Energy still going strong; WorldCom active; AMR continues to fly high

By Carlise Newman and Paul Deckelman

Chicago, May 16 - Energy companies emerged as the most active again Friday even with no news to prop the popular sector up. Telecommunications played a role in distressed trading as well, with WorldCom Inc. mentioned at nearly every trading desk.

Calpine Corp.'s bonds were seen up two points, with its 8½% notes due 2008 quoted at 76 bid/78 offered, up from 74 bid/76 offered Thursday and 72 bid early in the week.

"Calpine's earnings just gave the bonds a lift all week," said a distressed debt trader.

On Tuesday the San Jose, Calif.-based power company's first-quarter loss narrowed compared with year-earlier results that were hurt by hefty equipment-cancellation costs. Calpine had a net loss of $45.3 million (12 cents per share), narrower than the year-earlier loss of $75.7 million (25 cents per share). Revenue surged to $2.19 billion from $1.33 billion a year earlier.

As of March 31, liquidity for the company totaled approximately $615 million. This included cash and cash equivalents of $378 million, the current portion of restricted cash of $146 million and approximately $90 million of borrowing capacity under the company's credit facilities.

Northwestern Corp.'s 7 7/8% notes due 2007 were seen moving up a point Friday to 79 bid/81 offered and up two points from Wednesday, when they were seen at 76 bid/78 offered.

Northwestern also reported earnings this week, on Thursday, of $9.9 million (26 cents per share) for the quarter ended March 31. That compared with a loss of $52.4 million ($1.91 per share) for the first quarter of 2002.

The earnings include a gain of $27.3 million or 73 cents a share from the extinguishment of a subordinated note of Expanets, NorthWestern's communications services business on March 13.

Also within energy, Dynegy Inc.'s bank debt was quoted as moving up a half-point from Wednesday, to end the week at 97 bid/98 offered.

Meanwhile, "WorldCom was incredibly active this week," said a distressed debt trader. "It could be that we're gearing up for the hearing, but I believe most of it is just renewed interest. We've been seeing it every day."

The hearing for WorldCom's disclosure statement is scheduled in the U.S. Bankruptcy Court for Southern District of New York on Monday.

WorldCom's bonds traded at 28¾ Friday. They were seen ending the session at 29 bid/30 offered, a trader said.

In unrelated news, the Clinton, Miss.-based telecommunications company said on Thursday it won a contract to build a wireless telephone network in Iraq as the post-war country tries to rebuild and restore communications and other basic services.

WorldCom, which is changing its name to MCI, said it was on track to have a small wireless network operating in June.

Meanwhile, Global Crossing Inc. crossed desks again Friday. Its bonds were seen up a quarter-point at 5.25 bid, said one trader, while another desk saw the bonds holding steady at 5 bid/5.75 offered.

"With a name like that, any move is somewhat major," said one distressed debt trader. "It's pretty strange for me to sound enthusiastic about Global Crossing, isn't it?"

Another communications name which was moving up on Friday - and managing to hold its gains all the way through - was US Unwired Inc.'s 13 3/8% senior subordinated discount notes due 2009. They jumped from levels Thursday in the high 20s to around 32.5 bid/35 offered, propelled by the news that the Lake Charles, La.-based owner of several Sprint PCS affiliates had begun an offer to exchange a package of cash and new debt for its outstanding bonds (see "Tenders and Redemptions" elsewhere in this newsletter for full exchange offer details).

And Alamosa Delaware Inc.'s bonds rose after the Lubbock, Tex.-based Sprint PCS affiliate reported positive quarterly numbers after the market close Thursday.

Alamosa's 12 ½% notes due 2011 were quoted as high as 72 bid, a six point gain on the session, while its 13 5/8% notes due 2011 rose to about 73 bid and its zero-coupon/12 7/8% discount notes due 2010 were at 51 bid, also up about five points.

The over-the-counter bulletin board-traded shares of corporate parent Alamosa Holdings zoomed 34 cents (34.69%) to $1.32 on volume of 2.5 million, six times more than usual.

Alamosa said its net loss for the first quarter was $30.5 million (33 cents per share), widening out from a $25.6 million loss (27 cents per share) in the fourth quarter of 2002 and a loss of $28.1 million (30 cents per share) for the first quarter of 2002.

But the company said that total revenue for the first quarter was approximately $141.1 million, including subscriber revenue of $104 million, roaming revenue of $31.8 million, and product sales of $5.3 million. EBITDA was $17.1 million for the first quarter of 2003, up substantially from $12.1 million for the fourth quarter of 2002 and $3.1 million for the first quarter of 2002. Alamosa said that it had available funding of approximately $115.1 million at the end of the first quarter.

On the operational front, Alamosa's total subscribers increased by approximately 31,000 in the quarter, to about 653,000. Customer churn - customers leaving the company to jump to a competitor's service - decreased to approximately 3%.

A trader said he also saw the bonds of another Sprint PCS affiliate, AirGate PCS Inc.'s 13½% notes due 2009, quoted in the 40 bid/45 offered area, which he said was up about five points.

Allegiance Telecom Inc., whose 11¾% notes due 2008 and 12 7/8% notes due 2008 had both fallen nearly two points Thursday on news of the company's Chapter 11 filing, were down another points, at 20.5 bid.

In the airline sector, American Airlines parent AMR Corp.'s bonds managed to stay afloat again Friday. Its 9% notes due 2012 were up a point to 59 bid/62 offered from 58 bid/61 offered.

On Thursday AMR said it will issue up to 3 million common shares to suppliers, lessors and other creditors in exchange for concessions. The Fort Worth-based airline said the agreement will save the company in excess of $175 million a year and will cumulatively more than $1 billion. The company said this caps its $4 billion-a-year cost-reduction effort.

AMR managed to avoid sliding Thursday and Friday even after a warnings that it may still have to file for bankruptcy protection from its creditors despite winning concessions from its unions and suppliers in a filing with the Securities and Exchange Commission.

"Even with the modified labor agreements, the savings from management reductions and the vendor agreements, the company may nonetheless need to initiate a filing under Chapter 11 of the U.S. Bankruptcy Code because its financial condition will remain weak and its prospects uncertain," the company said in its 10-Q filing. "Among other things, the following factors have had and/or may have a negative impact on the company's business and financial results: the continued weakness of the U.S. economy; the residual effects of the war in Iraq; the fear of another terrorist attack; the SARS (Severe Acute Respiratory Syndrome) outbreak; the inability of the company to satisfy the liquidity requirements or other covenants in certain of its credit arrangements; or the inability of the company to access the capital markets for additional financing.

© 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.