RCN bonds firm as bankruptcy emergence nears; Mirant debt steady despite ruling

By Paul Deckelman and Sara Rosenberg

New York, Dec. 10 - RCN Corp. bonds were seen continuing their recent upward trend as investors appeared heartened by recent news reports that the Princeton, N.J.-based telecommunications operator is likely to be out of bankruptcy before the end of the month.

In bank loan dealings, Mirant Corp.'s debt held in during the session, despite a ruling in favor of Pepco on payment contracts handed down by the U.S. Bankruptcy Court for the Northern District of Texas.

Atlanta-based energy operator Mirant's '03 and ' 04 paper was quoted at 68.5 bid, 69.5 offered, unchanged on the day, a trader said, adding that it was actually pretty quiet in the name during trading hours.

With this latest ruling, Mirant must pay Pepco what it is owed under the asset purchase and sale agreement, under which Mirant bought Pepco's generating assets in December 2000.

RCN's bonds - which had been steadily rising into the upper 50s this past week - continued to push up Friday, when, a source said, "they were all up a couple" of points.

He quoted RCN's 10 1/8% notes due 2010 and 11 1/8% notes due 2007 both up 2½ points on the session at 60 bid, while its 10% notes due 2007 and 11% notes due 2008 were both also up that same amount to end at 57.5 bid and 58.5 bid, respectively.

On Wednesday, RCN announced that it expects to emerge from Chapter 11 by Dec. 31. That projection followed the decision by the U.S. Bankruptcy Court for the Southern District of New York confirming the company's plan of reorganization, which calls for the conversion of some $1.2 billion in debt into new RCN equity.

MCI slips

Also in telecommunications on Friday, bonds of MCI Corp. - which itself emerged from Chapter 11 at the end of April after shedding billions of dollars of debt and its old identity as WorldCom Inc. - were seen a bit easier, after two straight sessions Wednesday and Thursday during which the notes had firmed smartly after Standard & Poor's assigned the company a B+ credit rating.

The Ashburn, Va.-based Number-2 U.S. long distance carrier's 5.908% notes due 2007 were quoted down half a point at 102.75, its 6.688% notes due 2009 were at 104.5, up a quarter, while its 7.735% notes due 2014 finished at 108, down ¼ point.

Adelphia back down

And Adelphia Communications Corp.'s bonds - which had shot up about two to three points on Thursday, after chief executive officer William Schleyer made an upbeat presentation at a UBS media investors' conference - came back down to earth, its zero-coupon notes due 2008 quoted down a point at 68 bid, its 8 3/8% notes due 2008 off ¾ point at 89.25, and its 10 7/8% notes due 20 losing half a point to end at 94 bid.

On Thursday, Schleyer told attendees at the conference that the bankrupt Greenwood Village, Colo. -based cable operator had received healthy expressions of interest from potential buyers for its assets, which are estimated to be worth $17 billion to $20 billion. The CEO said that Adelphia expected to receive the final bids for its cable systems and other assets sometime next month, and would make a decision in the first quarter to accept the bids and sell the company, either piecemeal or in one fell swoop, or, alternatively, reject the bids, continue its reorganization process and emerge around mid-year as an independent company.

Integrated Electrical better

Integrated Electrical Services, Inc.'s 9 3/8% notes were being quoted solidly higher Friday, after the Houston-based provider of electrical solutions to the commercial and industrial, residential and service markets announced that it had completed the sale of substantially all of the assets of two of its commercial business units for a sale price of $7.5 million in cash.

That sent the bonds up to 91.25 bid, well up from their recent levels in the lower 80s.

IES said the sold units, based in Texas and Oklahoma, were included in the company's Oct. 28 press release, in which the company said that it planned to divest several commercial businesses with combined 2004 revenues of approximately $289 million.

Since Nov. 29, IES has completed three sales and received approximately $11.5 million in cash proceeds. During fiscal 2004, these units produced combined revenues of $57.6 million and operating income of $1.1 million.

Bally up more

Elsewhere, Bally Total Fitness Holding Corp., whose bonds had performed strongly for two prior sessions on the news that the Chicago-based fitness club operator had obtained a limited waiver from a majority of noteholders to avoid a possible default, causing S&P to then raise its ratings to B- , were again up on Friday. A market source quoted those 9 7/8% Notes due 2007 at better than 85, about two points up on the day, while its 10 ½% notes due 2011 were up 1¾ points to 98.5.

Winn-Dixie Stores Inc.'s 8 7/8% notes due 2008 were quoted a point higher at 91.5 in the wake of the announcement by the Jacksonville, Fla.-based supermarket chain operator that it had hired the former chief operating officer of supermarket giant Albertsons Inc., Peter L. Lynch, as its new president and chief executive officer. Effective immediately, Lynch replaces Frank Lazaran in those posts. Lazaran had taken the helm of the troubled company less than two years ago.

"The board concluded that making this change was a necessary step toward achieving our objectives and we feel very fortunate to bring in a chief executive of Peter Lynch's caliber to lead the company through this challenging period," board chairman H. Jay Skelton said in a statement.

Winn Dixie is in the midst of an extensive turnaround effort, as it tries to regroup and compete against larger chains that have invaded its traditional markets in the U.S. southeast, especially Wal-Mart Stores. Many analysts are skeptical that it can do so.

Buoyed by the news of the management change, its New York Stock Exchange-traded shares surged 38 cents (9.38%) Friday to $4.39, on volume of about 8.6 million shares, more than four times the usual turnover.

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