Reliant Energy bank paper bounces around on earnings; Adelphia bonds off, Pegasus steady

By Paul Deckelman and Sara Rosenberg

New York, Aug. 4 -Reliant Energy Inc.'s bank debt was off to a rough start Wednesday right after earnings were released, with the Houston-based energy operator's paper dropping by about a quarter to a half point - but by afternoon it had dusted itself off, regaining its earlier losses to end the day unchanged.

Among distressed-bond investors, Adelphia Communications Corp. notes were seen down two to three points "across the capital structure," a trader said, citing bearish sentiment on the whole cable industry stemming from a lengthy Wall Street Journal piece.

And Pegasus Satellite Communications Inc.'s bonds, which had been winging their way upward over the past several sessions on news that DirecTV Group Inc. will buy out Pegasus' assets, appeared to have steadied on Wednesday.

A trader in distressed bank debt said that Reliant's paper "dropped to 99.5" after the numbers came out. "Now it's back up to 99.75 bid, 100.25 offered. It dropped right after earnings and moved back up. I don't think the call was as bad as people expected."

But a second trader said the paper was quoted at 99.75 bid, 100.25 offered throughout the entire trading day.

For the second quarter, the Texas provider of electricity and energy services reported a loss from continuing operations of $69 million, or 23 cents a share, versus a loss from continuing operations of $34 million, or 12 cents a share, for the same period of 2003

The company also reaffirmed its 2004 outlook for adjusted earnings per share from continuing operations at $0.25.

"We are on track to deliver the outlook we provided earlier this year both in terms of earnings and cash flow for 2004. In addition, we have made significant progress toward our cost improvement targets and net debt-to-adjusted EBITDA goal of three times or less by the end of 2006," said Joel Staff, chairman and chief executive officer, in a company news release.

"In May we announced the sale of our upstate New York power generation facilities for approximately $900 million. The proceeds from the sale of these assets will be used to reduce debt, and we expect the transaction to be completed later this year."

Dan River loans steady

In other bank debt activity, Dan River Inc.'s paper was quoted at 93 bid, 95 offered, pretty much unchanged on the day following the release of monthly numbers, according to a trader.

"It traded 95 a couple of weeks ago so it's sort of been slipping off but it's unchanged today. It doesn't trade enough for this to have an immediate affect. Most people don't overreact to one month numbers on any credit," a trader said.

A trader in distressed bonds meantime saw the Danville, Va.-based textile company's bonds as having recently "traded down to 20. Now they're back up to 24, off a couple [of points] from their bottom."

For the period from June 6 to July 3, cash and cash equivalents were $1.627 million, net sales were $33.584 million, operating loss was $8.427 million and net loss was $18.633 million.

Pegasus unchanged

The distressed-bond trader also Pegasus' bonds "mostly at 64-66. They were firm - there was no sell off. They were firm and quiet."

The Bala Cynwyd, Pa.-based satellite television programming distributor's bonds "had their run already," another trader declared in agreement, quoting the company's 11¼% notes due 2010 unchanged at 64.5 bid, 65.5 offered.

That run took the Pegasus bonds into the lower 60s over the course of several sessions from prior levels in the upper 50s.

A market source, however, saw the run not yet over, although he acknowledged that his shop might have been quoting the Pegasus bonds a little lower than the others to begin with. Be that as it may, he saw Pegasus' 12½% notes due 2007 move up to 64.5 bid, from prior levels at 62, while its 9¾% notes due 2006 were at 62, up a point-and-a-half on the day. Also at that level, although their rise was a little smaller, were the 12 3/8% notes due 2006 and 9 5/8% notes due 2005.

Pegasus' bonds took their jump after the company announced that it had has agreed to sell its assets to former partner -and recent corporate enemy - DirecTV Group Inc. for $938 million - $875 million cash plus forgiveness of a $63 million legal judgment that DirecTV won against Pegasus.

Pegasus was for years the exclusive distributor of DirecTV programming to some 1.1 million mostly rural customers it serves, but the two companies feuded over the value of those customers. After DirecTV and the National Rural Telecommunications Cooperative - an industry group of rural-area TV program distributors, to which Pegasus belonged - agreed to terminate NRTC members' exclusive distribution rights, Pegasus said it refused to accept the agreement, and ultimately filed for Chapter 11 protection in Portland, Me. in order to protect its exclusive distribution rights.

Adelphia down on report

Also on the communications front, a trader said that a "nasty" article in the Wall Street Journal over the inroads that satellite broadcasters - like DirecTV - were making on the traditional turf of the cable TV operators, helped knock Adelphia Communications bonds for a loop. The bankrupt Greenwood Village, Colo.-based cable operator's bonds had recently been already sliding, with the senior issues quoted in the upper 80s, well down from levels at or above par just a few weeks ago, and they went down Wednesday "three points across the capital structure."

He quoted Adelphia's 10¼% notes as having dropped back to 87 bid, 88 offered from prior levels at 90 bid, 91 offered.

At another desk, Adelphia's 10 7/8 % notes due 2010 were seen having fallen to 86 bid from 88.5 offered, while its 9 7/8% notes due 2007 were also lower, off more than a point to 85.5 bid.

RCN sinks, Delta lower

A trader also saw RCN Corp.'s notes lower, the bankrupt Princeton, N.J. -based telecommunications operator's 10% notes due 2007 off two points at 50.5 bid, 51 offered.

He also saw Delta Air Lines Inc.'s bonds "sucking wind," its 8.30% notes due 2009 down a point on the session and down sharply from recent levels around 40 bid, which the bonds had reached after the Air Line Pilots Association offered a more substantial pay concession to the problem-plagued Atlanta-based carrier than it had previously offered.

Since that time, he said, the Delta bonds have been "dropping about a point a day down to their current levels."

Another trader saw them even worse, off "two to three points, depending on the coupon," with the 8.30s at 31 bid, 33 offered, and Delta's 7.70% notes due 2005 at 52 bid, 54 offered.

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