Delta bonds quiet, mixed as big run-up fizzles out; Mirant unit debt seen better

By Paul Deckelman and Sara Rosenberg

New York, Nov. 1 - Delta Air Lines Inc. bonds - which had shot up sharply for most of last week - were seen generally mixed in quiet trading Monday, the big run-up in the bonds apparently having run its course.

In bank debt trading, Mirant Corp.'s MAGI debt was seen up about a point on the day, according to a trader who could find no specific catalyst behind the movement.

Delta's benchmark 7.70% notes due 2005 were being quoted up about a point on the session at 78 bid. They had jumped about 30 points, to the mid-70s from the mid-40s over a five-session period that ended last Thursday, propelled by market speculation - which later turned out to be right that the beleaguered Atlanta-based airline and the union representing its more than 7.000 pilots would reach agreement on the $1 billion of wage-cut concessions that Delta said was absolutely essential if it were to stay out of bankruptcy.

That having happened, the huge run-up eased on Friday, with a little more upside push, but in restrained dealings. And that was certainly the case Monday with the 7.70s, said traders, who noted that in general, not much was going on in the junk bond market ahead of Tuesday's U.S. presidential elections.

A market source said that, if anything, Delta's other bonds were actually easier Monday, with its 7.90% notes due 2009 half a point down at 45 bid and its 8.30% notes due 2029 a point lower at 36. The 7.90s had jumped to the mid 40s from prior levels in the upper 20s, following the 7.70s up, while the 8.30s had managed to claw their way into the upper 30s from original levels in the lower 20s.

A distressed-debt trader, when asked whether anything was going on with Delta, answered: "Nothing that I saw." Other market players saw the Delta bonds mostly unchanged as well.

The Delta pilots - considered the highest paid in the airline industry, earning salaries ranging from $100,000 to $300,000 annually, depending on their seniority and the routes they fly, were scheduled to begin voting Monday on the new five year contract, which imposes a 32.5% wage cut on Dec. 1 and then holds wages at those levels for the remainder of the agreement. There are also work rule changes designed to wring more productivity out of the pilots, and some changes in the pension structure. In return, Delta is offering the captains the option of buying up to 15% of the company's stock at favorable prices, according to published reports.

Delta has meantime cautioned that the pilot concessions alone will not be enough to stave off bankruptcy - it is also looking for cooperation from its bondholders in whittling down its $20 billion of debt, and has an exchange offer pending that would result in a reduction of more than $800 million principal amount if completed.

Delta also announced Monday that it had lined up some $500 million of new financing from GE Commercial Finance. Cash-hungry Delta last week announced $600 million of new financing from a unit of American Express Corp., including $100 million that is included in the new GE-led financing.

Mirant loans gain

In bank debt trading, loans of Mirant Americas Generating Inc., a subsidiary of bankrupt Atlanta based power-generator Mirant, were seen better, with quotes of 97.25 bid, 98.25 offered.

That debt has been steadily rising since Mirant released positive monthly operating numbers last week. While the company had earnings of $17.79 million in August on sales of $349.99 million, compared to earnings of $98.09 million on revenue of $437.38 million in July, and operating income of $88.85 million in August compared with $116.06 million in July. It saw an increase in cash and cash equivalents to $1.48 billion in August compared with $1.397 billion for July.

But while the MAGI debt was firmer, the parent company's Mirant '03 bank debt was pretty much unchanged on the day at 62 bid, 63 offered, the trader added.

Federal-Mogul loans higher

Federal-Mogul Corp.'s bank debt was also stronger on the day, up by about a half a point to a full point with the bid side moving up to right around the 94 level, according to a trader.

Again, there was no specific news behind the pop, but recent positive financial projections and syndication of its new deal has been said to be creating more focus in the name over the last week or so.

The Southfield, Mich.-based supplier of vehicular parts, components, modules and systems, was forced to seek bankruptcy protection after being hit with numerous lawsuits claiming plaintiffs' medical problems from exposure to asbestos.

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