Adelphia lower as bid deadline is extended; asbestos bank debt better

By Paul Deckelman and Sara Rosenberg

New York, Jan. 7 - Adelphia Communications Corp.'s bonds were seen at lower levels Friday even as the bankrupt Greenwood Village, Colo.-based cable operator announced that it was extending its deadline for final bids on its assets by another two weeks to the end of the month to give all of the bidders who have expressed interest in its cable systems more time to come up with their final offers.

In bank debt trading, asbestos names continued to move, still on legislation talk, with both Owens Corning, W.R. Grace & Co. and USG Corp. seen active with a stronger tone.

Adelphia debt was seen down about a point or so across the board, with its 10¼% notes due 2006 quoted at 93 bid and its 10¼% notes due 2011 at 97 bid, 99 offered, both "a little weaker," a trader in distressed bonds said. He saw the company's busted convertible notes likewise down a point at 17 bid, 18 offered.

A market source at another desk saw both of those 10¼% issues down more than a point, with the 2006 bonds off 1¾ points at 92.75, while the 2011s were off 1 5/8 points at 96.875. He also saw the Adelphia zero-coupon notes due 2008 at 68.75, off a quarter-point, although he also saw the zeroes which were to have matured in 2003 actually up half a point at 104.5.

Another trader saw Adelphia's 9 7/8% notes due 2007 down two points at 92 bid, 93 offered. And the 8 7/8% notes due 2007 of its Century Communications unit were also down a deuce at 118 bid.

Adelphia said Friday that it would extend bid deadlines by two weeks until the end of January. It had originally set a deadline for those bids at mid-month but said that the response to its asset sale had been so great - with bids having come in from anywhere from 40 to 50 companies, according to many estimates - that "in order to accommodate that, we're using full month of January to conduct due diligence," a company spokesman said.

While the extension of the bidding deadline is apparently seen by bondholders as yet another delay in the process - hence, the retreat - another view is that it increases the chance for a greater return for creditors, since more companies may come in with higher offers for at least some of the company's assets.

Those assets - cable systems all over the country grouped into seven geographically based clusters - are worth an estimated $17 billion to $20 billion. Adelphia is pursuing a two-track strategy, soliciting bids from current cable operators and/or financial backers, while at the same time reserving the right to reject the bids and continue to reorganize in hopes of emerging from bankruptcy as an independent company three years after it first sought Chapter 11 protection. The company said it will make that decision which fork in the road to take sometime in the current quarter.

The fifth-largest U.S. cable operator has solicited bids from a broad range of companies that include private equity firms and large, medium and small-scale media companies. Cable giants Time Warner Inc. and Comcast Corp. are expected to submit a joint bid for Adelphia. Should they win, they would divide up Adelphia's assets between them to be contiguous with each company's existing footprints, and then shop any assets they didn't want around to some of the other bidders who have expressed interest.

Asbestos loans up again

Among the bank loan players, Owens Corning was quoted at 91.5 bid, 92.5 offered, up about half a point on the day, a trader said. Columbia, Md.-based chemical company W.R. Grace was quoted at 120 bid, 121 offered, up about half a point on the day. And USG was quoted at 117.5 bid, 118.5 offered, pretty much unchanged on the day, the trader said.

A bond trader saw Toledo, Ohio-based insulation maker Owens Corning's notes up half a point to 85, while Chicago-based building products company USG's were steady around 130 bid.

A market source saw Lancaster, Pa.-based floorcovering maker Armstrong World Industries off 1¼ point to 74.

Market observers said Washington is apparently making progress on crafting a claims payment mechanism that would stem the flood of asbestos lawsuits, with Senate Judiciary Committee chairman Arlen Specter (R.-Pa.) planning on holding a hearing on a draft proposal next week and aiming to wrap up action by the end of the month.

Gate Gourmet steady

Gate Gourmet Inc.'s U.S. dollar term loan B1 was still trading around 97 on Friday, according to a market source, even after Standard & Poor's downgraded the company's ratings to D after, as anticipated, the company missed its interest payments.

When asked whether levels have hung in at the high 90 context because lenders are relatively confident about recovery values in a worst case scenario, the source responded, "they must be."

"They did not make the amortization payments on the loans or the interest payment on the mezzanine debt," the source added.

These payments were technically due Dec. 31, although the company was given until late this past week under the grace period to make good on the payments.

Because of the company's failure to meet these debt requirements, S&P lowered its corporate credit rating to D from BB-, its senior secured credit facilities to D from BB and junior secured mezzanine loan facility to D from BB-.

S&P also placed its 1 bank loan recovery rating on Gate Gourmet LLC on CreditWatch with negative implications.

Nothing has been decided by the bank loan lenders in terms of a course of action regarding this event of default, but various options are being reviewed and it is anticipated that the loan group will hold a call early next week to discuss the situation.

Just what those options might entail is still unclear, but the Zurich, Switzerland-based airline catering company may need to completely amend and restate its credit facility, get an equity infusion or worst case scenario, be forced into Chapter 11, a source had recently explained.

In December, the company approached lenders asking to defer the loan amortization payments due Dec. 31 until April 1, 2005 and waive financial covenants for Dec. 31 due to liquidity concerns. The company had also asked mezzanine lenders to defer the interest payments. However, lenders opted not to sign off on the waiver.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.