Trico Marine bonds trade flat as restructuring looms; Leap loans continue rise

By Paul Deckelman and Sara Rosenberg

New York, April 27 - Trico Marine Services Inc.'s bonds moved up solidly on Tuesday - but began trading flat, or without their accrued interest, as the embattled company took steps that are likely to lead to a debt restructuring, either in or out of court.

Elsewhere, Leap Wireless International Inc.'s bank debt continued to rally on apparent investor bullishness about the telecommunications operator's post-restructuring equity value. And Federal-Mogul Corp.'s bank debt and bonds continued to improve.

Trico Marine's 8 7/8% notes due 2012 - which on Monday had fallen to bid levels around 41-42, culminating a slide which had stretched out over several sessions - "were quoted all over the map [Tuesday] morning, a trader said, with the bonds' nominal levels in the low-to-mid 40s. "Some were quoting them flat, and some were quoting them with the interest." He saw the bonds closing around 46 bid, 47 offered, trading without interest, and so, in his view, with the nominal price gain offset by the loss of the interest, it was essentially a wash.

Another trader saw the bonds closing at 47 bid, 48 offered, trading flat, up from 41.5 bid, 42.5 offered late Monday, so with the interest loss offsetting the price rise, "the net gain on the day was maybe a point - but nothing too dramatic."

Trico announced that Joseph Compofelice, currently a company director and chairman of Trico's audit committee, will take over as non-executive chairman of the board, replacing Ronald Palmer, who steps down as an executive of the company and a director but who will continue to "provide services" to Trico.

Palmer said that while he will "continue to focus on meeting Trico's business objectives," Compofelice's role will be "to work with all parties involved in the financial alternatives analysis," as the Houma, La.-based provider of marine services to the offshore oil-drilling industry is "clearly accelerating our efforts to meet Trico's financial challenges."

In that same vein, the company also announced that it had retained Lazard Freres & Co. LLC as its financial advisor and Kirkland & Ellis LLP as legal advisor. Trico's statement said Lazard and Kirkland & Ellis "will assist the company's management in exploring various alternatives including selling assets, raising additional financing and restructuring the company's debt, including its $250 million senior notes due 2012."

Trico's Nasdaq-traded stock - which plummeted more than 30% on Monday - continued to slide on Tuesday, losing another 26 cents (34.67%) to close at 49 cents a share. Volume of 9.2 million shares was about 20 times the usual daily turnover.

Leap rally goes on

In bank debt trading, Leap Wireless's paper continued its rally Tuesday, moving up to 105.75 bid, 106.75 offered from a previous level of 101.5 bid, according to a trader.

That brings the total appreciation in the San Diego-based telecom company's loan since its opening on Monday morning to a robust seven-and-a-quarter points.

As had been the case on Monday, there was no specific positive news pushing the paper higher; however, the most common reason being bandied about the marketplace seems to be a belief that there is great equity value behind the name. Leap, which sells a variety of telecom services under the "Cricket" name, sought Chapter 11 protection from its creditors in April 2003

Since bank debt holders will receive debt and equity in consideration for their positions as part of the Chapter 11 reorganization plan, the more equity value people attribute to the company, the better the bank debt trades.

"People are starting to do work on it," the trader said, explaining that as they research the issue, they are finding more and more value behind the bank debt.

Pegasus slips on downgrade

Pegasus Satellite Communications Inc.'s bank debt and Pegasus Media & Communications Inc.'s term loan D were slightly lower on Tuesday in reaction to Standard & Poor's rating downgrades late Monday, according to a trader.

Pegasus Satellite was quoted at 98.5 bid, 99 offered, down from previous levels around par, and Pegasus Media was quoted at 101 bid, 103 offered, versus previous levels of 102 bid, 103 offered, the trader said.

Pegasus Satellite's 11¼% notes due 2010 were meanwhile seen down a point-and-a-half at 68.5 bid.

On Monday, S&P lowered its corporate credit rating on Pegasus Communications Corp. and subsidiaries Pegasus Satellite Communications and Pegasus Media & Communications to CCC from CCC+. Furthermore Pegasus Satellite's senior unsecured rating was lowered to CC from CCC-.

S&P said the rating action reflects heightened concern about the company's business prospects, shrinking subscriber base, limited liquidity, overburdened debt and maturity structure, and increasingly acrimonious relationship with DirecTV.

Recently, Pegasus, a Bala Cynwyd, Pa.-based diversified media and communications company, lost a lawsuit to DirecTV concerning disputed billings under the Seamless Marketing Agreement between Pegasus Satellite and DirecTV under which Pegasus was court ordered to pay DirecTV some $52 million.

S&P also said that Pegasus is vulnerable to a near-term default if its already insufficient liquidity deteriorates further or if it is unable to defer a substantial amount of its 2005 debt maturities.

Elsewhere in the communications constellation, a trader saw Allegiance Telecom Inc.'s 12 7/8% notes "down a couple of sticks" at 41.5 bid, 42.5 offered, off from 43.5 bid, 44.5 offered previously.

Level 3 still pressured

And Level 3 Communications Inc.'s 9 1/8% notes due 2008 were at 71 bid, down anywhere from a point to two points lower. A trader, however, saw the Broomfield Colo.-based telecom fiber optic network operator's 11% notes due 2008 starting the day at 75 bid, 77 offered, then dropping as low as 73.5 bid, 75.5 offered, before firming off those lows to close at 76 bid, actually up a point on the session, as there were "better bids out there."

The trader opined that Level 3's debt had begun sliding in earnest after at least two brokerage houses put out bearish research notes on the company, focusing, among other things, on the end of Level 3's agreement to purchase wholesale dial access services from Allegiance; as part of the agreement to end the contract with Dallas-based Allegiance, recently bought in a bankruptcy sale by XO Communications, Level 3 has to pay $54 million.

Adelphia steady

Adelphia Communications Corp. bonds were seen little changed on the session, pretty much holding to the same lofty levels to which they've recently moved in anticipation that the bankrupt Greenwood Village, Colo.-based cabler might be sold rather than stay independent, which could fetch a greater return for creditors - perhaps as much as $21 or $22 billion, some in the market have said.

A trader quoted its 10¼% notes due 2006 at 106.5 bid, 107.5 offered, while its 10 7/8% notes due 2010 hovered at 110 bid, 111 offered.

At another desk, Adelphia's 101/4s were quoted at 105.5 bid, 106.5 offered, while its 10¼% notes due 2011 "got as good as"109.5 bid, a trader said.

Apart from the communications names, Mississippi Chemical Corp.'s 7¼% notes due 2017 were seen up nearly three points at 48.75 bid, although there was no news seen on the Jackson, Miss.-based chemicals producer.

Federal-Mogul higher

Federal-Mogul Corp.'s bank debt was up about half a point on Tuesday, with the paper quoted at 92.5 bid, 93.5 offered, according to a trader, who explained that the strengthening is probably still a result of last week's release of better-than-expected first quarter numbers for the Southfield, Mich. supplier of automotive components.

A bond market source meanwhile saw Monday's gains extended, with Federal-Mogul's 7 3/8% notes due 2006 pushing up to 30.25 bid from 29.75. And its 8.80% notes due 2007 firmed to 30 bid from 27 previously.

Results for the quarter included net sales of $1.553 billion, compared to net sales of $1.367 billion in the same period last year, gross margin of $297 million, compared to $273 million last year, net loss from continuing operations of $20 million, compared to $37 million last year, and cash flow from operating activities of $119 million, compared to $27 million last year.

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