RCN bonds edge higher in very quiet trading on Chapter 11 emergence

By Paul Deckelman

New York, Dec. 23 - Trading in distressed-company bonds was being called virtually non-existent Thursday, as the market would down with an early close at 2 p.m. ET in front of Friday's full closure in observance of the Christmas holiday.

With just about nothing else going on, the bonds of RCN Corp. - which officially emerged from Chapter 11 protection on Wednesday - were quoted a point higher, although a trader said it was unclear whether in fact the bonds were still extant, or whether the formerly bankrupt Princeton, N.J.-based telecommunications company had completed its planned exchange of new stock for its $1.2 billion of outstanding pre-petition debt.

"It's in the process, if it's not already done," he said, noting that there was also trading going on Thursday in the new shares, which are traded over-the-counter under the ticker symbol RCNIV (the old stock, cancelled in the reorganization, was RCNC). The shares went home at $19.75, the level at which they had opened, with 554,000 shares changing hands.

He meantime saw the bonds up a point for a third straight session, with the company's 11 1/8% notes due 2007 moving up to 63 bid, 65 offered from 62 bid, 64 offered. Its 11% notes due 2008 and 9.8% notes due 2008, though unquoted Thursday, generally trade at the same level, while its 10% notes due 2007 and 10 1/8% notes due 2010 trade about a point behind.

RCN went into a pre-packaged bankruptcy procedure in late May, after having reached agreement with its senior secured lenders and an ad hoc committee of holders of its senior notes on a debt restructuring that would cut its debt load from $1.66 billion to $460 million. The company had started talks with its various creditor interests in October 2003. The company's reorganization plan - which was approved Dec. 8 by Judge Robert D. Drain of the U.S. Bankruptcy Court for the Southern District of New York - called for the conversion of the other $1.2 billion of debt into 100% of the company's new stock, with the old common stock being cancelled as worthless. It also eliminated $1.8 billion of preferred stock.

RCN had said earlier in the month that it would emerge from Chapter 11 by Dec. 31, and beat its own timetable by more than a week. The company said it has $100 million in unrestricted cash on its balance sheet, as well as $330 million in senior secured exit financing provided by Deutsche Bank and $125 million in proceeds from the issuance of new convertible second-lien notes to certain investors and holders of the company's pre-petition bond obligations.

Twenty-year telecom veteran Peter D. Aquino replaced company founder David C. McCourt as chief executive officer, at McCourt's urging. McCourt will continue as chairman of the company. RCN - which touts its offering of various broadband services bundled in with its basic telephone service, has said that it would concentrate its post-bankruptcy efforts on growing market share in existing markets. As part of that effort, the company announced that it had completed the acquisition of the 50% of its

StarPower Communications, LLC joint venture that it did not already own from former partner Pepco Holdings Inc., a Washington, D.C.-area power utility. The rollup of the Pepco stake allows RCN to take full ownership of the company, which provides bundled telephone, cable television and high-speed Internet services in the Washington area.

Apart from RCN's firmer bonds, the trader said, "nothing was happening. Everybody was celebrating [the holiday] early."

ATA quiet at higher levels

For instance, he said, there was "absolutely nothing" going on in the bonds of ATA Holdings Corp.

Its debt had moved up to around 57 bid, 59 offered on Wednesday, up from prior levels around 49 bid, 51 offered, on the heels of Tuesday's formal approval by judge Basil Lorch III of the U.S. Bankruptcy Court for the Southern District of Indiana of the proposed $117 million sale of six ATA-leased gates at busy Midway Airport in Chicago to low-fare airline industry leader Southwest Airlines Inc. Southwest beat out a competing offer by rival low-fare carrier AirTran Airlines to buy all 14 of ATA's gates at Midway for $89.3 million.

Indianapolis-based ATA had sought protection from the holders of its 13% notes due 2009 and 12 1/8% notes due 2010 and other creditors in late October, making an emergency landing in the courts after having been battered by sky-high fuel prices and intense, dog-eat dog fare competition in the low-fare segment of the airline business.

Likewise, he said, there was nothing going on in another airline names that's been a distressed-market pacesetter over the past month or so, Delta Air Lines Inc., whose bonds have been climbing of late on its so-far successful efforts to cut pilot salaries and other employee costs and its partial success in efforts to trim its $20 billion debt load.

A market source at another desk saw the bonds of the Atlanta-based carrier unchanged Thursday around its recent levels, with its benchmark 7.70% notes due 2005 at 91.5 bid, its 7.90% notes due 2009 at 62 and its 8.30% notes due 2029 at 49 - all about double where they had been as recently as late summer, when Delta was still trying to dragoon $1 billion of annual labor cost savings from its pilots, considered the best-paid in the industry, and darkly warning that it might go bankrupt if such concessions were not forthcoming.

Mississippi Chemical steady after gains

The source also saw the 7¼% notes due 2017 of Mississippi Chemical Corp. hovering at the higher levels those bonds had moved to following the completion earlier in the week of the acquisition of the Yazoo City, Miss.-based chemical company by Terra Industries Inc. and Mississippi Chemical's concurrent exit from Chapter 11 under its new management.

Those bonds, which had been languishing in the lower 60s before the news of the impending acquisition by Terra was announced in early August, had gained a point in Wednesday's dealings to finish at 75 bid.

Mississippi Chemical had sought Chapter 11 protection in May 2003 via a filing with the U.S. Bankruptcy Court for the Southern District of Mississippi. Sioux City, Iowa-based Terra acquired the company for $268 million - $161 million of cash and assumed debt and stock valued at $107 million, plus the assumption of another $25 million of underfunded pension plan obligations.

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