Curative Health bonds fall on missed coupon; energy sector pulled lower by Reliant

By Paul Deckelman and Sara Rosenberg

New York, Nov. 1 - Curative Health Services Inc.'s bonds fell sharply Tuesday and began trading flat, or without their accrued interest, after the company announced that it would not make the scheduled Nov. 1 interest payment on that paper but would instead invoke the standard 30-day grace period while it tries to get its finances in order.

In bank debt trading, the energy sector as whole felt the tug of Reliant Energy Inc.'s third quarter loss and weak outlook, with names like Mirant Corp. dropping by about two points during the session on the news, according to a trader.

The bankrupt Atlanta-based Mirant saw its 2003 paper tumble to 103 bid, 104 offered by late day, as investors were discouraged by Reliant's negative financial results, the trader said.

Bond traders also pointed to the troubles of Reliant as a drag on Mirant's performance Tuesday. Mirant's bonds were also seen about three points lower across the board, with a trader quoting its 7.40% notes that were to have matured last year at 113 bid, 115 offered, down from 116 bid, 118 offered on Monday, and its 7.90% notes due 2009 likewise down three points, at 114 bid, 116 offered.

That three point drop was also seen in the company's convertible notes, with the 2½% converts due 2021 falling to 98 bid, par offered from 101 bid, 103 offered, while its 5¾% converts due 2007 retreated to 108 bid, 110 offered from 111 bid, 113 offered.

For the third quarter, Reliant reported a loss from continuing operations of $267 million (88 cents per share), a sharp deterioration from the year-earlier income from continuing operations of $75 million (23 cents per share). Adjusted EBITDA was $462 million for the quarter, compared to $391 million for the third quarter of 2004, with the improvement primarily a result of asset sales.

The Houston-based electricity and energy company also revised its outlook for 2005, saying that it expects adjusted EBITDA to be closer to the bottom of the range of the $650 million to $850 million guidance.

Reliant's own bonds were meantime seen down four points across the board, with its 9½% notes due 2013 falling to 102.5 bid, 103.5 offered.

Curative Health down

Elsewhere, Curative Health's 10¾% notes due 2011 fell to 63 bid, 64 offered from Monday' pre-news levels of 67 bid 68 offered, a trader said, knocked down by the news of the missed coupon payment.

A trader also noted that those bonds are now trading flat, or without their accrued interest, as usually happens to the bonds of issuers who experience some sort of occurrence of default.

The Hauppauge, NY-based medical services company instead invoked the 30-day grace period while it open talks with the noteholders and other creditors and examines its options.

Its Nasdaq-traded shares, already deep in penny stock territory, plummeted nine cents (13.04%) to 60 cents a share.

Delta DIP trades

Delta Air Lines Inc.'s debtor-in-possession financing facility was trading pretty actively in Tuesday's market at levels that have moved up by about three quarters of a point since the start of this week, according to a trader.

The bankrupt Atlanta-based Number-three U.S. airline carrier's term loan A was quoted at 103.75 bid, 104.25 offered and the term loan B was quoted at 104 bid, 104.5 offered, the trader said.

"CLOs have probably been trying to buy up the paper, which in turn has driven the price up," a buy-side source said. "There's great spread and now great ratings."

Delta's term loan A carries an interest rate of Libor plus 450 basis points and the term loan B carries an interest rate of Libor plus 650 basis points.

Delta's bonds meantime remain mired in the upper teens, at around a 17-18 context, the same level they have held since their Chapter 11 filing.

Among the other flying bankrupts, Northwest Airlines Corp.'s bonds are still around 29 bid, 30 offered, while United Airlines parent UAL Corp.'s bonds remain in a holding pattern around 14-15.

Back on terra firma, there were only relatively small moves seen in the 9% notes due 2012 of Refco Inc., in contrast to the recent big gains those bonds had notched and the pullback seen in the past session or two.

A trader saw the bankrupt New York-based financial company's bonds at 70 bid, which he called a ¾ point drop on the session, while another trader actually saw those bonds move up a point to 70 bid, 71 offered.

The continuing troubles of General Motors Corp. - its October sales slid 23% from a year ago, prompting a Moody's ratings downgrade - threw another pall over an automotive supplier industry that certainly doesn't need one; bankrupt former GM unit Delphi Corp.'s were seen down about a point on the session at 68 bid.

Charter jumps on profit

On the other hand, Charter Communications' bonds were seen mostly higher, after the debt-laden St. Louis-based cable operator reported a swing back into the black, with a third-quarter profit of $75 million (nine cents per share) versus a whopping year-ago loss of $3.3 billion ($10.89), although it should be noted that most of that red ink was due to asset writedowns.

A trader saw Charter's 10¼% notes due 2010 was up five points on the session to 84 bid. Its 10¾% notes due 2009 were seen a point better at 83.25 bid.

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