Pegasus bonds firmer, Leap bank debt finally steadies

By Paul Deckelman and Sara Rosenberg

New York, June 29 - Pegasus Satellite Communications Inc. bonds were seen about two points firmer across the board Tuesday, despite a lack of fresh developments in the Bala Cynwyd, Pa.-based satellite television program distributor's bankruptcy case or its ongoing legal battle with corporate nemesis DirecTV Group Inc.

In bank debt trading, Leap Wireless Inc.'s paper "settled in pretty nicely" at the 124 bid, 125 offered level on Tuesday, pretty much unchanged from Monday's levels, according to a trader, who said it was a nice change from last week's volatility.

Leap spent last week basically retreating from its recent highs, apparently pushed lower by a bearish research report on the San Diego-based telecommunications company from Imperial Capital.

Also affecting the paper was technical pressure as the bank debt started to feel a bit heavy and was said to be correcting itself.

Before being brought lower by the Imperial Capital research report, which was described as "not too favorable," Leap's bank debt had recently jumped as high as 126 bid - well up from levels around 110 bid seen earlier in the month.

Many in the market had cited new valuations for company's in its sector as the primary driver behind the recent surge, with a generally held belief that there is great equity value behind the name. Because bank debt holders get equity, along with some new debt, as part of the Chapter 11 reorganization plan, the more equity value people attribute to the company, the better the bank debt trades.

Pegasus moves higher

Back among bond investors, a trader in distressed issues quoted Pegasus' senior bonds, such as its 12 3/8% and 9¾% notes, both due 2006, at 47 bid, 49 offered, up from 45 bid, 47 offered on Monday.

At another desk, the 12 3/8s and 93/4s were both seen having moved up to around 46 bid from 44 previously, as did the 9 5/8% notes due 2005. The company's 12½% notes due 2007 firmed to 47 from previous levels at 44.75.

However, Pegasus' junior paper continued to languish, its 13½% notes due 2007 unchanged at nine cents on the dollar and its 12¾% notes due 2007 marooned all the way down at three cents on the dollar, unchanged on the day.

Pegasus - for now - distributes DirecTV service to about 1.1 million mostly rural customers, but the two companies have been feuding for some time over just how much those customers should actually be worth to DirecTV.

After months of legal wrangling, DirecTV and the National Rural Telecommunication Cooperative - a TV programming distribution industry group of which Pegasus was the largest member - agreed to end the exclusive right of NRTC members like Pegasus to sell DirecTV in their territories, effective Aug. 31.

While DirecTV said that non-Pegasus members could arrange to continue to distribute its programming in their service areas on a non-exclusive basis, it gave Pegasus no such option, instead making a take-it-or-leave-it offer of $675 per customer, which Pegasus rejected as grossly inadequate.

Pegasus alleged that DirecTV and NRTC were conspiring to destroy its business, and it filed for bankruptcy protection in Portland, Me. on June 2.

The court recently refused to grant Pegasus' motion for a court order to stop DirecTV from trying to market its services to new customers in Pegasus' formerly "exclusive" territory.

But while Pegasus bonds are worth less than half of their par value, stock of the parent Pegasus Communications Corp. - which did not file for bankruptcy - continues to attract buyers; in Tuesday's Nasdaq dealings, the shares jumped 96 cents (5.08%) to $19.84, aided by a strong last-hour push. Equity investors apparently feel that Pegasus Communications won't be sucked into the bankruptcy mess and will retain its assets. They have also been heartened by active recent buying by a hedge fund, Peninsula Capital.

Trico steady despite stock jump

Elsewhere, traders saw little or no movement in the bonds of Trico Marine Services Inc., even as the Houma, La.-based energy industry maritime services provider's Nasdaq-traded penny-stock shares jumped explosively Tuesday on news that the troubled company had won a concession from a major lender.

There was "no change at all in TMAR," a trader said, seeing its 8 7//8% notes due 2012 steady at 51.5 bid, 53.5 offered, while an observer at another shop actually saw those bonds down half a point at 50.5.

That contrasts sharply with the stock, which zoomed 12.4 cents (42.03%) to 41.9 cents on volume of 22.3 million shares, around 11 times the norm.

Trico said that it had reached an agreement with General Electric Capital Corp. allowing Trico to provide $1.7 million in cash in lieu of letters of credit to secure the payment and performance under its master bareboat charter agreement with the GE unit

Trico was forced to provide the additional security after Standard & Poor's dropped its corporate credit rating below the B-level on March 11. Under the so-called "Master Charter Agreement," Trico had to provide letters of credit within 30 days of receiving notice from GE but could not due to restrictions in other agreements.

GE Capital agreed to accept $1.7 million in cash deposits plus forbearance fees and said it would forbear for six months from exercising its remedies under cross-default provisions in the Master Charter related to Trico's failure to pay interest due on the 8 7/8% notes.

Mississippi Chemical up again

The bonds of Mississippi Chemical Corp. were on the rise for a second consecutive session, following Monday's news that the Jackson, Miss.-based chemicals maker had gotten a commitment for $182 million of new debtor-in possession financing.

Its 7¼% notes due 2017 - which on Monday had firmed to 59 bid, 61 offered, three points above recent levels - tacked on another two points to close at 61 bid, 63 offered.

Salton unchanged

News that Salton Inc. had enacted a "poison pill" defense in order to prevent any opportunistic adventurers from swooping in on the Lake Forest, Ill.-based small appliance maker and grabbing control with its stock price depressed from higher levels seen earlier in the year had little apparent impact on its bonds, which were seen steady.

Salton's 10¾% notes due 2005 were unchanged at 85 bid, 86 offered, a trader said, while its 12¼% notes due 2008 stayed at 77 bid, 78 offered. At another desk, however, the 121/4s were seen around 76 bid, up slightly, a market watcher said.

News that Delta Air Lines Inc.'s lenders had formed a creditors committee to negotiate with the Atlanta-based air carrier likewise did not much effect the company's bonds Tuesday; a trader saw Delta's 7.70% notes due 2005 unchanged at 67 bid, 68 offered and its 8.30% bonds due 2029 remained at 40 bid, 42 offered.

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