Delta bonds better in quiet dealings; Reliant refinancing fails to move bank debt

By Paul Deckelman and Sara Rosenberg

New York, Nov. 29 - Delta Air Lines Inc. bonds continued to show impressive firmness Monday, although trading in the distressed-issue market generally was pretty quiet on the first day back following the long Thanksgiving weekend.

In bank-loan dealings, Reliant Energy Inc.'s debt remained around 102 bid, despite news that the Houston-based energy operator was refinancing. The company's bonds were meantime quoted slightly lower, again in quiet dealings.

"There was some pretty good demand for the Delta paper," said a bond trader, who quoted the Atlanta-based airline operator's 8.30% notes due 2029 at 42.5 bid, 43 offered, adding that "some of the higher [priced] coupons were doing a little bit better also."

He said that the Deltas "seem to be doing better since Moody's changed their outlook", following Delta's announcement last week that it was able to complete the short-term portion of its three-part offer to exchange new debt for existing senior unsecured notes and secured passthrough bonds. That news was widely hailed as a big positive for the struggling carrier, which is trying to get a handle on its $20 billion debt burden as its next step in attempting to stay out of bankruptcy. By some estimates, completion of at least the minimum short-term portion of the exchange - though well below the maximum level of old bonds that Delta was hoping to take out at a discount - buys the company anywhere from six to 12 more months to try to get its financial house in order.

A second trader saw the 8.30s firm a point, to 42 bid, 44 offered from 41 bid, 43 offered during last week's extremely thin pre-holiday dealings. He meantime saw the company's benchmark 7.70% notes due 2005 having firmed to 85 bid, 87 offered from prior levels at 83 bid, 85 offered.

At still another shop, a market source pegged those 7.70s even higher at 86.5 bid, up two points on the day, while the 8.30s were seen half a point better at 42. He also saw the Delta 7.90% notes due 2009 up a point at 56 bid.

The second trader, meanwhile, saw little or no activity in other airline bonds; he quoted American Airlines corporate parent AMR's 9% notes due 2012 unchanged around 71 bid, 72 offered, even as the Fort Worth, Tex.-based Number 1 U.S. airline company prepared to launch its new $850 million credit facility this week.

Another airline company which recently announced a restructuring of its $975 million credit facility, Eagan, Minn.-based Northwest Airlines Corp., was seen slightly better Monday, its 7 7/8% notes due 2008 estimated up half a point, at 76 bid.

Reliant loans steady

In bank debt dealings, Reliant Energy's paper hung in around 102 bid Monday, as the market is continuing to assess the value of warrants that bank debt holders will hold on to, according to a trader.

"There are different valuations placed on the warrants. Some think they're valued at around $2. So you get paid off at par, but still retain your warrants. It moved up to around 102 before as people knew something was coming up," the trader explained.

On Monday, Reliant announced plans to get $4 billion in new debt consisting of a new credit facility, senior secured notes and fixed-rate tax-exempt bonds.

The credit facility is currently estimated to be sized at $2.8 billion with a $1.7 billion revolver and a $1.1 billion term loan B.

Proceeds from the transaction will be used to refinance existing debt facilities, including a $2.1 billion revolver and a $1.7 billion term loan at the parent company, $300 million of Orion Power Midwest bank debt and $400 million of floating-rate tax-exempt bonds.

A market source meanwhile saw Reliant's bonds off slightly on Monday, with the company's 9½% notes due 2013 heard at 114.875, down half a point on the session.

Iridium jumps

The source said the really big percentage mover that he had seen Monday was Iridium Satellite LLC, whose 14% notes due 2005 firmed to 14 bid from 12.75. The Bethesda, Md.-based satellite communications operator is the successor company to the ill-fated Iridium that crashed and burned in the late 1990s, managing to buy its $5 billion satellite fleet and other operations for a mere $25 million.

A junk trader saw bankrupt Princeton, NJ.-based telecommunications operator RCN Corp.'s bonds up two points on the session, although he had not seen any fresh news out on the company that would justify that. He quoted RCN's bonds as having moved up to levels of 51 bid, 53 offered and 53 bid, 55 offered from previous levels of 49 bid, 51 offered and 51 bid, 53 offered, respectively.

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