Allegiance Telecom slightly higher; Levi Strauss bonds race ahead; Goodyear unchanged to lower

By Carlise Newman

Chicago, Nov. 24 - Bankrupt Allegiance Telecom Inc. bonds were still enjoying the news of Qwest Communications Inc.'s offer to buy the company for $350 million.

Allegiance's 11¾% notes due 2008 rose to 42 bid from 40 bid, while the 12 7/8% notes due 2008 rose to 42½ bid from 40½ bid, according to a trader. On Friday, the bonds jumped 5 points across the board.

"They were 3 points higher out of the gate and then fell back to settle around 42 bid," the trader said.

The $350 million value of Qwest's possible bid for Allegiance Telecom, would include cash and assumed debt, the Wall Street Journal reported Friday.

Telecommunications company Qwest seeks to boost revenue, even as its residential phone business suffers under pressure from wireless rivals, the paper said.

The Journal said Qwest is still far away from completing a deal and that at least two other bidders other than Qwest have expressed strong interest in Allegiance, a Dallas-based telephone and data company which filed for Chapter 11 bankruptcy protection in May, the report said.

In other news, Levi Strauss & Co. bonds raced ahead. The 7% notes due 2006 were seen at 69½ bid, 71 offered, up from 64¾ bid, 65¾ offered Friday, while the 11 5/8% notes due 2008 were seen at 75 bid, 77 offered, up from 70½ bid, 71½ offered, with traders saying there were "buyers around."

Levi's 12¼% notes due 2012 were seen at 72½ bid, 74½ offered, up about 5 points.

In mid-November, Levi cut its forecast for the year. Assuming stable exchange rates, Levi said it expected full-year net sales would decline by 2% to 3%. Net debt at year-end is projected to be between $2.1 billion and $2.2 billion, as compared to previous guidance of about $2.1 billion.

Levi Strauss said last month that it would not file its third-quarter earnings report on time because it discovered accounting errors for past years and would have to correct prior earnings reports.

Elsewhere, Goodyear Tire & Rubber Co. was unchanged to lower after it said late Wednesday it had a loss of $105.9 million in the third quarter, and that the Securities and Exchange Commission has launched an informal inquiry into its restatement of earnings for the last 5½ years.

Goodyear paper was quoted at 85 bid, about ½ point lower than Friday. Another trader pegged them "roughly unchanged" at 86 bid. Yet another had the bonds down 2 points at 83 bid. The bonds had fallen 1½ points in the previous session. After the restatement announcement late last month, the bonds had dropped 3 points.

The Akron, Ohio, tire maker last month said it would have to restate earnings going back to 1998 because of errors in its internal billing system and the implementation of a new computerized accounting system. In a filing to the SEC late Wednesday, the company indicated the errors caused the company to overstate its earnings by $84.7 million during that period.

The company, as part of its filing to the SEC, said it had a loss of $105.9 million in the third quarter, or 60 cents a share, compared with a restated net income of $32.7 million, or 20 cents a share, a year earlier. Sales rose to $ 3.91 billion, compared with a restated $3.53 billion a year earlier.

Goodyear also said it is cutting another 1,200 jobs worldwide to help the nation's largest tiremaker cut costs as it battles rising rubber and other raw material prices. The job cuts are in addition to 2,600 jobs eliminated earlier this year and previously announced plans to cut 1,100 positions when the company closes a tire plant in Huntsville, Ala., next month.

Elsewhere WorldCom Inc. was unchanged after three straight sessions of losses and a weak monthly operating report late last Monday.

"The interest has been dropping off a little. But it's also a holiday week and trade is pretty thin," one trader said.

WorldCom's 8¼% notes due 2011 were seen at 36½ bid. The bonds had fallen a ½ point Monday, ahead of the report and a ½ point Tuesday and Wednesday, before rising slightly Thursday and Friday.

WorldCom recorded $1.95 billion in revenue for September versus $2 billion in August 2003. Operating income for September was $88 million, a decline of $50 million from August, primarily reflecting lower revenues. Sales, general and administrative expenses were flat month-over-month, including $47 million in August and $55 million in September for restatement and audit expenses.

The loss contrasts with the $132 million in net income MCI posted in August.

In other news, HealthSouth Corp. paper was higher. The 7 5/8% notes due 2012 were quoted up ½ point at 87½ bid, 88½ offered. The bonds rose 1 point Friday.

HealthSouth Corp. said it is current on all of its interest payments and intends to remain current on all upcoming interest payments (see story elsewhere in this issue). The company also said it intends to repay all the principal amounts of its debt in full.

"On a business level, we have been working diligently to meet our financial obligations and to restore the company's credibility with our stockholders and the investing public," said Joel Gordon, HealthSouth's interim chairman, in a filing with the Securities and Exchange Commission reporting a town hall broadcast to employees.

The Birmingham, Ala.-based healthcare provider said it continues to have discussions with banks and bondholders to address its financial situation and restructure its corporate debt. Alvarez & Marsal hopes to have a restructuring plan in place in the coming months, HealthSouth said.

"It was really dead today and it's only going to get worse this week," said a trader.

(Paul Deckelman contributed to this report)

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