Mirant bank debt, bonds still gaining; airlines seen up in wake of Independence failure

By Paul Deckelman and Sara Rosenberg

New York, Jan. 6 - Mirant Corp.'s bank debt was once again trading up during Friday's session, given a boost by the continued rise in the Atlanta-based power generating company's rapidly appreciating shares, which had another impressive day of gains, traders said.

Bonds of airline operators were seen better, also pulled northward by stock price gains among sector names, which got a boost from better December operating results. Another development seen as possibly playing a role was the demise of Independence Air, which ceased operations during the week, resulting in a reduction in overall industry capacity.

And such troubled automotive names as Delphi Corp. continued to firm amid a generally stronger automotive sector.

Mirant's 2003 paper was quoted at 127 bid, 128 offered, up about three points from Thursday's trading context of 124 bid, 124.5 offered, a trader said.

The bank debt has been trading up with the stock because the majority of that bank debt is being converted into equity as part of the Mirant's reorganization.

Although the energy company emerged from Chapter 11 this past Tuesday, the new equity is not expected to start trading until Jan. 11. Its existing Pink Sheet-listed shares were up $1.44 (6.02%) to $25.35 on Friday.

That strength in the stock also helped Mirant's convertible bonds, traders said, with the 2½% converts due 2021 seen having jumped 118 bid from prior levels 113.

A trader said those converts had firmed "about 12 points on the week."

However, Mirant's straight bonds were seen unchanged, though hovering at the sharply higher levels to which they had moved over the previous several sessions. Mirant's 7.90% notes due 2009 were steady at 129.5 bid, while its 7.40% notes due 2004 were likewise unmoved at 127.5.

The Mirant Americas Generating Inc. 8½% notes due 2021 were seen having tumbled in nominal price terms to around 102 bid, 104 offered from prior levels at 127 bid, 129 offered. A trader said that "they paid the coupon" on those MAGI bonds, amounting to some 25 points of interest, causing the nominal price of the bonds to drop back down.

Airlines higher

Elsewhere, a trader saw the airline issues "up a point across the board," with Delta Air Lines Inc.'s bonds doing even better than that, moving up to 23.5 bid, 24.5 offered from 22 bid, 23 offered on Thursday.

He also saw United Airlines parent UAL Corp.'s bonds a point better at 24 bid, 25 offered, while Northwest Airlines Corp.'s notes were at 39 bid, 41 offered, also up a point.

He also saw AMR's 9% notes due 2012 firmer at 89.25 bid, 91.25 offered.

Its main operating unit, Fort Worth-based American Airlines, the largest U.S. carrier, was one of a number of airlines that began moving aggressively into the void created when bankrupt Independence Air announced that it would cease its operations.

American said Thursday that it had implemented policies to assist customers needing to make other travel arrangements because of the latter carrier's closure.

It said that for confirmed travel effective Jan. 5 through Jan. 31, American would waive the advance-purchase requirements on most types of American fares for Independence Air customers, subject to inventory availability.

Besides the Independence impact, market observers noted that the airlines in general seemed to be doing better, with overall passenger traffic and load factor numbers having risen during the month.

Delphi rise continues

Back on solid ground, the bankrupt former General Motors Corp. subsidiary Delphi Corp. - whose bonds had been rising all week - continued to go with the flow on Friday. The troubled Troy, Mich.-based automotive electronics manufacturer's 6.55% notes due 2009 were a point better at 56.5 bid, 57.5 offered. He saw the company's 7 1/8% notes due 2029 also at that level, but unchanged on the day.

A trader at another desk saw the Delphi bonds get as good as 57 bid, 58 offered, which he called a two-point gain on the session.

Traders ascribed the Delphi surge to a combination of short covering and other technical factors, and the overall strength of the automotive sector, led by GM and Ford Motor Co., whose bonds rose despite lower sales for both carmakers in December and in 2005 as a whole, and despite a Standard & Poor's downgrade of Ford's bonds and those of its Ford Motor Credit Co. financing subsidiary.

Federal-Mogul jumps on restructuring

Bankrupt automotive braking systems maker Federal-Mogul Corp.'s bonds firmed smartly, after the Southfield, Mich.-based company announced a three-year restructuring plan that could affect 25 facilities and reduce the company's 44,000-person worldwide work force by about 10%.

A trader saw the company's bonds, such as its 7½% notes due 2009 and 8¼% notes that were to have come due last year, at 34.5 bid, up 1½ points.

Federal-Mogul filed for Chapter 11 protection in October 2001, pushed to insolvency big asbestos liabilities from its purchase some years earlier of a British company having asbestos problems. It said preliminary charges related to the restructuring are likely to be in the range of $125 million to $150 million.

Among other asbestos-challenged names, the bankrupt Lancaster, Pa.-based floorcovering maker Armstrong World Industries' 6-handle bonds were two points better at 74 bid, 76 offered, and its 9-handle notes were three points ahead at 76 bid, 78 offered, a trader said. He also saw the bonds of bankrupt Toledo, Ohio-based insulation maker Owens-Corning a point improved at 82 bid, 84 offered.

President Bush on Friday called for Congress to pass legislation aimed at curbing asbestos lawsuits this year, saying the United States needed to reform its legal system to better compete in the global economy.

A bill creating a $140 billion industry-funded mechanism for handling claims related to asbestos medical problems passed the Senate Judiciary Committee last year, but has gone nowhere since. Republican leader Sen. Bill Frist of Tennessee has said that getting that bill passed this year would be a key priority for him.

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