Delta bonds gain in otherwise quiet session, even though losses loom

By Paul Deckelman

New York, Jan. 18 - Bonds of Delta Air Lines Inc. were being quoted up a point or so in generally quiet post-holiday trading on Tuesday - even though the troubled Atlanta-based air carrier is poised to report another large quarterly loss this week.

A trader - calling the activity level "very quiet - quoted Delta's benchmark 7.70% notes due 2005 as having firmed to 88 bid, 89 offered from prior levels at 86 bid, 88 offered.

All of the Delta bonds, he said, "were up maybe a point or so," with the carrier's 10% notes due 2008 at 63 bid, 65 offered, up from 62 bid, 64 offered during Friday's abbreviated pre-holiday session. Its 8.30% notes due 2029 had risen to 41 bid, 43 offered, from 40 bid, 42 offered.

However, the trader said that Delta was the only name he saw moving around in the sector; American Airlines parent AMR Corp.'s 9% notes due 2012 and 2016 were essentially unchanged at 74 bid, while bankrupt United Air Lines' notes were mired at bid levels around 8 or 9.

Delta's gains may not last; the Number-Three U.S. air carrier is scheduled to report earnings this week, and is expected to report hundreds of millions of dollars of red ink - just as it has done in a string of recent quarters.

Wall Street is looking for Delta's loss for the fourth quarter ended Dec. 31 to come in at around $645 million, excluding one-time items - which would bring the total amount of money the airline has lost since 2001 to nearly $7 billion.

In other Delta-related news, the president of Delta's commuter subsidiary, Comair, resigned in the wake of an embarrassing computer failure over the Christmas holidays that caused the Cincinnati-based regional carrier to scrub over 1,000 flights, leaving tens of thousands of passengers scrambling to find alternate ways of getting home for the holidays.

Randy Rademacher had been president of the unit for five years before the computer fisaco, which kept Comair from getting back to schedule for several whole days. He stepped down Monday, three weeks after a computer failure caused the regional carrier to cancel all 1,100 of its flights on Christmas Day. It took Comair several days to return to its full schedule. He will be replaced by Fred Buttrell, who previously had run Delta's regional network.

Outside of the airlines, not much was going on, as market participants straggled back after the three day holiday break that saw the market closed on Monday.

"Some people want to turn a three-day holiday into a four-day holiday," a trader quipped.

Traders saw no change in the bonds of bankrupt asbestos-challenged companies such as Owens Corning, Armstrong World Industries, USG Corp. and Federal-Mogul Corp.

Those bonds had recently gotten a healthy boost on investor expectations that a bill establishing a mechanism that would pay claims submitted by people alleging that they had suffered medical problems as a result of past exposure to asbestos, while at the same time capping the flood of lawsuits which drove those companies bankrupt, will be more likely to defy capital gridlock and be passed this time around.

Bankrupt Troy, Mich.-based automotive components supplier Intermet Corp.'s were seen unchanged, at 55 bid, 56 offered.

Charter Communications Inc., wrestling with a debt load of nearly $20 billion and struggling to keep its customers from defecting to bigger cable, announced that Carl Vogel, its president and chief executive officer since 2001, had resigned and was replaced by Robert May, a former Cablevision executive who had successfully overseen the turnaround of HealthSouth Corp. May said his top focus would be to improve the company's dealings with its customers, to stop subscriber losses and churn (see related story elsewhere in this issue).

However the executive suite shakeup had little impact on Charter's bonds; traders saw its benchmark 8 5/8% notes due 2009 having opened at 77 bid, 79 offered, but fought their way back up to end around 80 bid, 82 offered, down a point on the day.

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