WorldCom higher; ATA Holdings rises on lease payment delays; HealthSouth weakens

By Carlise Newman

Chicago, Sept. 3 - WorldCom Inc. was again the center of activity in an unusually busy distressed debt trading session, with the bonds rising despite several negative reports in the last few days centering on the myriad fraud allegations against the company.

WorldCom's 8¾% notes due 2031 as well as its other bonds were up ½ point to 30 bid, 31 offered.

One trader attributed the rise to the news Tuesday that David Matlin has named to the new board of directors. Matlin, chief executive of MatlinPatterson Global Advisers LLC, is the company's largest stakeholder.

In addition, on Wednesday WorldCom's chief executive Bernie Ebbers pleaded not guilty in an Oklahoma court to 15 criminal charges, including securities fraud, that could bring him up to 10 years in jail.

Oklahoma filed the first criminal charges against Ebbers in the company's collapse, which cost state pension funds $64 million. His lawyers said the state did not have evidence to prove Ebbers guilty of fraud while prosecutors expressed confidence in securing a guilty verdict.

Ebbers was freed on $50,000 bond and the next hearing in his case is scheduled for October.

Oklahoma attorney general Drew Edmondson last week filed charges against Ebbers, five other former executives and WorldCom.

"WorldCom's back on top. We traded them in large lots at about 30 bid in the morning," a trader said.

ATA Holdings Corp. was "a bit better" Wednesday after announcing Tuesday it will be allowed to delay some airplane lease payments.

ATA Holdings, which hired Citigroup and Morgan Stanley to advise on refinancing or restructuring its $175 million 10½% senior notes due August 2004 in late July, also said Boeing Co. will defer plane deliveries.

ATA said in July it could not obtain additional long-term financing.

ATA's 9 5/8% notes due 2005 and its 10½% notes due 2004 were quoted 2 points higher at 72 bid, a trader said.

"This is good as long as they do eventually make the payments, which is anyone's guess," a trader said.

Boeing Capital Services Corp., General Electric Co.'s General Electric Capital Aviation Services, and International Lease Finance Corp., a unit of American International Group Inc., agreed to let ATA delay payments, mostly in the period from the end of June 30, 2003 through March 31, 2005, Indianapolis-based ATA said in a filing with the Securities and Exchange Commission.

Boeing also agreed to defer deliveries of seven 737-800 airliners until 2005. ATA originally agreed to take them in 2004. The modifications to the lease agreements, which cover planes acquired from 2001 through 2003, are conditional on ATA completing the exchange offer by the end of September.

HealthSouth Corp. bonds were "down a little" Wednesday. The 6 7/8% notes due 2005 were seen in the "89.75-90 bid" area, a trader said.

Last Thursday the Birmingham, Ala.-based healthcare company said its lending banks have waived a payment blockage, allowing past-due interest to be paid to the holders of the company's subordinated debt.

Meanwhile, Oglebay Norton Co.'s 10% notes due 2009 were seen falling 1 point Wednesday to 34 bid.

"There were a bunch of downgrades today so I'm surprised they didn't fall further," a trader said.

Oglebay Norton said last Friday it missed an interest payment due Aug. 1 on its 10% notes due 2009.

The Cleveland-based minerals company said it is in talks with its bank group and senior secured note holders to reach amendments to lending agreements. Once it completes those amendments, Oglebay Norton said it intends to pay deferred interest on the notes as soon as practicable.

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