Air Canada debt improving; WorldCom remains active

By Carlise Newman

Chicago, June 16 - Names that had crossed desks frequently in recent weeks made up Monday's distressed debt trading, with WorldCom Inc. still in the lead. Air Canada, which came on to the scene Friday, was active again Monday as well.

Air Canada's 10.25% notes rose another two points Monday to close the session at 40 bid, 42 offered, a trader said, from 38 bid, 40 offered Friday.

"Air Canada was up two, three points Friday and again today. The paper traded around 40 bid early, and then it just kind of died down," the trader said.

On Friday, Air Canada's 7,000 sales clerks ratified a cost-cutting deal to help the insolvent airline emerge from bankruptcy protection, the union said on Friday. Ratification of the agreement, which will result in 800 layoffs, is another step in Air Canada's complex restructuring, and follows a similar vote by its dispatchers and regional affiliate pilots, the company said in a press release Friday.

Air Canada must still get ratification votes from its 12,000 machinists, 8,300 flight attendants and its 3,200 main line pilots. Similarly to AMR Corp. and UAL Inc., failing to obtain labor concessions could wreck Air Canada's battle to avoid liquidation.

Air Canada's sales clerks, represented by the Canadian Auto Workers union, voted 71% in favor of the new six-year labor contract, the union said, adding that about 60% of the union members cast a vote. The sales clerks will get the same salary, health-care benefits and pensions, but will have fewer vacations and lower shift premiums and other monetary compensation, the union said.

Earlier last week, Air Canada's board of directors approved a plan to seek debt and equity financing to emerge from bankruptcy that will likely wipe out the value of its stock.

"In such circumstances, it is highly likely that a substantial portion of the company's unsecured debt will be converted to new equity and that there will not be any meaningful recovery to existing equity of the company," Air Canada said in a statement.

WorldCom was still active Monday, falling nearly a point, burdened by newspaper and wire reports that the U.S. government has been urged to think about ending contracts with the telephone and internet company.

WorldCom Inc.'s 7½% notes due 2011 were down "three quarters of a point" Monday to land at 27¼ bid, 28¼ offered, a trader said.

WorldCom's bonds dipped to levels of 28 bid, 29 offered Friday after having actively traded last week in the low 30s. Thursday's close saw the bonds at 31 bid, 32 offered.

A memo made available on Friday said the U.S. government should consider suspending business with WorldCom because of its financial fraud case, the Wall Street Journal first reported Friday. The assistant inspector general at General Services Administration, which handles government procurement, based his recommendation on civil fraud charges against the company.

The June 2 recommendation to consider beginning suspension proceedings came after GSA General Counsel Raymond McKenna said the agency had no evidence that WorldCom could not provide services for the government.

Ashburn, Va.-based WorldCom plans to change its name to MCI when it emerges from bankruptcy protection this fall.

"All the desks were seeing WorldCom and it looks like this week may be the same, especially if it remains quiet," a distressed debt trader said. "There were some off-the-run trades, stuff here and there, but the main names like WorldCom were still active.

Conseco Inc.'s bonds were quoted up one point Monday to 48 bid, 51 offered from 47 bid, 50 offered Friday - also up a point during that session - when it said it reached an agreement in principle with its creditors, who will amend their votes regarding the plan.

Conseco Inc. said it reached an agreement in principle with some of its creditors, who will amend their votes to support the company's second amended plan of reorganization.

Following the negotiations with dissenting creditors, the Carmel, Ind.-based insurer said it intends to file an amended plan and now believes that there will be sufficient votes for all classes to accept the plan, other than the trust originated preferred securities, who continue to object.

Conseco will accept the amended ballots, and intends to file a third amended plan that will address most of the remaining unresolved objections. The confirmation hearing began on Friday.

The announcement comes after Conseco filed the initial voting results with the bankruptcy court.

In addition, New York City developer Donald Trump and Conseco have reached an agreement on a long-standing dispute over control and distribution of profits of the General Motors Building on Fifth Avenue in New York, and have mutually agreed to sell the building. A news release said the terms of sale are confidential.

"It wasn't so hot today. Friday was much more active than today. Today we spent more time reading the paper than working," a trader said of Monday's action.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.