HealthSouth bonds brighter on upcoming interest payment; Mirant debt higher despite wider loss

By Carlise Newman

Chicago, Aug. 28 - HealthSouth Corp. bonds had a good day Thursday in a pre-holiday session after the company said it can pay the interest on its debt.

HealthSouth said its lending banks have waived a payment blockage to allow past due interest to be paid to the holders of the company's subordinated debt (see story elsewhere in this issue). The banks had previously issued a payment blockage notice on the company's subordinated debt, preventing payment of interest.

HealthSouth's 7 5/8% notes due 2012, which were up ½ point Wednesday, rose 4 points to 87 bid, 85½ offered Thursday, one trader noted. The 8½% notes due 2008 were up 3 points to 87 bid. The 10¾% notes due 2008 rose to 84 bid from 79 bid.

"HealthSouth's shot up fast," a trader said. "A far cry at least from when they were dropping 6 points or so a day."

HealthSouth said it will transfer funds to the trustees with past-due interest to be paid to holders shortly after the record date of Aug. 29.

Bankrupt energy producer Mirant Corp. on Thursday reported a wider first-quarter net loss on higher fuel costs and restated its results from the year-earlier period due to accounting errors.

Mirant's bank debt was seen up 2½ points on the day on the 2003 paper, to 43½ bid, 44½ offered, up from 41 bid, 42 offered..

The Atlanta energy producer reported a loss of $28 million (7 cents per share), for the quarter ended in March, compared with a restated year-earlier loss of $10 million (6 cents per share). The company originally reported a first-quarter net loss of 10 cents a share in 2002.

For this year's first quarter, income from continuing operations was 4 cents per share.

"People took comfort in what they saw," a trader said.

WorldCom Inc. bonds stabilized on Thursday and appeared to be unaffected by news that it would be charged with fraud by the Oklahoma City attorney general.

WorldCom's bonds were quoted Thursday at 29¼ bid, 29¾ offered. MCI bonds were seen at 76 bid, 76½ offered.

On Wednesday, Oklahoma attorney general Drew Edmondson charged WorldCom, its former chief executive Bernie Ebbers and five others with violating state securities laws by knowingly giving false information to investors. The charges were revealed on Wednesday.

The 15-count complaint in Oklahoma contends that the company and the former executives used deceptive measures to defraud investors, lied about the company's financial health and ran a business that operated as a fraud.

On Tuesday, news was out that WorldCom is likely to keep to its scheduled emergence from bankruptcy protection.

"The Oklahoma charges really don't seem to be doing anything to the bonds. They barely moved today," a trader said.

Elsewhere Federal-Mogul Corp. bonds were still weaker after the company said Wednesday that Citigroup Venture Capital Equity Partners LP has expressed an interest in making a $350 million equity investment in the company.

The 7½% notes due 2009 were seen down an additional ½ point at 13½ bid from 14 bid.

"They settled back to levels from earlier in the week," a trader said.

Meanwhile, Conseco Inc.'s unextended bonds were quoted up ½ point "to the 40, 40¼ bid area," a trader said. He didn't have a quote on the extended bonds, which usually trade at a 20 point premium to the unextended bonds.

Twinlab Corp. was relatively active Thursday as well. Its 10¼% notes rose "from the 40-42 area to 46-48," a trader said.

Twinlab said Wednesday it will implement a sale of its business through a Chapter 11 bankruptcy filing. The Hauppage, N.Y.-based health supplement company said it is unlikely that any purchase price for the sale of the business will exceed the amount of the company's debt and as a result, equity holders may receive no value.

Elsewhere, Charter Communications Inc.'s bonds were seen rising slightly. Charter's 8 5/8% notes due 2009 were seen at 751/2, 76½ offered, a rise of ½ point, a trader said.

Adelphia Communications Corp. was also seen in distressed trading Thursday. The 10¼% notes due 2011 were quoted at 66½ bid, 68 offered, a rise of a point; and its 9 1/8% notes due 2009 were unchanged at 80 bid, 82 offered.

Loral Space & Communications Inc., the New York-based satellite operator, also has been active in recent weeks on news of a possible sale to EchoStar Communications Inc. or IntelSat. The 10% notes due 2006 were quoted by a trader down 1 point at 58 bid.

And lastly, WestPoint Stevens Inc.'s 7 7/8% notes due 2008 were seen down ½ point to 18 bid. The WestPoint, Ga.-based home fashions marketer is in bankruptcy proceedings.

"Overall today was nice compared to some pre-Labor Day trading. We had a few things cross that we don't see that often and everyone had something to do," a trader said.

(Paul Harris and Paul Deckelman contributed to this report)

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