aaiPharma bonds jump as new chief named; Delta down; Interstate Bakeries paper active

By Paul Deckelman and Sara Rosenberg

New York, Sept. 27 - aaiPharma Inc.'s bonds and shares were heard by traders to have firmed smartly on Tuesday, coinciding with the troubled Wilmington, N.C. -based pharmaceutical company's announcement of a shake-up in its top management ranks - the second in less than a year. On the downside, Delta Air Lines Inc.'s bonds were being quoted as much as two points lower after the ailing air carrier announced details of a series of belt-tightening measures, including a 10% across-the-board pay cut for everyone working for the company.

In bank debt trading, Interstate Bakeries Corp.'s paper was once again busy in the secondary market, traders said, continuing its recent improvement in the wake of the Kansas City, Mo.-based baking giant's Chapter 11 filing last week.

A trader in distressed bonds quoted aaiPharma's 11½% notes due 2010 as having pushed up to 60 bid, 62 offered Tuesday. He said those bonds had most recently been languishing in the 52 bid, 54 offered area, although another trader said the bonds had lately stayed around 55.5.

At another desk, the bonds were seen having gained four points on the day to that same 60 bid level.

aaiPharma's Nasdaq -traded shares meantime jumped 42 cents (31.11%) to $1.77 on volume of 1.6 million, more than triple the norm.

The company - which has been wrestling for most of the year with the growing fallout from its March 1 announcement of "sales abnormalities" in key product lines and the resulting need to delay earnings as it recalculates data for several recent quarters - said Tuesday that Ludo Reynders, who most recently held executive posts at Quintiles Transnational, a medical research services unit of Durham, N.C.-based Pharma Services, would immediately take over as president and chief executive officer, replacing the company's founder, Frederick D. Sancilio, who had stepped into those jobs on an interim basis back in February, replacing Philip Tabbiner. Sancilio also immediately relinquishes his chairman's position to board member and former North Carolina governor James G. Martin, who will serve as non-executive chairman. Sancilio will remain a member of the company's board.

The shuffle at the top is the latest personnel change at the company, which has also replaced its chief operating officer, chief financial officer and several other top executives so far this year as it attempts to restore investor confidence.

Delta bonds lower

Delta Air Lines' efforts to correct its massive financial woes and rebuild confidence were met with something less than applause in the bond market - although shareholders and convertible debt holders seemed to approve.

The problem-plagued air carrier - which is struggling to keep from following sector peers United Airlines and US Airways Group into bankruptcy - announced a series of specific cost-cutting measures, chief of which is a 10% paycut for everyone from the airline's executives to the guys who clean the offices at Delta's Atlanta headquarters and elsewhere every night.

Also on the agenda are a raise in the amount employees must contribute for their healthcare plan, and lowering the cap on the maximum amount of vacation time an employee can accrue to five weeks instead of six.

Bond players were not impressed. A trader said that Delta's benchmark 7.70% notes due 2005 started the session at 47 bid, 49 offered, dropped to 44 bid, 46 offered, and then firmed slightly off those lows - "bounce" is too strong a word - to end at 45 bid, 47 offered, still down two points on the session.

He saw the company's 8.30% notes due 2029 as having dropped to 21 bid, 23 offered from opening levels at 24 bid, 26 offered, before coming off the lows to finish at 22 bid, 24 offered.

Another trader saw the Delta's "kind of treading water," with the 8.30s at 24 bid, 25 offered and the 7.70s at 45.25 bid, 46.25 offered. The 8.30s, he said had been perhaps half a point weaker than their finish before improving later in the day.

A third trader quoted Delta's 7.70s off 1¾ points to 44.25, while its 7.90% notes due 2009 were 1½ points lower on the day at 27 bid.

But if bond investors were not reassured by the company's announcement, equity players most certainly were, with Delta's New York Stock Exchange-traded shares gaining 40 cents (13.61%) to end at $3.34 on volume of 8.2 million, nearly double the usual turnover.

In line with that equity rise, Delta's convertible bonds were also bouncing, its 8% converts up three-quarters of a point to 32.75 bid, while its 2 7/8% converts were heard up two to three points to 33.75.

Intermet unchanged

Back on terra firma, Intermet Corp.'s 9 ¾% notes due 2009 - which had fallen more than 40 points last week into the lower 30s after the Troy, Mich.-based automotive components maker warned that it would sustain losses of between $19 million and $24 million in the quarter, putting the company in violation of its credit facility covenants and necessitating a waiver from its lenders - were seen unchanged at 35 bid.

A trader saw Adelphia Communications Corp. bonds "mostly offered, with not much trading," with the bankrupt Greenwood Village, Colo.-based cable operator's 10¼% notes due 2008 at 86 bid, 88 offered, its 10¼% notes due 2011 at 90 bid, 92 offered, and its busted 6% convertibles at 28 bid, 30 offered.

Adelphia late Monday reported a $63 million loss on $328 million of income for August.

Interstate loan better

In bank debt trading, Interstate Bakeries' term loan was quoted Tuesday at 97.5 bid, 98 offered, and its revolver quoted at 98.25 bid, 99.25 offered, according to a trader. Both tranches were maybe up about a quarter on the day.

The paper has been steadily improving and actively trading since mid-last week, when the company announced that it filed for Chapter 11 in the U.S. Bankruptcy Court for the Western District of Missouri in Kansas City, mainly because of liquidity issues resulting from declining sales, a high fixed-cost structure, excess industry capacity, rising employee healthcare and pension costs and higher costs for ingredients and energy.

A day after filing, the wholesale baker and distributor of fresh baked bread and sweet goods - known for brands such as Wonder, Hostess, Dolly Madison and Drake's - received interim court approval permitting its $200 million debtor-in-possession financing facility from JPMorgan Chase Bank, and permitting it immediate access up to $50 million to continue operations, pay employees, and purchase goods and services going forward during the restructuring period.

Calpine loan better, bonds weaker

Calpine Corp.'s second-lien term loan was quoted at 88 bid, 89 offered, up about a point on the day, as people were happy to see that the "bond deal cleared", according to a trader.

The San Jose, Calif., power company priced $785 million of 9 5/8% first-priority senior secured notes due 2014 at 99.212.

Calpine also priced $725 million of unsecured convertible notes due 2014 at 83.9.

Proceeds from the bonds will be used to redeem or repurchase existing indebtedness through open-market purchases. Proceeds from the convertibles will be used to redeem in full its High Tides I and High Tides II preferred securities, to repurchase approximately $100 million of its High Tides III preferred securities and to repurchase other existing indebtedness through open- market purchases.

These offerings will not only help liquidity and take care of some upcoming maturities but have also managed to give investors more confidence in the company's ability to access the capital markets and follow-through on what it previously said it would attempt to do.

Calpine's new bonds were quoted trading at 98.5 bid, 98.75 offered, down from their 99.212 issue price.

A trader said the company's existing notes were mostly easier- although he saw its 8¼% senior notes due 2005 as having firmed to 99 bid from prior levels at 98.5 bid, 99 offered, which it had hit earlier "when people wondered whether the deal would get done."

Calpine, he said. "Priced their deal, and the '05s hung in there because they're short, but everything else was off."

He quoted the company's 8½% notes due 2011 at 65 bid, 66 offered, about half a point weaker, while even its 10½% notes due 2006 were "no higher" than 97 bid, 98 offered.

Another trader saw "a lot of trades in Calpine," all lower, with its 8¾% notes due 2013 down two points at 77.25 and its 8½% notes due 2010 off three quarter of a point at 78. He saw Calpine Canada's 8½% notes due 2008 three points lower at 70 bid.

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