Pegasus bonds trade up on DirecTV news; loan investors weigh terms

By Paul Deckelman and Sara Rosenberg

New York, Aug. 2- Pegasus Satellite Communications Inc. bonds were seen up about three points on the news that DirecTV Group Inc., the Bala Cynwyd, Pa.-based satellite television programming distributor's content provider - and main corporate nemesis - has agreed to buy out its bankrupt rival for $875 million in cash, plus forgiveness of a $63 million legal judgment it won against Pegasus earlier this year.

Investors in Pegasus' Media & Communications Inc.'s term loan D were meanwhile seen by bank debt traders to be warily mulling over the possibility of being paid down at a premium in connection with the DirecTV Inc. transaction.

The term loan was quoted wide, at par bid, 102 offered, according to a trader.

"This news was I think more or less baked into the bank debt levels," the trader said. "The question now is will bank holders get any sort of call premium, because that's how the bank debt is structured."

While the bank debt players seemed a bit wary, bond traders plunged right in and took Pegasus Satellite's notes about three points higher on the day, with its 9 5/8% due 2005 and 9¾% notes due 2006 both ending at 58.5 bid and its 12 3/8% notes due 2006 and 12½% notes due 2007 both closing around 60.25, up four points on the session.

A distressed-debt trader said that he saw some noticeable activity levels in the Pegasus paper, which he said had come slightly off its highs to close at around 60-61, still up around three points on the DirecTV news.

Another trader saw the company's 11¼% notes at 61 bid, 61.75 offered, up three points. However, he saw Pegasus' deeply distressed 13½% notes due 2007 still languishing around 9-10. Investors, he said, realize that "there's only going to be so much recovery that's going to trickle down from the seniors to the sub."

DirecTV has agreed to purchase Pegasus Satellite Communications Inc.'s satellite television assets for $938 million, including $875 million cash, plus certain adjustments to be made at closing and an agreement to dismiss all litigation concerning Pegasus Satellite's distribution of DirecTV services and Pegasus Satellite's bankruptcy, according to a company news release.

Furthermore, Pegasus Communications Inc. has agreed to purchase Pegasus Satellite's broadcast television stations subject to higher and better offers.

The sale of the satellite television assets and the settlement with DirecTV as well as the sale of the broadcast television stations are subject to bankruptcy court approval and applicable antitrust filings and approvals.

"These agreements enable a final resolution to five years of litigation between Pegasus Satellite, DirecTV and the NRTC concerning Pegasus's right to distribute DirecTV, through a sale of Pegasus Satellite's satellite television assets to DirecTV for $938 million. They also reflect a consensus between Pegasus Satellite and its creditors on the disposition of Pegasus Satellite's broadcast television stations to Pegasus Communications. We believe that this will allow Pegasus Satellite's bankruptcy to be resolved quickly and with the least continued risk to creditors," said Marshall W. Pagon, Pegasus Satellite's chief executive officer, in the news release.

Delta lower

Elsewhere, a trader saw Delta Air Lines Inc. bonds down two points on the session, its 7.70% notes due 2005 at 56 bid, 58 offered and its 8/30% notes due 2029 at 33 bid, 35 offered.

On Monday, the Atlanta-based air carrier upped the amount of concessions it says it needs from its 7,500 pilots to a cool $1 billion - up 20% from previous demands.

There was no immediate response from the union that represents the captains.

Battered by rising fuel costs and unable to pull in more revenue by raising prices - the industry, led by number-one carrier American Airlines, on Monday abandoned a short-lived price hike plan that had begun late in the preceding week - Delta said in a government filing it was seeking more concessions to avoid the fate of United Airlines, currently in Chapter 11.

Aside from Delta and Pegasus, a trader sniped, "everything else was watching pain dry."

WestPoint loans trade

Back on the ground, WestPoint Stevens Inc.'s bank debt traded a bit, and therefore saw levels tighten up, with the paper quoted at 72½ bid, 74½ offered, according to a trader.

On Friday, the paper was quoted at 70 bid, 75 offered.

No specific news sparked the new buy side interest in the West Point, Ga.-based textile firm's debt.

Primus regains some lost ground

Primus Telecommunications Group, Inc. bonds - which got clobbered on Friday after the McLean, Va.-based telecom operator reported a second-quarter loss, a sharp deterioration from its year-ago profit - were on the rebound, up anywhere from two to four points on the session as players stepped in to reverse Friday's oversold condition.

The bonds were heading in quite a different direction than they were on Friday, when they slid badly on the company's announcement after the close the previous session that in the second-quarter ended June 30, it lost $15 million (17 cents a share) versus its year-ago profit of $20 million (21 cents a share). That shocked the socks off Wall Street, where the analysts had been looking for about 10 cents a share of earnings, and caused its stock to drop half of its value and the bonds to likewise swoon.

On Friday its 8% notes due 2014 were seen to have tumbled as low as 68 during the session before going home at 72, still down 10 points on the day, and its 12¾% notes due 2009 lost 24 points to close around 84.

On Monday, though, it was a different story, with the 8% notes moving up to 76 bid from 72 and the 123/4s at least two points better at 86.

Another trader also saw the 8s around 75, "up three or four points on the day," and while he didn't specifically see the 123/4s he thought they were "probably better as well, following the other ones [up]."

However, he did not share whatever bullish sentiment caused the Primus notes to bounce Monday.

"The deal on these guys is they have a lot of the same problems that AT&T has in their long-distance business - everybody's trying to be a loss-leader in that [to drum up business for a company's other services]. That's a problem."

Today, he said, Primus "still covers interest three times. Tomorrow? I don't know. They're free cash-flow positive today. I don't know about tomorrow. That's what everybody's trying to figure out right now."

But another trader took a more sanguine view, that the numbers weren't all that bad. Actually, he said they were "pretty decent," and so the bonds "are back in the pink" - at least relative to Friday.

© 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.