Delta bonds lead airlines lower; Adelphia eases; Mirant debt lower

By Paul Deckelman and Sara Rosenberg

New York, Jan. 10 - Continued fears of a looming airline industry price war sparked by Delta Air Lines Inc.'s announcement last week of new lower prices on many of its flights helped push the shares of major carriers down Monday and dragged their bond prices down as well.

Also lower, for a second straight session, was Adelphia Communications Corp.'s bonds, which had declined last Friday as well, possibly in response to the beleaguered Greenwood Village, Colo. cable operator's decision extending the deadline for bids for the company's assets for another two weeks.

In bank debt trading, Mirant Corp.'s '03 bank debt was about half a point lower in Monday's session with the paper quoted at 72.5 bid, 73.5 offered, according to a trader.

No particular news was seen as pushing the bankrupt Atlanta energy company's paper down, the trader added.

A trader in distressed bonds meanwhile saw Mirant's lower-rated securities down a point across the board, with its 2½% busted convertible notes dipping to 74 bid, 76 offered. He also saw Mirant's 7.40% notes and 7.90% notes each down a point at 76 bid, 78 offered and 75 bid, 77 offered, respectively.

The trader said that there was "weakness in anything speculative," in explaining the drop in Delta Air Lines' notes. He saw Delta's benchmark 7.70% notes due 2005 down a point at 90 bid, 92 offered, while its 10% notes due 2008 went all the way down to 68 bid, 70 offered from 73 bid, 75 offered. The 7.90% notes due 2009 dropped to 57 bid, 59 offered from 61 bid, 63 offered, while its 8.30% notes due 2029 finished at 44 bid, 46 offered, off from 47 bid, 49 offered.

The weakness, he said, extended across the airline spectrum, with American Airlines corporate parent AMR's 9% notes due 2012 and 9% notes due 2016 at 76 bid, 78 offered, down two points on the session.

Another trader saw Continental Airlines' 8% notes due 2005 at 96.5 bid, 97.5 offered, down about half a point. Those same bonds, he said, "had gotten as high" as 98 only about a week earlier. And he saw Northwest Airlines Inc.'s 9 7/8% notes due 2007 pretty much unchanged at 85 bid, 86 offered.

Delta, he said, was down about half a point on the day, with its 7.90s at 59.5 bid, 60.5 offered, while its 8.30s finished at 46 bid, 48 offered.

Yet another trader quoted the 8.30s down a point, at 45.5 bid, 46.5 offered.

The bonds fell in tandem with the air carriers' shares. Continental and Northwest were the biggest losers among the sector Monday, with Houston-based Continental falling 43 cents, (4.1%) to $9.99, while Eagan, Minn.-based Northwest lost 18 cents (2%) to $8.42. Delta was off 13 cents (1.96%) to $6.49.

The airline sector has been struggling since Delta's announcement last week of cuts approaching 50 cents on some of its fares, a move aimed at making the Atlanta-based carrier more competitive with low-fare airlines like Southwest Airlines and JetBlue. AMR said that it would match the Delta fare cuts on some routes, possibly opening the door to a fare war among the major carriers, which by some estimates could shave as much as $2 billion or even $3 billion from industry revenues.

Adelphia lower

Elsewhere, Adelphia Communications - whose bonds retreated slightly after it said that it would push back the deadline for final bankruptcy court bids for its assets to the end of the month - was down again Monday, with one trader quoting its bonds off a point across the board, the 10¼% notes due 2011 at 96 bid, 98 offered, the 10¼% notes due 2006 at 92 bid, 94 offered, and the company's busted convertible notes at 16 bid, 18 offered.

A source at another desk saw Adelphia's 7¾% notes due 2009 off 1½ points at 89.5 bid, Other issues, he said, lost half a point to 90.5 for the 8 3/8% notes due 2008; to 91 bid for the 9¼% notes that were to have come due in 2002; and at 95 bid for the 10¼% notes due 2004.

"There was absolutely nothing going on," a trader said. He noted that "the market opened heavy and never did recover. There was some selling right out of the chute."

He had no firm levels for Delta, but opined that "it was lower, and the others [airlines] also seemed to be off. But there was not a lot of trading."

At the distressed desk of one house, Level 3 Communications Inc.'s 9 1/8% notes were seen down three points at 84 bid, 86 offered.

However, they did see one name doing a bit better, as Intermet Corp.'s 9¾% notes due 2009 were quoted up four points on the day ending at 59 bid, 61 offered.

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