Adelphia jumps as company puts itself up for sale; Denny's lower on downgrade

By Paul Deckelman and Sara Rosenberg

New York, April 22 - Adelphia Communications Corp.'s bank debt firmed, and its bonds jumped several points Thursday after the bankrupt Greenwood Village, Colo.-based cable operator said that the possible sale of part or even all of the company will be explored as part of a plan of reorganization.

Elsewhere, Denny's Corp. bonds were quoted lower after Standard & Poor's downgraded the company's debt by two notches in response to its planned recapitalization. Asbestos-related names meanwhile were unchanged, despite the Senate's failure to overcome procedural hurdles blocking consideration of a planned lawsuit liability settlement.

Adelphia's bank debt was seen up about a quarter to a half a point across the board in reaction to the company's announcement.

The company's TCI bank debt was quoted at 98.625 bid, 99.125 offered. Its Old Century bank debt was quoted at 97.25 bid, 98.25 offered, while the Century revolver was quoted at 96 bid, 97 offered, a trader said.

On the bond side of the ledger, Adelphia "definitely motored [upwards]," a trader said, quoting the company's 10¼% notes due 2011 "up three, maybe four points," at 108 bid, 109 offered. He saw the 10 7/8% notes due 2010 three points better at 106.25 bid, 107.25 offered, a three-point gain on the session, and quoted Adelphia's 9 7/8% notes due 2005 at 103 bid.

The trader said that Adelphia's convertible notes, which have been bouncing up and down in the 40s recently (finishing at 48 bid, 50 offered Wednesday), went home much higher at 56 bid, 57 offered.

Another trader also saw the converts up, although not quite as strongly; he said that after having touched 56 bid the converts backed off a little from that peak to end at 54 bid, 56 offered.

"The rest of their paper - the par bonds - moved up three or four points," he said, pegging Adelphia's various issues in a 105-109 context.

A market-watcher elsewhere saw Adelphia's 7 7/8% notes due 2009 three points better at 101.5; he saw its 8 3/8% notes due 2017 a point better at 109.5, and its 8 3/8% notes due 2007 two points up at 111.

Other Adelphia bonds he saw moving around were the 7¾% notes due 2009, which moved up to 103 bid from prior levels around 98.5; and the 10 7/8s due 2010, up four points at 107.5.

Bonds of Adelphia's Century Communications unit were also higher, in line with the gains of its parent's paper; Century's 8 7/8% notes due 2007 were seen up three points at 111.

Adelphia's over-the-counter-traded shares - languishing down in penny stock territory - firmed solidly as well Thursday, up 15.5 cents (22.14%) to 85.5 cents. Volume of 8 million shares was more than double the usual turnover.

Adelphia chairman and chief executive officer Bill Schleyer said in a company statement that "we were pursuing a plan of reorganization that called for an independent Adelphia because we believed it was in the best interests of our bankruptcy constituents." But, he added: "Increasingly, in our continuing dialogue with constituents after filing the plan, it became clear that a broad range of constituents preferred to allow the market to determine the appropriate value for Adelphia."

Bondholders and other creditors have objected to the company plan on the grounds that breaking Adelphia up by selling its assets - or even the whole company - would likely yield a greater recovery to its creditors than the company plan to swap much of its billions of dollars in debt for cash and equity in a restructured, independent company.

Even so, Schleyer added that "while we will explore the possible sale with full vigor, we also intend to continue to pursue a plan for an independent company upon emergence. We will compare the value created in both approaches and do what is in the best interests of our constituents."

The statement said the company would also continue to seek approval of an $8.8 billion exit financing package that would let Adelphia remain independent.

Weirton lower

The news that Weirton Steel Corp. will not continue on as an independent company but will instead be sold to International Steel Group Inc. sent the bankrupt West Virginia-based steelmaker's 10% notes due 2008 headed back down to 15 bid, 20 offered from Wednesday's bid level around 20.

Judge L. Edward Friend II of the U.S. bankruptcy Court in Wheeling, W.Va., ruled Thursday that from what he had seen of Weirton, the company would likely lose $100 million a year as an independent concern, a level of losses he considered unsustainable.

Friend thus ruled in favor of requests by the company management and the union that represents Weirton's 3,000 workers that the company be bought out by International Steel, a burgeoning steel conglomerate cobbled together over the last few years by financier Wilbur Ross from the ruins of other now-defunct American steelmakers like Bethlehem Steel Corp. and LTV Corp. Addition of the Weirton assets will vault International Steel ahead of traditional domestic steel industry leader United States Steel Corp. in terms of total steelmaking capacity.

Ross's bid was $237 million, which includes some debt assumption; an independent bondholders group that felt International Steel's offer undervalued the company; they put together their own $364 million offer, but Weirton management and the union felt that only International Steel could quickly close on the deal and keep Weirton in operation and save its jobs; they said the bondholders' bid - which included forgiveness of $130 million of additional debt - was by no means a sure thing.

A trader said that even though that $130 million was not "real" money in terms of up-front cash, "Wilbur's doing the same thing, except he's getting the judge to cancel it for zero."

The trader lamented that "the thing that's unfair about this whole thing is that the senior bondholders are the ones who gave up $110 million [of debt] last time [Weirton] filed," several years ago, for security, so this wouldn't happen to them - and now the judge is doing it to them again. What they're saying is that the workers have more rights than the people who put the money up," since a key element in International Steel's victory was the union's disdain for the bondholder group's offer.

"That's like saying the occupant of the house has more rights than the bank that gives them the mortgage," he added.

Denny's sinks

Denny's bonds were being quoted lower, a trader said, after the Spartanburg, S.C.-based restaurant chain operator said in an 8-K filing with the Securities and Exchange Commission that it had disclosed to an ad hoc committee of holders of Denny's 11¼% senior notes due 2008 information about the company's intentions of possibly recapitalizing the struggling company. Such a recapitalization would include an exchange of the 11¼% notes into common stock, refinancing of Denny's 12¾% senior notes due 2007 and refinancing its credit facility.

Standard & Poor's weighed in with a two-notch downgrade, cutting the bonds to CC+ from prior levels at CCC, while keeping a negative outlook. The ratings agency said it viewed completion of any such transaction requiring bondholders to get less than par value for their notes "tantamount to a default."

Denny's 11¼% notes due 2008 had recently been hovering around a 91-92 bid level; however, a trader said that following the downgrade, he saw the bonds "a little weaker," pegging them at 89 bid, 91 offered.

In other distressed-bond dealings, the trader saw Trico Marine's 8 7/8% notes due 2012 "down a bit" at 48.5 bid, 49.5 offered, off from 50.5 bid, 51.5 offered previously, despite a lack of fresh news about the Houma, La.-based provider of marine services to the offshore oil drilling industry.

Asbestos bonds steady

And there was little reaction seen in the bonds of asbestos-challenged companies to the news that the Senate, on a procedural vote Thursday, failed to get a bill that would set up an asbestos claim liability resolution mechanism onto the floor for a vote.

Although Senate Majority Leader Bill Frist wanted to get the full hundred-member body to consider the Republican-backed bill, he failed to get the supermajority 60 votes needed to shut off further debate and move for a vote.

The bill would set up a $124 billion claims fund to be paid for by insurers and defendant companies; instead of being allowed to sue the companies, people claiming medical problems from asbestos exposure would be paid out of the fund. Supporters of the bill, mostly Republican, say the mechanism is needed to stem a flood of lawsuits that have driven numerous companies bankrupt over the last few years. Opponents, mostly Democrats, claim the $124 billion is inadequate to meet all of the claims.

Each side has accused the other of carrying water for special interests, with the Democrats accusing the GOP of trying to get big companies with asbestos problems off the hook at the expense of ordinary citizen claimants, while the Republicans say the Democrats are doing the bidding of trial lawyers who profit hugely from the current system.

But news of the latest roadblock didn't have much impact on the bonds of bankrupt Southfield Mich.-based auto parts maker Federal Mogul Corp., still anchored around 26 bid. And there was little movement seen in the notes of bankrupt Lancaster, Pa.-based floor-covering maker Armstrong World Industries Inc., holding steady around 51-52 bid, or in the notes of Owens Corning, a bankrupt Toledo, Ohio-based building products maker; those bonds remained in the low 40s Thursday.

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