Penn Treaty shares up amid rumors of board meeting; airlines nosedive on spike in oil; Tribune sinks

By Ronda Fears

Memphis, Dec. 14 - Penn Treaty American Corp. shares were higher Thursday amid market rumors that there was a board meeting Thursday and an overall sentiment that big holders will eventually pressure the Allentown, Pa.-based long-term care insurance provider to sell out, following more than a year of waiting for the company's audit of 2005 financials.

"Penn Treaty hasn't filed their 10-K from '05 yet! I heard there was a board meeting today and some big announcement is coming," said a trader, who asserted the stock should trade higher being that he sees book value at around $12.25 and Penn Treaty is the only pure long-term care insurance firm.

"I think holders will cause the company to sell out in time. They are tired of waiting for management to get it in gear. Management said once numbers come out they will be large buyers of the stock."

Penn Treaty shares (NYSE: PTA) gained 24 cents on Thursday, or 3.52%, to settle at $7.06 with 147,400 shares moved versus the norm of 55,433 shares.

Another trader said, however, that it also has been rumored recently that the Irish firm Imagine International Reinsurance Ltd. may be rethinking its decision in December to ink a new reinsurance agreement with Penn Treaty.

"I was attending a major financial meeting last month in London. The latest rumor is that Imagine made a mistake when they got in bed with Penn Treaty and is looking to sell it to another reinsurer," the trader said.

The top five institutional holders of Penn Treaty, which collectively own around 20% of the equity as of Sept. 30, are Dimensional Fund Advisors Inc., Sunova Capital LP, Atlas Capital Management, LP, Goldman Capital Management, Inc. and Rutabaga Capital Management, LLC.

Penn Treaty has been delinquent in filing financials for more than a year, without airing much on the progress of that effort. In June, the company said its accountant required more time to complete its audit but it expected "to complete the audit shortly."

Tribune snubbed on snubbing

In a deal-related move, or perhaps more appropriately dashed hopes of a deal, Tribune Co. shares pulled back Thursday, which one trader said was the result of players suspecting the company will fail to get any bids for the whole company and has snubbed good bids for sections, such as billionaire David Geffen's offer to buy the Los Angeles Times newspaper for $2 billion in cash.

"They have a bird in the hand but are throwing that away. Yet, they say they don't have any valid bids for the whole company," one stock trader said. "Today some guys just backed out of this one, for good probably."

Tribune shares (NYSE: TRB) fell 71 cents on the day, or 2.18%, to $31.91 with some 3.57 million shares traded versus the norm of 1.63 million shares.

Tribune has declined to accept or reject Geffen's bid, according to media reports Thursday. Other bidders reportedly interested in the Los Angeles Times include supermarket king Ronald Burkle and real-estate developer Eli Broad.

Chicago-based Tribune rebuffed the bid because it is still seeking offers for the entire company, according to The Associated Press.

Last month, the company extended the bidding search process, which was prompted by demands from its largest shareholder, the Chandler family, which owns a 20% stake in the media conglomerate. In July, the Chandlers demanded that Tribune take dramatic steps to boost shareholder value, such as asset sales or a sale of the entire company.

On Wednesday, a report in the New York Times said that the Chandlers were considering a plan to head a consortium of private-equity firms that would launch a leveraged buyout.

Airlines plunge as oil rises

Merger mania buzz aside, the airline stocks took a nosedive Thursday as oil futures soared on word that the Organization of Petroleum Exporting Countries has decided to curtail production, although not until February. Just about the only exception in the airline stocks, though, was Midwest Air Group Inc., which has a merger bid on the table from AirTran Holdings Inc.

Midwest Air has spurned the AirTran bid, but traders said many players believe the two will eventually come to terms, most likely with a little higher bid than the $11-per-share bid presented Wednesday.

Midwest Air shares (Amex: MEH) added another 95 cents on Thursday, or 8.56%, at $12.05. AirTran shares (NYSE: AAI), however, fell back by 33 cents on the day, or 2.57%, to $12.52.

Otherwise, it was a huge day of shorting airline stocks, traders said, after a big surge in the group, virtually across the board, on Wednesday.

Beyond AirTran's hostile takeover bid for Midwest Air, which is not a big deal in the market, bankrupt carriers Delta Air Lines Inc. and Northwest Airlines Corp. are in play - with Delta having an $8 billion-plus offer from US Airways Group Inc. and Northwest hiring Evercore Group LLC to pursue a deal.

Delta shares (Pink Sheets: DALRQ) fell 23 cents, or 13.29%, to $1.50, and Northwest Air shares (Pink Sheets: NWACQ) plunged $1.17, or 18.37%, to $5.20.

Traders said that while Delta and Northwest may be ahead of the game in the airline consolidation efforts, as they are actively in play, rumors of talks among UAL Corp. and Continental Airlines Inc. didn't help those stocks in the face of rocketing fuel prices.

UAL shares (Nasdaq: UAUA) dropped 69 cents, or 1.53%, to $44.55 while Continental shares (NYSE: CAL) lost 42 cents, or 0.94%, to $44.34.

The January contract for light sweet crude climbed $1.14 on Thursday to $62.51 a barrel on the New York Mercantile Exchange, and gasoline futures climbed 4.76 cents to $1.665 a gallon.

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