Delta bonds lower after wider loss; Owens Corning bank debt retreats

By Paul Deckelman and Sara Rosenberg

New York, Jan. 20 - Delta Air Lines Inc. bonds were seen down about two points Thursday after the Atlanta-based air carrier - as expected - reported a sharply wider fourth-quarter and full-year loss versus the previous year's red ink. Continental Airlines Corp. also posted a loss, in line with the losses previously posted by such competitors as AMR Corp. and Northwest Airlines Corp.

In bank debt trading, Owens Corning's paper fell off by a few points in apparent reaction to asbestos names falling in the equity market and uncertainty over the outcome of court hearings that have taken place regarding the company's asbestos liability.

Delta's benchmark 7.70% notes due 2005 were seen at 87.5 bid, 88.5 offered, down from 88.75 bid, 89.75 offered, while its 8.30% notes due 2029 dropped to 39.25 bid, 40.25 offered from prior levels at 41.5 bid, 42.5 offered, a trader said.

"All the airlines were under pressure," he added, in the wake of the big losses reported by the problem-plagued U.S. airline industry.

The trader saw Northwest's 7 5/8% notes maturing on March 15 unchanged at par bid, 100.5 offered.

"They're fine," he said, noting that with maturity just weeks away virtually nothing would keep those bonds from being money good. He also saw the Northwest 8 7/8% notes due 2006 a quarter-point lower at 88.25 bid, 89.25 offered.

He further saw Continental's 8% notes scheduled to mature on Dec. 15 unchanged at 95.25 bid, 96.25 offered.

At another desk, the 8s were actually seen up ¼ point, despite the losses, at nearly 97.

Delta showed a net loss for 2004 of $5.22 billion ($41.07 per share) for the year and $2.21 billion ($16.58 per share) for the fourth quarter ended Dec. 31. The yearly loss figure is the biggest ever for a U.S. airline, eclipsing the $3.5 billion that AMR lost in 2002. In 2003, Delta had lost $790 million ($6.40 per share) for the full year and $332 million ($2.69 per share) in the fourth quarter (see related story elsewhere in this issue).

Excluding one-time items, such as a $1.9 billion goodwill impairment charge, Delta lost $2.3 billion ($18.10 per share) for the year and $780 million ($5.88 per share) for the fourth quarter. The quarterly loss was worse than the $5.51 of red ink that Wall Street had been looking for. The big quarterly losses came even as Delta's revenues for the quarter improved slightly to $3.64 billion, a gain of 0.9% from $3.61 billion a year ago.

Continental, meantime, lost $206 million ($3.12 per share) for the period, a sharp reversal of the year-earlier profit of $47 million (61 cents a share). The loss came even though revenues for the fourth quarter were up 6.7% from a year earlier, to $2.2 billion. Excluding special items, Continental had a quarterly loss of $174 million ($2.62 per share), although that did beat Wall Street expectations of a $3.29 loss per share.

For the full year, Continental lost $363 million, or $5.55 per share; in 2003, it had net income for the year of $38 million. Excluding the special items, its 2004 net loss was $255 million ($3.91 per share), widening out from a year-earlier loss of $209 million ($3.20 per share).

Owens Corning down

In bank debt dealings, a trader saw the Owens Corning paper quoted at 88.5 bid, 89.5 offered, down from 91 bid, 92 offered previously.

The bankrupt Toledo, Ohio-based building materials company's bonds were meanwhile seen about a point lower on the session at 78 bid, 80 offered, while bonds of another asbestos-challenged company, bankrupt Lancaster, Pa.-based floorcovering maker Armstrong World Industries Inc., likewise were down a point at 73 bid, 74 offered.

The asbestos company stocks were lower Thursday in the wake of Wednesday's news that Sen. Arlen Specter (R.-Pa.), the chairman of the Senate Judiciary Committee, introduced legislation that would set up a $140 billion payment mechanism for medical claims related to asbestos, while also curbing the proliferation of asbestos-related lawsuits that drove such companies as Owens Corning and Armstrong to seek bankruptcy protection.

While the bonds and shares of those companies had moved solidly higher since November's elections on expectations that the strengthening of Republican control of both houses of Congress might mean an end to the legislative gridlock that had stalled previous bills, investors appear to be having second thoughts on the issue, fearing that getting a bill passed might not be so easy after all.

Mirant loans better

Mirant Corp.'s MAGI bank debt was higher in Thursday's session with levels of 106 bid, 107 offered, compared to 105.5 bid, 106.5 offered on Wednesday, according to a trader.

The '03 paper, however, was basically unchanged with some trades taking place during the afternoon around 931/2, the trader added.

Trading activity did slow down in the name on Thursday compared to Wednesday when the paper bounced around on news that the Atlanta-based power company filed its disclosure statement and reorganization plan with the U.S. Bankruptcy Court for the Northern District of Texas.

Under the proposed plan, holders of general unsecured claims would get nearly all of the reorganized company's common stock, holders of Mirant Americas Generation LLC's general unsecured claims would get 90% of their claim in new notes and the remaining 10% of their claim in the reorganized company's common stock, holders of Mirant Americas' senior notes due 2011, 2021 and 2031 would have their notes reinstated and existing shareholders would get a share of junior trust interests, any shares remaining after the general unsecured creditors have received their shares.

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