Choice One bank debt firmer; Delta bonds gain; aaiPharma up

By Paul Deckelman and Sara Rosenberg

New York, Oct. 6 - Choice One Communications Inc.'s bank debt saw an approximately two-point jump Wednesday following the company's prepackaged chapter 11 filing.

In bond debt trading, Delta Air Lines Inc.'s beleaguered notes were seen up between three and four points on the session, aided perhaps by reported gains in its September traffic and the company's choosing of a famed international marketing company to help it reposition itself in the mind of the flying public.

Choice One's bank paper was up a deuce on the bid side to 60 bid, a trader said. He added that "it's not that big a deal, so people are trying to own as much as they can."

Choice One filed for Chapter 11 Tuesday night at the U.S. Bankruptcy Court for the Southern District of New York, but since the restructuring was accepted prior to the filing by almost 100% of its lenders, it is expected that the exit from bankruptcy could happen in less than 60 days.

Under the reorganization plan, $404 million of the Rochester, N.Y.-based integrated communications provider's outstanding senior debt will be converted into $175 million of new six-year senior secured term notes and 90% of the common stock of the reorganized company. The $252 million of outstanding subordinated debt will be converted into the other 10% of common stock and into two series of seven-year warrants to purchase additional shares of common stock.

The company has already received a commitment for a $20 million of debtor-in-possession facility via agent bank General Electric Capital Corp. and a commitment for a $30 million working capital revolver after the restructuring is complete.

"We are extremely gratified by the remarkably high degree of lender acceptance our financial restructuring plan has received," said Steve Dubnik, chairman and chief executive officer, in a company news release.

Adelphia loans higher

Also in the communications area, bankrupt Greenwood Village, Colo.-based cable operator Adelphia Communications Corp.'s bank debt was about a quarter of a point stronger across the board Wednesday, as investors are "just looking for payouts with minimal downside," according to a trader.

Adelphia's Old Century paper was quoted at 98.75 bid, 99.25 offered, and its New Century paper was quoted at 98.25 bid, 98.75 offered, the trader said.

However, Adelphia's 9 7/8% notes due 2007 were seen down a point, around 90 bid.

Delta bonds gain

Also in bond dealings, Delta's notes "traded up," a trader said. "There was a little bit of pop there."

The troubled Atlanta-based air carrier's benchmark 7.70% notes due 2005 bounced to 45.5 bid 46.5 offered from prior levels around 41, while its 7.90% notes due 2009 firmed to 30 bid, 31 offered and its 8.30% notes due 2029 improved to 26.5 bid, 27.5 offered - gains of about four points on the short end and about three points on the longer part of the curve.

Delta announced Wednesday that system traffic for September increased 8.6% from September 2003 on a capacity increase of 4.6%. Delta's system load factor was 70.5% in September, up 2.7 points from the same period last year. Domestic traffic increased 6.3% year over year while capacity increased 2% percent. Domestic load factor in September was 68.1%, up 2.8 points from the same period a year ago. International traffic in September increased 15.6% year over year on a 13.7% increase in capacity. International load factor was 78.0% up 1.3 points from September 2003

Despite the better operational performance in September, however, Delta's financial performance "continued to deteriorate during the September quarter as a result of a decline in domestic yields and fuel prices that climbed to record high levels," said Gerald Grinstein, Delta's chief executive officer. "In addition, our operations were negatively impacted by four major hurricanes during the quarter."

Delta, trying to dig itself out of its financial hole and avoid bankruptcy, also said Wednesday that it has hired the international marketing firm Ogilvy & Mather Worldwide to help reshape its image. Terms of the airline's deal with the New York-based marketing company were not disclosed.

Ogilvy & Mather and its media agency partner, Group M/MindShare, will develop a new advertising and brand campaign for Delta, the nation's third-largest airline, with the rollout slated for early next year.

aaiPharma higher

Elsewhere, aaiPharma Inc.'s 11½% senior subordinated notes due 2010 were seen as good as 71 bid, 72 offered. The Wilmington, N.C.-based pharmaceuticals maker's bonds "have firmed up over the past couple of days," a trader said, from prior levels around 67 bid, 68 offered.

The company - which said just last week that it would not be able to make the scheduled Oct. 1 interest payment on the notes and would have to seek relief from its noteholders - said Wednesday that it has retained Rothschild Inc. to assist its management in its ongoing evaluation of potential asset divestitures.

The company said that it is evaluating a potential simplification of its operating structure by divesting businesses and assets that it may determine are no longer strategic to its long-term business plan.

"A successful conclusion to this process, if pursued, will enable management to refocus and devote all of its attentions to positioning the company for profitable growth," stated Dr. Ludo Reynders, aaiPharma's president and chief executive officer, in a news release Wednesday.

And traders said that Owens Corning's bonds were trading in the low 50s, up from prior levels in the upper 40s that it held before announcement Tuesday of a bankruptcy court ruling seen as favorable to bond investors and unfavorable to its bank lenders (see related story elsewhere in this issue). Traders expressed some skepticism over the reliability of a quote of bids around the 60 level which one trader had seen in the Owens Corning bonds on Tuesday, wondering if it was a valid quote.

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