Delta bonds up on oil price drop, financing news; asbestos bank debt resumes climb

By Paul Deckelman and Sara Rosenberg

New York, Dec. 2 - Delta Air Lines Inc. bonds were quoted higher across the board Thursday, as the Atlanta-based air carrier announced new financing and as world crude oil prices - seen as a reliable leading indicator for jet fuel prices - continued to slide on world commodity markets.

In the bank-debt sphere, Owens Corning and W.R. Grace & Co.'s loan paper once again headed higher after taking a breather on Wednesday, although market participants saw no real catalyst for the move.

Delta's benchmark 7.70% notes due 2005 were seen by a trader in distressed bonds as having pushed as high as 90 bid, 91 offered, from 87 bid, 89 offered.

At another desk, the 7.70s were seen up 3½ points on the session at 90 bid. Delta's 7.90% notes due 2009 firmed to 58.5 bid, from 55.5, and its 8.30% notes due 2029 were two points better on the session, at 44.5 bid.

Another trader was more restrained, seeing the Delta up a point across the board.

Delta's New York Stock Exchange-traded shares, meantime, was up 58 cents (7.95%) to end at $7.88. Volume of 16 million shares was about twice the average daily handle.

After the market close on Wednesday, Delta announced that it had it completed agreements with several lenders to obtain $1.1 billion of new funding, - and then immediately borrowed $830 million of it.

Delta - whose cash-burn rate in the face of higher fuel prices and consequent liquidity slide has triggered alarms among investors and analysts - obtained the financing from GE Commercial Finance, a unit of General Electric Co., and from an American Express Co. unit, Travel Related Services Co.

In other Delta developments, the carrier announced that 229 pilots had retired ahead of Wednesday's imposition of a 32.5% pay cut - a level which will be in effect for the next five years, part of Delta's efforts to cut costs and stave off possible bankruptcy.

The carrier - which has over 7,000 pilots, considered among the best-paid in the industry before the pay cut - said that it does not anticipate service disruptions because of the exit of the 229 captains.

On top of Delta's own news, Delta and other air carriers as well got a boost from the continued drop in world crude prices.

Prices for light, sweet January-delivery crude on the New York Mercantile Exchange fell $3.64 Wednesday, and continued to retreat Thursday. After falling as low as $42.50 per barrel, crude settled at $43.25 per barrel, down $2.24 on the day. It was the lowest settlement price since Sept. 10. In mid-October, crude had topped $55 a barrel.

Other airlines gain

The gyrations are not lost on the overall airline industry, even beyond troubled Delta.

A trader in distressed bonds saw the 13% and the 12 1/8% notes of bankrupt Indianapolis-based ATA Holdings as having climbed 27.5 bid from 23.5 previously.

However, he saw no movement in the bankrupt bonds of United Airlines parent UAL Corp.; the bonds continue to languish around the 6 to 7 cents on the dollar area. As for AMR Corp., parent of American Airlines, the bonds remain in the lower 60s.

Asbestos bank debt up again

Back on the ground, Owens Corning and W.R. Grace bank debt was trading at firmer levels, even though a trader said that once again, there was no particular impetus found behind the move.

Owens' bank paper was quoted at 89.5 bid, 90.5 offered, versus 88.5 bid, 90 offered, according to a trader. The bank debt had rallied by about two or three points on Tuesday in reaction to better stock performance and then stayed at those higher levels on Wednesday before heading back up in Thursday's session.

Grace's bank paper was quoted at 117.5 bid, 118.5 offered, compared with 116.25 bid, 117.5 offered on Wednesday, the trader added. Like Owens, the Grace debt had rallied on Tuesday in reaction to better stock performance - but only by about half a point - and then stayed at those higher levels on Wednesday before continuing to head up in Thursday's session.

Owens Corning, a Toledo, Ohio-based insulation maker, and Grace, a Columbia, Md.-based specialty chemicals and building materials company, were among dozens of U.S. companies forced into bankruptcy over the past few years by an explosion of asbestos-claims lawsuits.

Some observers note that the bank debt, bonds and shares of such companies as Grace and Owens Corning has been trading markedly higher in the past month following the Nov. 2 elections on an investor perception that with the Republicans solidifying their control over both houses of Congress the chances have improved of Congress breaking the legislative logjam that revolves around efforts to craft a $140 billion claims payment fund.

Owens Corning bond debt, meantime, has been on fire for the past few sessions, and it was quoted Thursday up further still at 811/4, up 1½ points.

Among other asbestos-challenged companies, Armstrong World Industries bonds were seen at 70 bid, up a point on the session.

Bankrupt Southfield, Mich.-based auto parts maker Federal Mogul Corp.'s bonds were seen ¼ point better at 32.5 bid.

And a trader saw the asbestos-challenged bonds of bankrupt Chicago-based building products company USG Corp. hanging in around the 130 bid level.

Project finance loans trade

Back among the bank loan investors, there has been a noticeable amount of trading activity recently in energy project finance bank debt such as Teco Panda and Lake Road, according to a trader, who explained that this paper is really off-the-run stuff that usually does not see much activity.

"As we're nearing year-end, a lot of banks are trying to sell some of this stuff," the trader said.

Teco Panda was quoted at 67 bid, 70 offered and Lake Road was quoted in the mid-90's, the trader added.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.