Delta, Adelphia bonds push lower; Gate Gourmet bank debt higher

By Paul Deckelman and Sara Rosenberg

New York, Jan. 12 - Delta Air Lines Inc. bonds continued to lose altitude on Wednesday, accompanied by the whole airline sector, as the recent rebound in the bonds of the air carriers, fueled by a decline in oil prices and various pieces of positive news about the hard-hit industry, seems to have faded.

Also on the downside, bondwise, was Adelphia Communications Corp., despite a lack of fresh news about the bankrupt Greenwood Village, Colo.-based cable operator.

In bank debt dealings, Gate Gourmet Inc.'s dollar term loan B1 moved up, with traders citing the Zurich, Switzerland-based airline catering company's second pro-rata auction having cleared.

Delta's bonds sank as airlines were down a point across the board, a trader said. He quoted Delta's 7.90% notes due 2009 at 55 bid, 56 offered, off a point. He also saw American Airlines corporate parent AMR's 9% notes due 2012 dipping to 74.5 bid, 75.5 offered, off from 75.5 bid, 76.5 offered previously. And Northwest Airlines Corp was also seen a point easier at 91 bid, 92 offered.

A trader in distressed bonds said that he had not seen any Delta paper trading around but did see AMR fall to 74 bid, 76 offered, while ATA Airlines - whose bonds had recently been as high as the 60s on news of the pending asset sale/bailout/takeover of the bankrupt Indianapolis-based airline by Southwest Airlines. He saw the company's 13% notes due 2009 and 12 1/8% notes due 2010 going to 50 bid, 52 offered from 53 earlier.

He meantime saw troubled discount carrier Independence Airlines' 8¾% notes due 2007 at 43 bid, 45 offered, down from their recent levels at 48 bid, 50 offered. The company's 6% convertible notes actually got better, up two points to 48 bid, 50 offered.

At another desk, Delta's 8.30% notes due 2029, which had been above 50 several weeks ago, were quoted down 1½ points to 44.5 bid, while the 7.90s - which had firmed into the 60s - ended at 55, down 1½ points. The 7.70% notes due 2005, recently just a little below par, lost a point to 90.

Adelphia bonds down

Outside of the airlines, Adelphia Communications' bonds were seen lower across the board, although there was no news out on the company, which is in the process of selling its assets, probably for an amount in the area of $17 billion to $20 billion.

A trader saw the company's 10¼% notes due 2006 down two points at 90 bid, 92 offered, while its 10¼% notes due 2011 were also off a deuce at 94 bid, 96 offered. Its convertible notes were a point easier at 15 bid, 17 offered.

Asbestos bonds mixed

And he saw Armstrong World Industries bonds firm to 76 bid, 78 offered from the 74 bid, 76 offered level that the bankrupt Lancaster, Pa.-based floorcovering maker's bonds had been holding for a while, although he had seen no news out on them.

On the other hand, bankrupt Toledo, Ohio-based insulation maker Owens Corning's bonds were gyrating lower, to 80 bid, 82 offered from prior levels at 84.

He saw little movement in the bonds of other bankrupt asbestos-troubled companies, with Chicago-based building materials maker USG Corp.'s bonds staying at 130 bid, 132 offered.

Gate Gourmet loan gains

In bank debt trading, Gate Gourmet's loan was seen having moved up to the 96 bid, 97 offered type of range on Wednesday from 95.5 bid, 96.5 offered after a second pro rata auction cleared, according to traders.

The auction once again came from a European seller and was for foreign currency pro rata paper. According to two sources the pro rata paper sold contained both term loan A and revolver paper, but according to a third source it was just term loan A paper this time.

This is the second auction in two days. On Tuesday foreign currency term loan A and revolver paper was auctioned out of London in the 92, 94 context.

Prior to Tuesday's auction, the U.S. term loan B had backed off to about 95 but had rebounded to the 95.5 bid 96.5 offered level by the afternoon, to end the day pretty much unchanged.

"The fact that there was supply out there put a lot of pressure on the B. The auction came out, people started selling the B, auction cleared, B went back up. It was in the 97, 98 context last week," one trader explained.

Gate Gourmet has been watched recently by market players as the company failed to make an amortization payment on its loans and an interest payment on its mezzanine debt, which means that technically an event of default under the credit agreement has occurred.

In light of these missed payments, Standard & Poor's downgraded the company's bank loan ratings to D last week from BB and Moody's Investors Service downgraded the company's bank loan ratings to Caa1 from B1 this week.

Nothing has been decided by the bank loan lenders in terms of a course of action regarding the default, but various options are being reviewed.

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