Revlon paper dips on earnings while UAL brightens; Mirant continues to firm somewhat

By Carlise Newman

Chicago, Oct. 30 - Revlon Inc. paper dipped lower Thursday on the company's wider third-quarter loss, while UAL Corp. soared in reaction to a narrower loss that the company said indicates successful restructuring.

New York-based Revlon said its loss widened to $54.7 million, or 78 cents per share, in the third quarter, from a loss of $22.1 million, or 41 cents a share, a year earlier, when it received prepayment of certain licensing royalties.

Revlon also said it has almost exhausted several lines of credit, though chief executive officer Jack Stahl said he expected the company would have access to funds it would need for its growth plan.

Reaffirming the company's liquidity, Stahl said in a news release he was "confident Revlon will continue to have access to the resources we need to execute our growth plan."

The company said that as of Oct. 29, it had used $248 million under its $250 million bank credit agreement, all of a $100 million MacAndrews & Forbes term loan, and $20 million of the $65 million MacAndrews & Forbes line of credit.

Revlon's 8 5/8% notes due 2008 were down 3 points at 51 bid, one trader said. The notes have been all over the place, rising modestly Thursday 1 point after dropping ½ point the prior day. A few weeks ago, they were steadily rising.

From the end of 2002 to the end of the third quarter, Revlon's long-term debt grew to $1.86 billion from $1.75 billion.

"This was worse than expected. Still I think there's some chance for a turnaround," a trader said.

Meanwhile, UAL, the parent company of United Airlines, had a different fate.

UAL reported its third-quarter financial results and released its monthly operating report for September. UAL's third-quarter operating profit was $19 million, an improvement of $665 million over last year. Excluding $71 million in special charges, the company reported an operating profit of $90 million.

UAL's third-quarter net loss was $367 million, or $3.47 per share, which includes $330 million in special charges and reorganization expenses. Excluding those charges, UAL's loss for the third quarter totaled $37 million, or $0.36 per share.

United's unsecured bonds were 2 points higher at 17 bid, 19 offered, one trader said. The bonds had been around 15 bid for several weeks before Thursday.

"They got as high as 19 bid right away in the morning and then settled back to 17 by the close," he said.

The special charges include $96 million in non-cash aircraft-related charges and $234 million in reorganization items. The majority of reorganization expenses were non-cash items resulting from the rejection of aircraft.

"As these results make clear, our restructuring is on track. We are making tremendous progress in reducing costs, improving revenue, and building a strong, sustainable business for the future," said Glenn Tilton, chairman, president and chief executive officer, in a news release. "Although there is still much work to be done, our year-over-year improvement reflects the hard work of all United's employees and their singular focus on serving our customers and running a great airline."

Elsewhere Mirant Corp. managed to firm further Thursday after reporting a second-quarter net loss Tuesday after writing off all the goodwill associated with its North American businesses.

Mirant said it recently reviewed $2.1 billion of goodwill on its balance sheet that was associated with its power generation and energy marketing operations in the United States and Canada, in compliance with accounting rules. As a result Mirant, which filed for Chapter 11 bankruptcy protection on July 14, concluded that it must fully write off the goodwill and record a noncash charge.

Mirant's 7 5/8% notes due 2006 firmed 1 point to 84½ bid from 83½ on Wednesday, according to a trader.

The paper sank after the earnings announcement, but managed to firm up just a day later.

Mirant reported a second-quarter net loss of $2.2 billion, or $5.44 a share. The company's restated second-quarter net loss was $182 million, or 45 cents, a year earlier.

Mirant said the charge does not affect the company's plans to re-emerge from Chapter 11 bankruptcy protection or drain its cash balances.

"It was all about earnings today. Tomorrow will be all about WorldCom," a trader said.

WorldCom Inc. was quoted 2 points higher Thursday at 37½ bid, 38 offered, he said.

The bankrupt Ashburn, Va.-based telephone company's confirmation hearing on its reorganization plan is set for Friday. WorldCom filed an amended plan Oct. 22, under which general unsecured claims were divided into two sub-classes: MCI pre-merger claims and ad hoc MCI trade claims represented by the committee. Holders of WorldCom general unsecured claims are deemed to have rejected the plan and are not entitled to vote.

Elsewhere Dan River Inc.'s 12¾% notes due 2009 continue to gain, to 29 bid, 30 offered, up about 4 points on the session and 7 points in the last three sessions. However, as one trader put it, "it's a crappy credit in the crappiest of all sectors."

In mid-October, Dan River's bonds saw a steep drop after the Danville, Va. company amended its senior secured credit facility, waiving the maximum leverage ratio covenant violation that existed at the end of the third quarter and revising requirements during the fiscal fourth quarter, including the minimum levels of excess availability under the revolver and monthly operating EBITDA, according to a filing with the Securities and Exchange Commission.

(Paul Deckelman contributed to this report)

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