Telewest, RCN bonds firmer after court rulings; recently strong Leap debt stumbles on report

By Paul Deckelman and Sara Rosenberg

New York, June 23 - Telewest Communications plc bonds were quoted several points better Wednesday, now that the British-based broadband operator has gotten the approval of the English courts for its reorganization plan. Also in the communications sphere, RCN Corp. bonds were seen firmer, after the bankrupt Princeton, N.J.-based telecommunications operator won court approval for its exit financing commitments, despite earlier objections from several creditors.

However, the bonds of Adelphia Communications Corp. - which has also run into some creditor qualms about the terms of its exit financing - were lower.

Also continuing on the downside was Pegasus Satellite Communications Inc. while the previously robust bank debt of Leap Wireless International Inc. was seen lower by two points.

A bank debt trader quoted the San Diego-based telecom company's paper on Wednesday going out at 124 bid, 125 offered.

The trader said that Imperial Capital had put out a research report a few days ago that "may not have been too favorable," to Leap.

If so, it would represent a divergence from the recent conventional wisdom on Leap; the bank debt, while clearly off its recent highs above 126 bid, is still well up from levels around 110 bid seen earlier in the month.

Many in the market have been citing new valuations as the primary driver behind the recent surge, with a generally held belief that there is great equity value behind the company's name - and that when the bank debt holder s get equity, along with some new debt, as part of the Chapter 11 reorganization plan, the more equity value people attribute to the company, the better the bank debt trades.

Besides valuations, market participants have been anticipating the release shortly of the company's latest monthly financial results, and again, the overall consensus has been that the numbers will show the company turning in good operating performance, even as it restructures its debt.

Leap's bondholders, on the other hand, have seen little to inspire them; since they are well down the food chain from the bank debt holders, they are not likely to get very much out of the restructured company's presumably stronger equity. Their pessimism is reflected in trading levels for the company's zero-coupon discount notes due 2010 which have recently languished around 13.5 bid, while its 12½% notes are still marooned around 16.5.

RCN better on exit loan OK

But bankrupt telecommer RCN was doing well after the U.S. Bankruptcy Court for the Southern District of New York approved the company's exit financing commitments, despite objections having been filed by several parties involved in the case, namely Vulcan Ventures Inc. and Wells Fargo & Co., two "substantial" holders of RCN's preferred stock. They had objected to fees attached to the $460 million exit facility (see related story elsewhere in this issue).

RCN's 11 1/8% notes due 2007 were seen half a point better at 61 bid, while the company's 9.80% notes due 2008 were up a point at 61.5 and its 11% notes due 2008 were two points ahead at 62.5. However, RCN's 10% notes due 2007 and 10 1/8% notes due 2010 were each quoted unchanged at 60.5.

Telewest jumps 3

A favorable court ruling on the other side of the pond gave a boost to Telewest's bonds, which were seen up more than three points on the session. Its 9 5/8% notes due 2006 were seen up more than three points to 58.5 bid, while its zero-coupon notes due 2007 were four points up at around 60 bid.

At another desk, a market source saw the 9 5/8s up just under three points to 58.25, but did not see very much movement in the company's other issues, with its 9 7/8% notes due 2010 half a point better at 55 bid, and its 11% notes due 2007 were up perhaps a quarter point to 59.5. The source actually saw one of the company's issues easier, the zero-coupon notes due 2010 half a point behind at 43.5.

Telewest's Nasdaq-traded shares were up 51.9 cents (21.01%) to $2.989 Wednesday.

Telewest and its Telewest Finance Ltd. subsidiary had on Monday gotten the approval of Britain's courts for the companies' reorganization plans, which would give bondholders 98.5% of the equity in a newly organized, Delaware-incorporated entity, Telewest Global Inc. Telewest anticipates its plan becoming effective on July 16, and expects the reorganization to be completed July 19.

Adelphia slides

No such optimism is seen these days around people associated with Adelphia Communications Corp. The Greenwood Village, Colo.-based cable company's bonds were seen down about two points on the session Wednesday, its 10¼% notes due 2011 at 103.5 bid, its 9 3/8% notes due 2009 at 101.5 bid, and its 9½% notes, which were to have matured this past Feb. 15, at 100.5 bid. Adelphia subsidiary Century Communications Corp.'s 8 7/8% notes due 2007 were down a point at 109.5 bid.

Adelphia - currently restructuring before the U.S. Bankruptcy Court for the Southern District of New York - has lately run into a buzzsaw of opposition from some creditors who feel that its planned exit financing is too larded with unnecessary fees.

Meantime, over the objection of creditors who just want the company sold - either whole or in pieces - management continues to insist that it is still also considering the possibility of emerging from bankruptcy as a stand-alone company.

Pegasus loans in spotlight, bonds lower

Back among bank debt investors, Pegasus Media & Communications Inc.'s term loan D and Pegasus Satellite Communications' bank debt remained a prime focus in the distressed market as people are still watching and waiting to see what happens.

The Bala Cynwyd, Pa.-based satellite television programming distributor's term loan D was quoted at 97 bid, 98 offered and the Satellite paper was quoted at 97.5 bid, 99 offered, according to a trader who saw the paper basically unchanged on the day. However, on Tuesday, a trader had put the D loan at 97.5 bid, 98.5 offered and the Satellite loan at 97 bid, par offered.

Pegasus Satellite's bonds were meantime all seen about a point lower on the session, continuing the slide seen Tuesday after the Portland, Me. federal bankruptcy court overseeing its reorganization handed the company its latest setback in its protracted struggle with corporate nemesis DirecTV Group Inc.

The senior notes, such as Pegasus' 12 3/8% notes due 2006, 9¾% notes due 2006 and 9 5/8% notes due 2005 were all seen down a point, at 41, 41, and 40, respectively. Likewise down a point were Pegasus' junior 13 ½% notes due 2007, now trading at nine cents on the dollar.

Investors' attention towards the name increased following news after the market had closed Monday that the bankruptcy court had denied its request for a temporary restraining order against DirecTV; Pegasus was trying to keep DirecTV from marketing its service directly to consumers in areas served by Pegasus.

The bottom line on the decision, DirecTV said, is that it can continue to market its service and activate new customers in what were formerly exclusive territories for Pegasus.

Pegasus - for now - distributes DirecTV programming to its 1.1 million customers in mostly rural markets, but the two companies have been feuding for some time over just how much those customers should actually be worth to DirecTV.

After many months of legal wrangling, DirecTV and the National Rural Telecommunication Cooperative - a TV programming distribution industry group of which Pegasus was the largest member - agreed to end the exclusive right of NRTC members like Pegasus to sell DirecTV in their territories, causing Pegasus to cry "foul."

Pegasus alleged that DirecTV and NRTC were conspiring to destroy its business and it filed for bankruptcy protection on June 2. In response, DirecTV began marketing its service in Pegasus' once- exclusive territories, sparking the latest court confrontation.

Delta bonds slip

Apart from communications names, Delta Air Lines Inc. bonds were seen lower, though there was "not a lot of action" in its, a trader said, after Moody's Investors Service cut the Atlanta-based air carrier's ratings a notch, the senior unsecured notes falling to Caa3 with a negative outlook; Moody's cited difficulties Delta may face in getting its pilots to agree to sizable concessions the airline says it needs from them.

Delta's 8.30% bonds due 2029 were seen down a point at 40 bid, 41 offered.

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