Delta bonds down as consent bid falters; Adelphia bank paper firms

By Paul Deckelman and Sara Rosenberg

New York, Sept. 10 - Delta Air Lines Inc. bonds were flying backwards Friday, after the troubled Atlanta-based air carrier suffered a stinging setback in its effort to begin restructuring its debt out of court.

A trader saw Delta's 8.30% notes due 2029 at 24.5 bid, well down from the levels around 28-29 at which those bonds had finished on Thursday. He also saw Delta's 7.90% notes due 2009 having retreated to 28.5 bid from prior levels around 32.

Traders did not see any activity Friday in the company's benchmark issue, the 7.70% notes due 2005, which on Thursday had eased to around 46 bid, 47 offered.

Delta's bonds had pushed smartly higher earlier in the week in response to chief executive officer Gerald Grinstein's Wednesday presentation of the company's much ballyhooed and long awaited turnaround plan, which will include cutting as many as 7,000 jobs and abandoning Delta's Dallas-Fort Worth route hub.

But late Thursday, after the market closed, Delta announced that its consent solicitation to the holders of some $1.7 billion of equipment trust certificates and passthrough certificates had expired that afternoon, and said that it had not received the necessary consents to the various bonds' respective indentures (see "Tenders and Redemptions" elsewhere in this issue).

Delta, which has a massive debt load of about $20.5 billion, began the process of trying to restructure at least some of those obligations by asking the holders of some $1.7 billion of the ETCs and passthroughs - securities backed by liens on portions of the company's aircraft fleet - to consent to proposed indenture changes that would have enabled Delta to purchase the securities from them and hold them. That was seen by analysts as the likely first step in an effort to restructure the company's debt out of court by exchanging those notes for other debt that might help bring down Delta's interest costs or otherwise cut its obligations.

But the secured bondholders were very leery about the idea, forming a committee that represented most of them, and which said that it would not go along with Delta's request, unless Delta provided more information about its turnaround plan and how Delta was planning to restructure its debt.

Delta tried to placate the balky bondholders by issuing a question-and-answer release summarizing the case for consenting to the proposed changes, but this was rejected by the committee as inadequate. Although Delta extended the original Aug. 31 expiration date to Thursday, the extra time did not encourage any more bondholders to give in to the company.

In announcing the bondholders' rejection of its initiative, Delta noted that the consent solicitation "only involved a modification which would have affected Delta's flexibility to restructure certain components of its debt. This consent solicitation was not a transaction to raise cash.

"Not receiving the required consents from holders of the ETCs and PTCs only affects Delta's ability to include those certificates in certain possible future restructuring steps. Delta continues actively to seek solutions that will allow for a successful out-of-court restructuring."

Trico actively quoted

Trico Marine Services Inc. meanwhile plans to go a different route, saying that it will turn to the courts for help in restructuring its debt though a Chapter 11 filing, which will probably take place in the fourth quarter. Trico expects to be out of bankruptcy in the 2005 first quarter.

The Houma, La.-based provider of maritime services to the oil drilling industry said that more than 2/3 of its senior noteholders had agreed to support the company's restructuring plan, under which Trico intends to convert $250 million of 8 7/8% senior notes due 2012 into equity.

A trader in distressed bonds said he saw those notes "quoted a lot," although his shop had seen no real trading in them. He pegged the bonds in a 46-47 bid context, although another trader saw them a bit higher, at 47.5 bid, unchanged.

Adelphia loans up after big trade

In bank debt trading Friday, Adelphia Communications Corp.'s paper "felt stronger," a trader said, as investors were impressed by a large trade getting done in the company's TCI paper on Thursday.

"A big block trade north of $25 million took an original seller out," the trader said about Thursday's TCI trade. "People [are now] looking for carry trades."

Both Adelphia's Old and New Century paper were quoted higher by about ¼ to 3/8 on the day, with the old seen at 98.25 bid, 98.75 offered, and the new seen at 98 bid, 98.5 offered.

The bankrupt Greenwood Village, Colo. -based cable company's FrontierVision paper was up about 1/8 to 1/4, with quotes seen at 100.375 bid, 100.875 offered.

And the TCI paper was quoted at 99.125 bid, 99.625 offered, not really higher on the day but "definitely feeling good," the trader added.

Archibald notes plunge

Back among the bond players, a market source saw Archibald Candy Corp.'s 10% notes due 2007 slide all the way down to 24 bid from prior levels at 66, although he said the drop was expected, and was connected to a large funds payout made by the bankrupt Chicago-based candymaker as part of its continuing reorganization efforts.

"They expected it," he said of market players in the seldom-traded name.

In late August, Paragon Capital Partners, a merchant banking firm advising Archibald Candy on its bankruptcy and divestiture transactions, announced that it had completed the sale of Archibald's Canadian-based Laura Secord unit to Gordon Brothers Group, LLC for a price estimated at more than 18.7x its 2003 fiscal-year EBITDA.

It was the second big asset sale that the company had completed over the last several months, following the earlier sale of Archibald's Fannie May and Fanny Farmer operations for about $39 million, more than twice the $18 million initial stalking horse bid.

The company, which filed for Chapter 11 protection on Jan. 28, estimates that with the two units fetching higher than expected sale proceeds, its senior lenders would be paid off at 100% of their investment, while bondholders will likely realize a greater recovery than initially thought.

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