HealthSouth moderately active; Loral Space lingers on desks; WorldCom, Petroleum Geo trade

By Carlise Newman

Chicago, Aug. 22 - HealthSouth Corp. was a moderately active name in an otherwise quiet Friday trading session, with many traders either on vacation or planning to be in the next few weeks.

HealthSouth's bonds rallied earlier in the month after the company announced it had paid $117 million in past-due interest under various borrowing agreements, but were weakening as of Friday.

On Friday they were lower, possibly weighted by a report of a probe into allegations of bribery at the troubled healthcare provider. The 7 5/8% notes due 2012 fell ¾ of a point to 77¼ bid, 79¼ offered, a trader said. The 8.3% notes were quoted at 81½ bid, 83½ offered, a drop of 1 point.

"The bonds all went out a little lower today," a trader said.

The Wall Street Journal reported on Friday that federal prosecutors in Alabama are looking into possible links between a corruption probe in the state government and the accounting scandal at HealthSouth.

Investigators have been looking at claims of bribery involving a high-level state official since 2001, the report said. Two Alabama businessmen and a top aide to former state governor Don Siegelman have pleaded guilty to fraud in relation to bribes paid to one of the businessmen, the newspaper reported.

Birmingham, Ala.-based HealthSouth faces federal charges of inflating its reported earnings by $2.5 billion in recent years. Much of the inquiry has focused on Richard Scrushy, HealthSouth's founder and former chief executive.

Prosecutors are now swapping information on the two probes, the Journal reported, citing people familiar with both investigations. The assistant U.S. attorney in Montgomery told the newspaper that such cooperation was commonplace.

Meanwhile, WorldCom Inc. was active "all day" on Friday, with its bonds rising to at 30 bid, 31 offered from 29¼ bid, 30 offered Thursday, a trader said.

The Ashburn, Va.-based long distance company earlier in the week said it stands by its July 7 financial forecasts, which called for 2003 revenues of $24.5 billion. It said its revenues would be $24.6 billion in 2004 and $25 billion in 2005. WorldCom rallied for most of the week following the report.

On Friday, the New York Stock Exchange fined Citigroup Inc.'s Salomon Smith Barney brokerage unit $1 million and suspended an Atlanta branch manager for failing to supervise brokers who dealt with WorldCom Inc. employees.

Traders said the news didn't have much of an effect on the bonds.

"Someone is getting busted every day with some of these companies," a trader said.

Meanwhile, Loral Space & Communications Inc.'s 10% notes due 2006 firmed to 66½ bid, 68¼ offered, a rise of about half a point, a trader said.

On Tuesday, Loral said EchoStar had made an informal bid for its North American satellites and showed interest in the rest of the company. Loral did not disclose the terms offered by EchoStar, but the broadcaster told a court on Monday it could pay about $1.45 billion for all of Loral's assets, lawyers who were at the court hearing said, according to news reports.

The bid, which Loral said it would evaluate, was the first public sign of rival interest since Loral agreed in July to sell its North American satellites to Intelsat for $1 billion.

Elsewhere, Petroleum-Geo Services ASA bonds traded in the 65-66 area, a trader said.

"They went out at about 66 bid, maybe 2 points firmer than Thursday," he added. "I didn't think we'd see them today, thought the activity had dried up."

The bankrupt Oslo, Norway-based oil company filed its reorganization plan at the end of July. Under the plan, PGS' creditors holdings its $2.14 billion senior unsecured debt, comprising $680 million of bank debt and $1.46 billion of bonds, would be entitled to select between two recovery packages. One consists of a senior unsecured term loan facility and represents 61% recovery; and the other consisting of a combination of unsecured notes and 91% of PGS post-restructuring equity, which will be reduced to 61% after PGS shareholders acquire 30% of the total post-restructuring shares for $85 million, and represents 73% recovery.

Global Crossing Inc.'s bonds were also active, trading at 4 bid midday, a trader said. The bonds were seen closing the session at 4¼ bid, 5 offered.

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