the bonds having dropped to an offered level of 19, with no bids, from prior levels around 19 bid, 20 offered.

Horizon bonds better

Likewise, he surmised that "something is going on" with Horizon Natural Resources, noting that the bankrupt Ashland, Ky. -based coal company's had risen to 4.5 bid, 5.5 offered from 3.75 bid, 4.5 offered before - an indication, he, said that talks might be underway to get bondholders and other unsecured creditors a slightly larger slice of the pie when the company's assets are divided up among its debtholders.

The bankruptcy court handing the restructuring case of the Ashland, Ky.-based coal producer - now known as Horizon Natural Resources - will decide whether to confirm the company's restructuring plan on Aug. 31 and will consider the results of its recent asset auction. The court is expected to approve the sale of the company's assets to billionaire financier Wilbur Ross' Newcoal LLC, Oldcoal LLC. The Ross company, in partnership with A.T. Massey Coal Co., won the court-mandated auction with a $786 million bid, split between $304 million in cash and $482 million in second-lien notes - plus the assumption of the company's liabilities. Unsecured bondholders expect to receive somewhere between three cents and five cents on the dollar.

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