Adelphia up as CEO outlines sale progress; Delta gains as convertibles deal rumored

By Paul Deckelman and Sara Rosenberg

New York, Dec. 9 - Adelphia Communications Corp.'s "bonds were very active," in the words of a bank loan trader Thursday, although he saw its bank debt relatively quiet, following the bankrupt Greenwood Village Colo.-based cable operator's presentation at an industry conference at which its chief executive outlined the progress being made in the sale of Adelphia's assets and predicted a decision in the 2005 first quarter on whether it will accept those bids or decide to remain an independent entity. But even though the bonds were moving around, the company's bank debt was seen little changed.

Delta Air Lines Inc. bonds were meanwhile seen having firmed solidly, with traders citing some market speculation - still unconfirmed at this juncture - that the Atlanta-based airline might be looking to sell an issue of convertible notes.

Adelphia's bonds were clearly up in the wake of CEO William Schleyer's presentation at a UBS Investment Bank global media conference in New York, although one trader in distressed issues said he didn't really see what everyone was getting excited about.

He observed "they made a presentation and said they think the bids [on the assets] are gonna go good. There was no real information there, I didn't think," beyond what you'd expect the executive to say, "but the bonds were up two or three points. So that's good. It created some trading."

He saw Adelphia's busted convertible issues go to 18.5 bid, 19 offered from 16.5 bid, 17 offered, while its 10¼% notes due 2006 were two points better at 92 bid, 94 offered and its 10¼% notes due 2011 were likewise up about a point or so at 97 bid, 98 offered, although it was his impression that "the converts jumped more."

At another desk, Adelphia's bonds were all "up a couple" of points, a source said, quoting its 10 5/8% notes due 2010 and 9 7/8% notes due 2005 both up 3½ points on the day at 94.5 bid and 93.5 bid, respectively, while the Adelphia 7¾% notes due 2009 and 8 3/8% notes due 2008 were each up a deuce at 89 bid and 90 bid, respectively.

While the bonds were jumping, the bank debt seemed to be slumbering, a trader said, with Adelphia's Old Century paper quoted at 99 3/8 bid, 99 7/8 offered, while the New Century was quoted at 99¼ bid, 99¾ offered, pretty much unchanged on the day.

In his presentation, Schleyer, who took over the reins of the battered company in March 2003, said that Adelphia expects to get the final bids for its assets in January, and will make a decision in the first quarter whether it will accept some or all of those bids, or stay independent, reorganize and emerge from bankruptcy as a stand-alone company.

He said that if Adelphia goes the second route, decides not to accept the bids and stay independent, it will emerge from bankruptcy in the second half of next year. If the company is sold, the deal is expected to close in next year's fourth quarter.

Adelphia, the fifth-biggest U.S. cable operator, with 5.3 million subscribers, has assets estimated to be worth between $17 and $20 billion. It has divided up its cable operations - which stretch from New England to the West Coast - into seven regional clusters: one includes its highly valuable Los Angeles-area operations, along with smaller assets through out the Western United States, another is centered around its assets in South Florida. Yet another cluster is centered around its Cleveland-area operations, with a fourth built around its former home-base area in Western Pennsylvania. There is a fifth cluster in northern New England, a sixth in Buffalo and other parts of upstate New York and southern New England, and the last centered in Virginia, Maryland, West Virginia and Kentucky. Small isolated clustered have been packaged with more valuable urban properties in the same region, to ensure that everything gets sold.

Adelphia has attracted the attention of cable giants Time Warner and Comcast, which asked for and got permission to submit a joint bid for all of the company's assets; conventional wisdom is that should they win, they will divvy the assets up so they are compatible with the two cable giants' respective operational footprints, and then sell off anything they don't want to second-tier operators.

Some smaller operators, and some cable industry pioneers, are also said to be in the hunt, with the aid of equity partners. There was some talk that several equity firms would team up for a supersized bid for the whole company, but that appears unlikely at this juncture.

Delta gains

Elsewhere, Delta Air Lines' bonds were considerably better, with a market source quoting the company's benchmark 7.70% notes due 2005 at 93 bid, up 1¼ points, while its 7.90% notes due 2009 were seen up two points at 62.5 bid, and its 8.30% notes due 2029 got as good as 48 bid, up two points on the day.

Another trader saw Delta's 7.70s as high as 94 bid, 95 offered, with the 7.70s at 63 bid, 65 offered, and the 8.30s at 48 bid, 50 offered, up from about 46 previously.

Asked whether anything was going on, he just chalked it up to "momentum, and maybe some guys covering shorts," but beyond that, he had no firm information that would explain the big move.

However, another trader noted that there were some market rumors floating around - as yet still unsubstantiated - that the company might be bringing an offering of convertible notes to market, which would be a powerful sign that despite Delta's well publicized troubles, the capital markets feel comfortable enough with the company to sign onto such a deal.

However, a quick query of sources in the convertibles market would seem to indicate that if such a deal is in the works, it is still in its early stages, as the sources said they had not seen any signs of such a deal actually going on yet.

Delta's convertibles, meantime, were bouncing around actively, with the 8% due 2023 quoted up 2¾ points to 66.75 bid, 68.75 offered at one sellside shop but pegged at 66.25 at another. The 2 7/8% convertible due 2024 was quoted up 1½ points to 69.875 bid, 71.875 offered, but up from there to 70.125 bid at another.

Fleming gains

Elsewhere in distressed land, a trader said that Fleming Cos. bonds were "up quite a bit," although he had seen no new news on the Dallas-based grocery wholesaler, now undergoing reorganization. He quoted Fleming's 10 1/8% and 9¼% senior notes at 31 bid, 32 offered, well up from 26 bid, 27 offered recently, while its junior bonds were at two to three cents on the dollar, up from prior levels around a penny or two.

Bally continues higher

And a trader saw Bally Total Fitness Holding Corp. "up big" for a second consecutive session, citing the news that Standard & Poor's had raised the Chicago-based fitness club operator's ratings to B-. S&P said the actions were based on the company having obtained a limited waiver from a majority of noteholders to avoid a possible default, and said that the outlook is now developing.

He saw Bally's 9 7/8% notes due 2007 pushing up to 84.5 bid, 85.5 offered from prior levels of 82.5 bid, 83 offered, and its 10½% notes due 2011 rising to 97.5 bid, 98.5 offered from 95.5 bid, 96.5 offered, "definitely up today."

The Bally bonds had also been up Wednesday - about two points for the 9 7/8s and perhaps half a point for the 101/2s - after Bally obtained a limited waiver relating to the two series of notes.

The company - which had failed to file with its financial statements for the quarter ended June 30 with the SEC and to deliver the financial statements to the bond trustee, potentially putting it in violation of its indenture covenants - now has until next July 31 to file updated financial statements with the SEC and to furnish them to bondholders and the bond trustee.

(Ronda Fears contributed to this report)

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