Loral plummets on possibility of extended sale process, Intelsat earnings; Federal Mogul takes slight hit

By Carlise Newman

Chicago, Oct. 21 - Loral Space & Communications was trounced Tuesday, a day after the company announced that it would sell its satellites to Intelsat Ltd. and after rumors late in the day that the sale process may be extended. In addition, Intelsat's third-quarter earnings fell 41%.

After Monday's market close, Loral said that Intelsat was the highest bidder in an auction held today for Loral's North American telecommunications satellites for $1.1 billion. The other bidder at the auction was EchoStar Communications Corp.

But on Tuesday Loral "got pummeled," a trader said, quoting the 10% notes due 2006 down 8 points on the session at 79 bid, 80 offered. The 9½% notes were down 10 points to 40 bid, 41 offered. Another desk saw the 10s down 4 points on day at 81 bid.

"There was a rumor out there that something was happening today, something to prevent the sale from going through or extend the process," a trader said, before the report came out.

After the close Tuesday, three state attorneys general expressed competition concerns to the court over EchoStar Communications Corp.'s efforts to buy satellites that rival DirecTV had ordered from bankrupt Loral, according to Reuters.

As a result of EchoStar's moves to buy the satellites, DirecTV, a unit of Hughes Electronics Corp., raised its offer price to $165 million from $140 million for one of the satellites it plans to launch next year for local channels.

DirecTV had said in a bankruptcy court filing that, if Loral sells the satellites to EchoStar, it could create a claim in excess of $200 million against Loral. It also said a sale could drag Loral into a intellectual property and antitrust quagmire.

Earlier this month, EchoStar offered $200 million for the satellite currently earmarked for DirecTV's local programming and said it would buy three more satellites from Loral.

On Tuesday, EchoStar offered Loral an alternative of $60 million in cash for the one satellite plus a commitment to indemnify Loral against any damage claims related to the sale, said EchoStar attorney Robert Dehney.

"There was a glitch somewhere, something to stop the honeymoon for the bonds," one trader said.

Meanwhile bankrupt auto-parts maker Federal-Mogul Corp. posted a quarterly loss as reorganization expenses cut into profits, but the company's bonds were surprisingly resilient.

Federal-Mogul reported a third-quarter net loss of $29.5 million (34 cents a share) compared with a net loss of $73.3 million (89 cents a share) a year ago.

Sales were little changed at $1.35 billion.

Federal Mogul's 7½% notes due 2009 were seen ending the session at 13½ bid, 15 offered, ½ point lower than Monday.

"The paper got as low as 11 bid at one point, but bounced back and ended up not down by very much," a trader said.

The Southfield, Mich.-based company filed for Chapter 11 bankruptcy protection in October 2001 under pressure from mounting asbestos lawsuits. It expects to emerge from bankruptcy next year free of asbestos liabilities under a reorganization plan that includes a trust to pay existing and future claims.

Federal-Mogul chief executive Charles McClure said the reorganization process has taken longer than initially hoped, but the company continues to work with its creditor committees to resolve lingering issues. He targeted mid-2004 for emerging from bankruptcy protection.

Werner Holding Co. tumbled deep into distressed territory one trading session after Home Depot Inc., its largest customer, Friday said it will discontinue buying stepladders from the Greenville, Pa.-based ladder manufacturer and will review its purchases of extension ladders.

The 10% notes due 2007, which Monday were quoted about 10 points down at 92½ bid, were seen in the lower 60s today. One source put them at 62, and another saw a trade at 64, although he opined it was "too low." Another trader saw that issue Tuesday morning at a very wide 55 bid, 75 offered.

Contributing to the slide, on Monday, Standard & Poor's downgraded Werner's corporate credit rating to B from B+.

Elsewhere, UAL Inc., parent of United Airlines, saw some slight gains on Tuesday. United's unsecured bonds were a point better at 14 bid, 15 offered, a trader said.

"They were moving yesterday, up maybe a point, and another today," he said. "Three airlines posted profits today and that momentum probably had something to do with it."

America West, ATA, and Alaska Air all posted third-quarter profits Tuesday. US Airways Inc., which emerged from bankruptcy last March, did not.

Meanwhile Revlon Inc. bonds "just keep moving up," a trader said, with the 8 1/8% notes and 9% notes both up half a point to 73 bid, 73½ offered. The cosmetics company will release its third-quarter earnings and hold a conference call on Oct. 30.

In other news, WorldCom Inc. paper was "about the same" on Tuesday. The bonds were seen at 38 bid, 39 offered, one trader said.

"Unchanged is still good," the trader said.

Last week the bankrupt telephone company said its net income and revenues declined in August from July, blaming lower long-distance calls volume network-wide and higher reorganization expenses.

(Paul Deckelman contributed to this report)

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