WorldCom confirmation hearing begins; Mirant sags as Pepco and FERC interfere

By Carlise Newman

Chicago, Sept. 8 - As usual, WorldCom Inc. dominated distressed debt trading Monday as its confirmation hearing begins. However, Mirant Corp., Collins & Aikman and the steel sector were astir as the summer lulls begins to draw to a close.

WorldCom bonds opened offered at 30 bid, but "traded down during the day," a trader said. After testing the lows of the day at 29 5/8, the benchmark paper closed at 29½ bid, 30 offered, he said.

A judge adjourned the first day of WorldCom's bankruptcy case hearing on Monday to allow the company and two groups opposing its reorganization plan to continue talks toward a settlement.

The court set a deadline of midnight for the talks.

Both of the objecting groups have been fighting for more money from the bankrupt telephone company. The hearing is due to resume on Tuesday at 9 a.m. ET. The hearing is expected to last at least two weeks.

MCI's current plan is backed by about 96% of the company's creditors and would erase $36 billion in debt. If approved during the confirmation hearing, WorldCom will emerge from bankruptcy with about $3.5 billion to $4.5 billion in debt and $1 billion in cash.

Meanwhile, Mirant's bonds sagged on Monday after Pepco and the Federal Energy Regulatory Commission announced Friday that they would block any efforts by Mirant to cancel an unprofitable power-supply contract through the bankruptcy court.

Mirant's 7.9% notes due 2009 were seen at 46 bid, 48 offered, 2½ points lower than Friday's levels. Mirant Americas Generation's 8.5% notes due 2021 were seen at 71 bid, 73 offered, 2 points lower than Friday.

The FERC and Pepco, in a joint filing, asked the U.S. District Court for Northern Texas to ensure the court overseeing Mirant's bankruptcy does not let Mirant out of its contractual obligations to Pepco, a unit of electric utility Pepco Holdings Inc.

Allowing Mirant to break the contracts could force the utility to buy replacement power at a cost of up to $700 million, Pepco has estimated.

The FERC/Pepco filing argues the Federal Power Act confers jurisdiction to FERC that takes priority over any ruling by a bankruptcy judge.

"The Mirant paper was a little lower on Friday on the news, but it seemed more active on Monday," a trader said. "I think it was just a matter of volume. People were still out last week."

There was still a lot of action Collins & Aikman Products Inc.'s debt Monday.

"The bonds firmed more today after regaining losses on Friday," a trader said. "I think they've recovered somewhat from the news, but there were still all those downgrades last week."

There was still a lot of action Collins & Aikman Products Inc. Monday.

"The bonds firmed more today after regaining losses on Friday," a trader said. "I think they've recovered somewhat from the news, but there were still all those downgrades last week."

Collins & Aikman firmed during the session after falling 4 points on Thursday. Its 10¾% senior notes ended the day at 89 bid, up from 88 bid Friday. The 11½% subordinated notes due 2006 ended the session at 80 bid from 79 bid Friday.

Both issues were up "a little over 1 point," a trader said.

The slide on Thursday - the bonds fell four points but regained lost ground on Friday - occurred in response to news that the Troy, Mich.-based auto parts maker lost a contract to supply components to DaimlerChrysler for its Jeep line, which is 2% of the company's revenue.

Meanwhile, traders said Conseco Inc.'s bonds were still "booming," a trader said. Conseco was about 4 points higher across the board. The extended bonds were quoted at 81 bid, up from 75½ bid, and the unextended bonds were seen at 48 bid, up from 421/2.

"Incredible," a trader said of the recent rise of the unextended bonds, which were up 10 points on the day Friday. "Remember when the (unextended) bonds were trading in the teens?"

"It was nuts Friday. A little more subdued today, but still Conseco was one of the more active names to trade," added another trader.

Elsewhere, AK Steel Inc.'s 7¾% notes due 2012 were seen at 77 bid, 79 offered, unchanged from Friday, but actively traded, a market participant said.

Meanwhile, Atlas Air Corp. bonds were quoted bid "around 25," although one market source said the price could be higher, perhaps even around 30; he was not clear on earlier levels.

The Purchase, N.Y.-based air cargo carrier was downgraded by Moody's Investor Service to Caa3 from Caa2 on Monday because of uncertainties about the company's prolonged debt and lease restructuring program. Moody's then withdrew the ratings because it had concerns about whether it would have sufficient information to adequately monitor developments.

Bankrupt cable television provider Adelphia Communications Corp.'s 9 7/8% notes due 2007 were seen at 67½ bid, down 1 point.

And Westpoint, Ga.-based home furnishings maker WestPoint Stevens Inc.'s 7 7/8% notes due 2008 were seen by traders down ½ point at 18½ bid.

(Paul Deckelman contributed to this report)

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