Adelphia bank debt better, bonds vary; aaiPharma off after results, CEO hospitalization

By Paul Deckelman and Sara Rosenberg

New York, Nov. 10 - Adelphia Communications Corp.'s bank debt was seen stronger Wednesday, as investors reacted to the news that the company's unsecured creditors had formulated a plan for an alternative restructuring if the company opts not to go the route of selling assets. Meanwhile, bond traders saw the different issues of the bankrupt GreenwoodVillage, Colo.-based cable operator all over the map, with some issues firming handsomely and others in retreat.

And traders saw the bonds of aaiPharma Inc. lower, in line with a dive by the Wilmington, N.C.-based pharmaceuticals company's stock following its weak third-quarter results and the unexpected hospitalization of its chief executive officer.

Adelphia's loans firmed as investors were "playing the take out," a trader said, under the assumption that they will be paid down at par when the company emerges from bankruptcy. Such speculation intensified given new chatter that the unsecured creditors' committee had offered up its own Plan B in the event that Adelphia doesn't sell its assets off, either piecemeal or to one or two bidders.

"All flavors are straddled around par," the trader said. "Century New and Olympus are 99.5 [bid], par [offered]. Century Old is 99 bid with no real offers," he added.

If Adelphia's bank debt was uniformly higher, its bond debt was anything but.

A trader noted that while the Century bonds, such as the 8 3/8% notes due 2008 and the zero-coupon notes due 2008 were clearly higher, the Adelphia corporate paper was on the downside, with Tuesday's news about the creditor's committee having "an obvious negative effect on the market. There was lots of trading in Adelphia," he added.

He saw the 8 3/8s push up to 117 bid from prior levels at 112, while the zeroes firmed to 69 bid from 61.5.

On the downside, he pegged Adelphia's 10¼% notes due 2011 as having fallen to 89.5 bid from 92 and its 101/4s due 2006 retreating to 83.5 bid from 86.75.

He also saw Adelphia's 10 7/8% notes due 2010 ease to 87.5 bid from 88.625; its 9 3/8% notes due 2009 go down to 85.75 bid from 88.75; and its 7 7/8% notes due 2009 lose a point to end at 82.5 bid.

Another market source saw Adelphia's paper "all up a little," with the Century 2008 zeroes up two points to 68, the 8 3/8% notes due 2017 1½ points better at 116.5 and the 9 3/8% notes due 2009 three points better at 89.

Another trader, who had the 10¼% notes due 2011 pegged lower to begin with, saw that paper gain two points to 89 bid, 91 offered.

On Tuesday, the Adelphia creditors committee proposed a reorganization in which, among other things, secured debts will be repaid in cash and the unsecured creditors would get 500 million new common shares in the reorganized company, based on a $17 billion agreed enterprise value after deducting or reserving payments to bank lenders and other senior creditors.

Debtor-in-possession claims are assumed to be $772.5 million and bank claims are estimated to be $6.82 billion with $500 million reserved for administrative claims and $251.6 million for other secured claims. If Adelphia does not go ahead with a planned new financing, then bank claims will be paid from available cash and will then receive new notes for the remainder of their claim.

Adelphia - which filed for bankruptcy on June 25, 2002, amid claims that the controlling Rigas family had systematically looted hundreds of millions of dollars from company coffers for their own benefit - charges that Adelphia patriarch John Rigas and his family deny - also said it expects to have final offers for the company's assets in January 2005.

Adelphia began an auction process in September at the behest of noteholders who said that the company's initial plan to emerge from bankruptcy as a stand-alone company did not provide enough return for its bond creditors. Adelphia somewhat reluctantly agreed to an auction process, where analysts have estimated that the assets could fetch as much as $20 billion. Cable giants Time Warner Cable and Comcast are seen as likely bidders, either jointly or separately, for many of Adelphia's assets, including its corporate crown jewels - its lucrative cable operations in the Los Angeles metropolitan area.

aaiPharma drops

Elsewhere, aaiPharma's 11½% notes due 2010 were seen down 4¼ points Wednesday to 72 bid.

That was in line with a loss of 53 cents (14.64%) in its Nasdaq-traded shares to $3.09, on heavier-than-usual volume of 1.7 million shares.

That loss in turn followed the company's wider third-quarter loss and the hospitalization of its CEO.

aaiPharma reported a loss of $33.8 million ($1.18 a share) on revenue of $43.2 million, a worsening from the year-ago red ink of $9.4 million (34 cents a share), on revenue of $39.7 million. Wall Street analysts had expected a consensus loss of $9.4 million (19 cents a share) on revenue of $51.4 million.

As if that weren't enough bad news for aaiPharma - which has been battling accounting irregularities and a series of management changes all year - the company said that president/CEO Dr. Ludo J. Reynders has been hospitalized with "suspected pneumonia."

Reynders had just assumed command of the troubled company in late September, taking over from Frederick D. Sancilio, the company's founder, who had been the interim CEO since February, when he replaced Dr. Philip Tabbiner. With Renders incapacitated for the near term, his duties will be assumed by Timothy Wright - who thus becomes the fourth person this year to be performing the day-to-day CEO duties.

Mirant loans up further

Back among the bank loan investors, Mirant Corp.'s '05 paper was up a couple of points on the day at 69.75 bid, 71.75 offered, while the '03 paper basically was unchanged at 67 bid, 68 offered, and the MAGI (Mirant Americas Generating Inc.) debt was quoted slightly firmer at 97.75 bid, 98.75 offered, according to a trader.

However, all of the Mirant paper has been steadily improving since the Atlanta-based energy company released positive operating numbers about two weeks ago.

"It all started with earnings. A new investor class came in. That helped to drive the market. A lot of the guys that got burned through the first bankruptcy got reengaged and that's helped sustain a bid and push it higher," the trader explained.

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