Mirant bank debt off on court ruling; ATA bonds firm as asset battle looms

By Paul Deckelman and Sara Rosenberg

New York, Dec. 13 - Mirant Corp.'s bank debt was seen down pretty much across the entire complex Monday, with traders citing an apparent delayed reaction to Friday's news that the company must honor its Pepco contracts.

In bond dealings, ATA Holdings Inc. bonds were seen to have gone skyward as rival low-fare carriers Southwest Airlines Co. and AirTran Holdings Inc. squared off in a battle to see which would get bankrupt ATA's valuable rights to gates at Chicago's busy Midway Airport.

Mirant's 2003 bank loan paper was down half a point to 67.75 bid, 68 offered and the 2005 revolver was down three quarters of a point to 74.5 bid, 75.25 offered, according to one trader.

A second trader, however, had the '03 paper quoted at 68 bid, 68.75 offered. The trader agreed with the 74.5 bid, 75.25 offered context given on the revolver but said that the change in price since Friday was less than three-quarters of a point.

On Friday, the U.S. Bankruptcy Court for the Northern District of Texas ruled against Mirant saying that the Atlanta-based energy operator must pay Pepco - a unit of Washington-based utility company Pepco Holdings Inc. - what the latter is owed under the asset purchase and sale agreement, through which Mirant bought Pepco's generating assets in December 2000.

In addition, Mirant posted monthly numbers on Monday that included a $61.37 million loss for October on sales of $170.07 million, compared with an $83.88 million loss on sales of $287.94 million for September.

However, a trader said, the numbers appeared to be "pretty neutral" - which is why he thought the Pepco ruling appeared to be the main driver behind Monday's weakening.

Mirant bonds, meantime, "looked like they were going to open up easier, but then they basically stayed the same," a trader said. He quoted the company's busted 2½% convertible bonds as hanging in around 69 bid, 71 offered, while its 7.40% Mirant Corp. bonds were steady around 70 bid, 71 offered.

"I didn't see any change there," he declared. "It looked like with the [Pepco] news that came out, they were going to go lower, but then they stopped and didn't go lower. It was a head fake."

At the same time, he saw the Mirant Americas Generating Inc. unit's "Maggies" all hovering above par.

ATA bonds higher

Elsewhere, the trader saw ATA's 13% notes due 2009 and 12 1/8% notes due 2010 as having risen about two points to 34 bid, 36 offered, up from 32 bid, 34 offered Friday, buoyed by the news that there will be a battle between Southwest and AirTran for ATA's gates at Midway, and for certain other assets.

At another desk, the bonds were quoted earlier in the day around 33 bid, although they were thought to have started from a lower level, around 30.

Indianapolis-based ATA, which filed for Chapter 11 protection from its bondholders and other creditors in late October, driven there by the same unfavorable industry dynamics which brought down larger, more traditional competitors like United Airlines and US Air, had announced an agreement to sell its 14 gates at Midway, plus take-off and landing slots at LaGuardia Airport in New York and Reagan National Airport in Washington, for $90 million in cash. On Friday, Dallas-based Southwest, considered the leading low-cost operator, said that it would offer to buy six Midway gates and enter into a code-share agreement with ATA covering flights out of Chicago to nine destinations. Including the assumed value of the code-share arrangement, Southwest's deal, entered just before the bidding deadline, as seen valued at over $100 million, apparently trumping the AirTran offer. A third low-cost airline, America West, had been mentioned as a possible buyer for ATA, but decided at the last minute not to get involved.

ATA is scheduled to tell the bankruptcy court on Thursday which bid it prefers.

Separately, the company announced late Monday that its chief financial officer, David M. Wing, had resigned, effective Dec. 8, in order to "pursue other interests." The company has not yet named a successor.

Delta seen gaining

Elsewhere among the airlines, the trader saw "better bids" on Delta Air Lines Inc.'s bonds, quoting the Atlanta-based air carrier's benchmark 7.70% notes due 2005 a point better at 93 bid, 95 offered, its 10% notes due 2008 at 74 bid, 76 offered, well up from 71 bid, 73 offered; its 7.90% notes due 2009 up a point at 63 bid, 65 offered, and its 8.30% notes due 2029 two points ahead at 50.

Another trader, on the other hand, saw the Delta 7.70s unchanged at 92.5 bid, 93.5 offered. He pegged American Airlines parent AMR Corp.'s 9% notes due 2012 likewise unchanged at 75/5 bid, 77.5 offered, while Continental Airlines Corp.'s 8% notes due 2005 were holding steady at 96.5 bid, 97.5 offered, and Northwest Airlines Corp's 7 5/8% notes due 2005 stable at 100.25 bid, 100.75 offered.

At another desk, the Continental bonds were seen half a point better at 97.5, while Northwestern's 7 5/8% notes due 2008 were up a point at 80.5.

The airline bonds have been gaining altitude lately on the precipitous slide in world crude oil prices seen since light, sweet crude for January delivery peaked at $55.17 on the New York Mercantile Exchange. It has since come down to the low 40s, a reduction of almost 25%.

RCN holds at higher level

Among the earthbound issues, a trader he said he'd seen 'no real change" in RCN Corp. notes, which had firmed smartly toward the tail end of last week, as investors began anticipating an exit from bankruptcy soon for the Princeton, N.J.-based telecommunications company. RCN said last week 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.

However, with the company's bonds having made their move last week - with the 10 1/8% notes due 2010 and 11 1/8% notes due 2007 having risen to 60 bid, while its 10% notes due 2007 and 11% notes due 2008 improving to 58.5 bid, the bonds pretty much stayed there Monday.

Adelphia firmer

A trader saw Adelphia Communications Corp.'s bonds a little better on the session, despite a lack of fresh news about the Greenwood Village, Colo.-based cable operator, which is currently reorganizing through the courts.

He saw Adelphia's 10¼% notes due 2006 up nearly a point at 91 bid. While its 10¼% notes due 2011 were unchanged at 97.375, the 7 7/8% notes due 2009 were seen up more than a point at 88.75.

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