Pegasus, Enron bonds move up, textile sector bank debt unravels

By Paul Deckelman and Sara Rosenberg

New York, July 7 - Pegasus Satellite Communications Inc. bonds and those of bankrupt energy giant Enron Corp. were seen solidly higher Wednesday - the former on the possibility it may reach some kind of a deal with corporate nemesis DirecTV Group Inc., the latter on investor expectations that the company's emergence from bankruptcy may be nearing and they may be in line for cash distributions.

On the bank debt front, the textile sector in general came under pressure on Wednesday, possibly as a result of the liquidation rumors that have been flying around on sector name Galey & Lord Inc. over the past week or so.

Pegasus paper was "coming out," a bond trader said, "amid a lot of uncertainty" about the Bala Cynwyd, Pa.-based satellite television programming distribution company. He quoted its senior paper - which had recently moved to highs above 50 from prior levels in the mid-40s - as having gotten as high Wednesday as 55 bid, 56 offered, before coming off those highs and settling in at 52 bid, 53 offered.

"There's a lot of stories" floating around about the company, he said, including reports that there might be what he called "an emergency hearing" Thursday before the U.S. Bankruptcy Court in Portland, Me., that is overseeing the company's reorganization. The hearing, he said, would concern "DirecTV's ability to cut off PGTV at the end of August."

There was also speculation, he said that Pegasus might be "working on a deal with DirecTV" to preserve its franchise, despite all of the bad blood between the two companies - although he added that "we hear [those kind of rumors] every day." He noted that at his shop, the analysts believe that "in the end Pegasus is going to cut a deal with them."

Pegasus distributes DirecTV service to about 1.1 million mostly rural customers but its exclusive franchise to do so is scheduled to come to an end on Aug. 31.

The two companies have been feuding for some time over just how much those customers should actually be worth to El Segundo, Calif.-based DirecTV. After months of legal wrangling, DirecTV and the National Rural Telecommunication Cooperative - a TV programming distribution industry group of which Pegasus was the largest member - agreed to end the exclusive right of NRTC members like Pegasus to sell DirecTV in their territories, effective Aug. 31.

While DirecTV said that non-Pegasus members could arrange to continue to distribute its programming in their service areas on a non-exclusive basis, it gave Pegasus no such option, instead making a take-it-or-leave it offer of $675 per customer, which Pegasus rejected as grossly inadequate. It filed for bankruptcy protection in Portland on June 2, charging that DirecTV and NRTC were conspiring to destroy its business, and saying that the filing was the only way to preserve the value of its distribution agreement. Pegasus said DirecTV and NRTC had no right to unilaterally abrogate its exclusive contract.

In response to the bankruptcy filing, DirecTV recently began to market its services to new customers in Pegasus' formerly "exclusive" territory - and the Portland court ruled last month that DirecTV was within its rights and refused to grant Pegasus a court order to stop the practice.

The trader said that between "all that speculation" that the court might step in in Pegasus' defense, or that Pegasus might make a deal with its enemy, or even that shorts were being covered, the company's bonds were up.

Another trader saw the bonds likewise "up a couple of points," at 53 bid, 55 offered or 54 bid, 56 offered.

Enron rising

Elsewhere, the first trader saw Enron's paper up. Enron Corp. "high-claim" paper was 26.75 bid, "medium-claim" was 26.5 bid and "low-claim" was 26.25 bid.

He saw Enron's Osprey Trust 8.31% notes at 36.5 bid, and its 7.797% notes at 35 bid.

The trader said that all of the current news about Enron, including prosecutorial action against former chairman Ken Lay and other one-time executives of the Houston-based energy trader, bankrupt since late 2001, "had absolutely nothing to do with" the rise in the paper.

"As they get closer to coming out of reorg, there's going to be another distribution to the Osprey holders, maybe two distributions, and as well to the corporate bondholders."

WestPoint Stevens falls

Among bank debt names, the textile companies were being pushed around, a trader said.

A prime example of a company that suffered that was WestPoint Stevens Inc. The bank debt of the West Point, Ga.-based manufacturer and marketer of bed and bath home fashions dropped by about five points to 82 bid, 87 offered, the trader said.

Meanwhile, Galey & Lord's bank debt managed to basically hold steady at 38 bid, 42 offered, compared to Tuesday's levels of 38 bid, 43 offered, the trader added.

But Galey & Lord had already had its downward spiral, falling to 35 bid, 45 offered down from 48 bid, 49 offered last week after the New York-based textile company held a private investor call that sparked rumors of a possibly liquidation.

Oneida loans slip

Elsewhere, Oneida Ltd.'s bank debt was down about a point ,with quotes ending the day at 91.5 bid, 92.5 offered, according to a trader, who couldn't find any particular reason for the move.

On Wednesday, Oneida - a provider of flatware, dinnerware, crystal, glassware and metal serveware for both the consumer and foodservice industries based in the upstate New York city of the same name - did announce that it signed a letter of intent to sell substantially all of the assets of its Encore Promotions Inc. subsidiary to Bradshaw International Inc., and also to enter into a licensing agreement with Bradshaw. The sale is expected to be completed by July 31.

"This transaction is a very positive move. It supports Oneida's business restructuring, enabling us to focus our resources on core operations while continuing to pursue opportunities for market growth," said Peter J. Kallet, chairman and chief executive officer, in a company news release.

"The Encore operations are a natural extension of Bradshaw's proven expertise in kitchenware marketing. Oneida already has a solid relationship with Bradshaw, through a licensing venture for mass-market cookware and bakeware products, and we are very pleased to continue developing our supermarket placements via Encore and Bradshaw."

Horizon Natural loans trade

Horizon Natural Resources Co.'s bank debt "traded [in] good size" on Wednesday in the 66 to 68 context, according to a trader, as investors continue to be pleased with strong monthly numbers.

"The paper is unchanged on the day but it moved up like 10 points yesterday," another trader added.

Adelphia bonds, loans dip

Adelphia Communications Corp.'s bank debt was slightly lower on Wednesday with the revolver and Old Century paper seen down by about a quarter of a point.

The revolver was quoted at 95 bid, 96 offered and the Old Century was quoted at 96½ bid, 97½ offered, according to a trader.

On the bond side of the fence, the bankrupt Greenwood Village, Colo.-based cable operator's 9 7/8% notes due 2007 were a point lower, at 97 bid, while the 8 7/8% Notes due 2007 of its Century Communications subsidiary were also down a point, at 108.

A bond trader saw the Frontiervision "still trading with a high premium," around 123-124. He called Frontiervision "the Rolls Royce of Adelphia paper," with the highest claims against assets and hence the most value.

With some Adelphia corporate issues trading almost 10 points below their recent highs, having gradually come down in the last several weeks - even as the company cleared away objections to its exit financing and won court approval to start work on the $8.8 billion package, an important step - the trader opined that TimeWarner had been the object of market speculation as a possible buyer for part or all of Adelphia, "the one that was supposed to be all hot and heavy" for Adelphia, but the air has recently gone out of that balloon, "now that they're making a run at [film studio] MGM."

He said that "in the end, Adelphia is still going to be sold, there's still a couple of companies looking at them," - but if TimeWarner opts out, "the workout might just be a little bit longer. It kind of drags on a little bit."

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