Airlines continue retreat as oil prices gyrate; Trump bonds better after Chapter 11 filing

By Paul Deckelman

New York, Nov. 22 - World crude oil prices went on a wild ride Monday, dragging airlines bonds around after them; although in the end the crude prices came off their highs and actually eased a little from Friday's level, their volatility remains an uncomfortable reminder for the air carriers that their finances are largely at the mercy of factors which they cannot control, such as energy costs.

Elsewhere, the long-awaited dropping of the other shoe for Trump Hotels & Casino Resorts happened over the weekend, when the Atlantic City, N.J.-based gaming company filed for chapter 11 protection so it could implement its previously announced recapitalization and reorganization plan. The company's bonds were better Monday.

Oil prices - which had been gradually retreating down to around $45-$46 per barrel from the high of $55.17 for a barrel of crude reached last month on the New York Mercantile Exchange - started heading back up around the tail end of last week, spurred by a shortage of heating oil and other distillates - including jet fuel - and fears that a cold winter and production cutbacks by the Organization of Petroleum Exporting Companies might boost prices still further. Energy costs are the second biggest expense for the airlines, exceeded only by labor costs.

On Monday, crude spiked back up to around $49 a barrel, before coming off those highs to finish at $48.64 for a barrel of light sweet crude, down 25 cents, on the New York Mercantile Exchange.

But the gyrations unsettled investors in both airline stocks and airline bonds, and the major carriers were all heard to have headed lower, particularly Delta Air Lines Inc., whose benchmark 7.70% notes due 2005 were seen having retreated to 83 bid, 85 offered from 85 bid, 87 offered on Friday.

A trader said the troubled Atlanta-based carrier's bonds were "a little weaker," quoting its 8.30% notes due 2029 as having fallen back to 40 bid, 41 offered from 42.25 bid, 43.25 offered.

At another desk, a market source saw the long Deltas at 40.5 bid, saw the airline's 7.90% notes due 2009 at 54, and pegged the 7.70s at 83.5, all down two points on the day.

However, another trader said that at his shop "we didn't see very much action [in Delta], adding, though, that "my sense is they're probably a little softer."

Delta's slide was replicated in the movement of the bonds of its air-carrier rivals. A trader saw American Airlines parent AMR Corp.'s 9% notes due 2012 at 70 bid, 71 offered, down from 71 bid, 72 offered.

AMR had its own bad news for the ailing industry Monday, with the announcement that the Fort Worth, Tex.-based carrier was delaying the delivery of 54 jetliners from Boeing Co.

The largest U.S. carrier had originally agreed to take the planes between 2006 and 2010, but it said Monday it would defer delivery to delay $2.7 billion in spending through 2010, with more than half of those slated for the next three years.

Chief financial officer James Beer said in a statement that delaying the delivery of the planes - and the heavy cash outlay it would provoke - would improve the airline's ability to restructure its finances.

Other airline names seen heading lower in sector sympathy with AMR and troubled Delta included Continental Airlines Inc., whose 8% notes due 2005 were seen half a point lower at 104.5, while Northwest Airlines Corp.'s 7 7/8% notes due 2008 were quoted down 1½ points at 76.

Trump up on Chapter 11 filing

Elsewhere, the expectations that the ailing, debt-bloated Trump Hotels & Casino Resorts has finally taken the radical step it needs in order to reorganize its finances helped give the company's bonds something of a boost, with the benchmark Trump Atlantic City Associates 11¼% second mortgage notes due 2006 at 90.75 bid, up half a point, and the THCR 12 5/8% notes at 108.5 bid, up ¾ point.

Another trader saw the A.C.s up at least two points to 90 bid, 91 offered.

Under the terms of the company's bankruptcy filing, the holders of roughly $1.8 billion of Trump notes, including the $1.3 billion of the A.C.s, would exchange them for $74 million in cash, along with $1.25 billion of new 10-year notes and about $395 million worth of common stock (see related story elsewhere in this issue).

The bondholders will own about two-thirds of the company, while Donald Trump's stake will shrink to about 27% from 56% pre-petition, but he will not be told "you're fired" - the scowling real estate magnate's trademark punch line on his TV show "The Apprentice." He will instead will remain as chairman, chief executive and public frontman for the company's three New Jersey casinos.

Adelphia higher

While Trump is just going into bankruptcy, another company that's been there for a while hopes to be out soon and its bonds were seen up Monday, despite a lack of fresh news.

A trader in distressed issues saw Adelphia Communications Corp.'s 10¼% notes due 2011 firm to 95 bid, 97 offered from 92 bid, 93 offered, while the Greenwood, Colo.-based cable TV operator's 10¼% notes due 2006 firmed to 90 bid, 92 offered from 88 bid, 89 offered before.

"Their senior notes did better," he said, "but their convertible notes did not." He saw no rationale behind the rise in Adelphia, which is in the process of trying to sell its cable assets in an auction which could fetch at least $17 billion for its creditors.

At another desk, Adelphia's 9 7/8% notes due 2007 were seen up a point at 89.5 bid. Its Century Communications unit's 8 7/8% notes due 2007 were half a point better at 118.

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