Oakwood Homes trades up on news of sale; Allegiance Telecom losing its luster

By Carlise Newman

Chicago, Nov. 25 - Oakwood Homes Corp. paper rose Tuesday after the company said is to be acquired by Clayton Homes Inc., a subsidiary of Berkshire Hathaway Inc., for $373 million.

The purchase is subject to the approval of an amended reorganization plan by the company's creditors and the bankruptcy court. The transaction is expected to close by March 31, 2004.

The Greensboro, N.C.-based home builder said it has been informed that, subject to the extension of post-petition financing commitments, the sale has the support of Oakwood's official committee of unsecured creditors.

Oakwood's 7 7/8% notes due 2004 and 8 1/8% notes due 2009 traded up to 51 bid on the news, but came down from the peaks to end offered at 47.

They had recently been seen trading in the mid 40s.

Meanwhile, Allegiance Telecom Inc. bonds slowed down after several days of gains in response to a news report that Qwest Communications Inc. is offering to buy the company for $350 million.

The value of the transaction with Allegiance, a Dallas-based telephone and data company which filed for Chapter 11 bankruptcy protection in May, would include cash and assumed debt.

Qwest is still far away from completing a deal and at least two other bidders other than Qwest have expressed strong interest in Allegiance, news reports said.

Allegiance's 11¾% notes due 2008 fell ¼ of a point to 40¾ bid. The bonds had been as high as 42 bid on Monday. On Friday, the bonds jumped 5 points across the board after the news was released.

Elsewhere, Air Canada bonds were "a little better" after the airline received notice of an unsolicited revised investment proposal from Cerberus Capital Management LP on Friday.

The proposal was made after completion of the equity solicitation process, which resulted in Air Canada's board of directors selecting Trinity Time Investments, a corporation controlled by Victor T. K. Li, a wealthy Hong Kong investor, to be the equity plan sponsor. That agreement included a C$450 million equity investment, which would represent 31% of the common equity of restructured Air Canada.

Air Canada's 10¼% notes were seen up 1½ points to 49½ bid, according to a trader. The bonds were seen in the mid-40s last week before rising 3 points Friday after the investment news.

"The fact that they're pretty much being fought over has caused a rise in the paper," the trader said.

On Nov. 8, Air Canada chose the equity proposal from Li. The decision to choose Li's Trinity Investments over Cerberus came largely because federal law restricts foreign ownership of Air Canada, according to news reports. Li is a Canadian citizen.

Cerberus has said it would boost to C$550 million a C$450 million offering to creditors, the reports said, citing a report by Ernst & Young.

Cerberus would acquire 11.9% of the new Air Canada's equity for C$250 million, and backstop an C$850 million rights offering to creditors.

Through Trinity, Li's offer calls for a C$650 million injection of equity in return for a 31.23% equity stake and 49% of the voting rights in the restructured carrier, Ernst & Young said.

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

HealthSouth Corp. said Monday it is current on all of its interest payments and intends to remain current on all upcoming interest payments. The company also said it intends to repay all the principal amounts of its debt in full.

"Things are improving there, slowly, but they're starting to pull out of the mess they've been in," a trader said.

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.

"Nothing was really going on of note. It was really, really quiet," a trader said.

In other news, Denny's Corp.'s 11¼% notes due 2008 were up 1 point to 70 bid, according to a trader. The paper has been rising steadily, on average about 3 points a week, since the company reported increased same-store sales for October. Prior to that, the restaurant chain had reported dismal third-quarter earnings that brought the bonds down about 5 points.

London-based Telewest Communications plc's 9 5/8% notes due 2006 were up 1½ points to 58 bid. When the company released its third-quarter earnings report in early October, it said it saw its best customer growth so far this year in October. Income for the third quarter to Sep. 30 was £114 million compared with £97 million for the same period last year.

Adelphia Communications Corp.'s 9 7/8% notes due 2007 were down ½ point at 82½ bid, according to a trader.

(Paul Deckelman contributed to this report)

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