Acquisition offer intrigues Galey & Lord loan investors; Delta volatile on pilot concession news

By Paul Deckelman and Sara Rosenberg

New York, July 21- Investors in Galey & Lord Inc.'s bank debt mulled over the company's latest announcement that it has accepted an acquisition offer from Patriarch Partners LLC - although there was little movement seen Wednesday in its bank debt.

There was considerable movement, meantime, in Delta Air Lines Inc. bonds after the union that represents the carrier's 7,500 pilots came across with a much more substantial offer of wage concessions than it had previously made - only to be told by the company that it wasn't enough.

The Galey & Lord paper was quoted at 40 bid, 45 offered, pretty much unchanged on the session, a trader said.

"I think people knew about this offer on the private side. Any bid is good. Whether you can liquidate it for more, I don't know," the trader added.

Although the New York-based textile company's board of directors approved the offer, it is still subject to lender approval. Financial terms of the deal were not disclosed.

Earlier in July, Galey & Lord's bank debt had spiraled down, falling to 35 bid, 45 offered from prior levels around 48 bid, 49 offered, after a private investor call sparked rumors of a possible liquidation.

"This transaction is an important milestone in the evolution of Galey & Lord, which has taken significant steps to compete in a changing market and amidst increased global competition," John J. Heldrich, the president and chief executive officer of Galey & Lord, said in a company news release.

"Patriarch Partners is a highly regarded strategic investor with a proven track record of enhancing the value of companies in our industry. They are committed to working with management to execute a long-term vision that will enable us to build toward a successful future," Heldrich added.

Dan River lower

Also in the beleaguered textiles sector, a trader in distressed bonds was quoting Dan River Inc.'s bonds at 21 bid, 23 offered - down from 25 bid, 27 offered on Tuesday and well down from recent highs as good as 30 bid.

He saw no fresh news out on the Danville, Va.-based textile maker, which is currently reorganizing under Chapter 11.

Mirant rises again

Elsewhere, Mirant Corp.'s 2003 bank debt was once again stronger Wednesday, with the bankrupt Atlanta-based energy operator's paper quoted at 57.5 bid, 58 offered.

A trader added that the debt had "traded several times in the 57.5 context".

On Tuesday, that bank debt had been quoted at 56.5 bid, 57.5 offered, after moving up by about a point and a half.

And, just for comparison, last Friday, that paper was quoted at 55.25 bid, 55.75 offered after spending the latter half of last week getting stronger.

No specific news was seen as a potential impetus behind Mirant's move.

On the bond side, a trader saw Mirant's corporate paper, such as its busted 2½% convertible, up a point at 59 bid, 61 offered, while its 7.90% notes due 2009 were at 60 bid, also up a point.

He saw the company's Mirant Americas Generating Inc. bonds little changed with the MAGI 7.20% notes due 2008 in a 79-80 bid context.

Delta up - and then down

The big mover of the day, the trader said, was Delta, which was "opening up five or six points" on news that the pilot's union had sharply increased its concession offer to the company, but said that they then "settled back" to end unchanged on the longer end to up only moderately on the shorter end.

He saw Delta's 7.70% notes due 2005 shoot up to 69 bid in the early going well up from 62 bid, 64 offered late Tuesday, before dropping from that high to fly home in a 65 bid, 67 offered context.

"They came off the high - but still ended higher on the day." he said.

However, he saw the Delta 8.30% bonds due 2029, which had ended on Tuesday around the 38 bid, 40 offered level, jumping to 43 bid, 44 offered on the news, but giving it all back by the end of the session to finish at 38 bid, 40 offered, unchanged.

Delta's New York Stock Exchange-traded shares jumped more than a dollar at one point to a high of $6.49, but finished well off that high, in the end rising to just $5.49, up nine cents (1.67%).

The Air Line Pilots Association was reported by The Wall Street Journal to have offered pay cuts of as much as 23.5% to the beleaguered airline, which is trying to reduce its highest-in-the-industry pilot costs in order to get a more realistic cost structure that will let Delta compete better with sector rivals - both the old-line carriers like American Airlines, Continental Airlines, Northwest Airlines and the bankrupt United Airlines, as well as the low-cost carriers like long-time industry leader Southwest Airlines and its upstart cohorts like Jet Blue, AirTran and ATA Holdings. The pilots also offered work-rule concessions that could save additional money.

But Delta had already asked for pay cuts of at least 34.5% and total savings from the pilots of 45%, and had said it did not want to indulge in piecemeal efforts to cut its spending.

On Wednesday, Delta CEO Gerald Grinstein told the pilots union that its proposal, which would save up to $705 million a year, is a good start - but doesn't go far enough.

Grinstein said of the proposal in a company statement that "the good faith effort it conveys is welcomed and appreciated even though, unfortunately and as we've discussed with ALPA, our rapidly deteriorating financial situation means more will be required to position Delta for long-term viability."

He said that he has scheduled a meeting for July 28 to discuss the company's future. Employees will be invited and questions will be taken about issues including the proposal - but it will not be a formal negotiation session.

Adelphia down

Back on the ground, a market observer saw Adelphia Communications Corp.'s bonds down about a point-and-a-half or two points, although he had seen no fresh news out on the bankrupt Greenwood Village, Colo.-based cable operator.

Adelphia's 9 7/8% notes due 2007 were down to 92.75 bid from prior levels at 95 bid and its 10 7/8% notes due 2010 were at 94.5 bid, off from 96.

At another desk, the 9 7/8s were seen at 92.5 bid, down 2½ points on the session, while the bonds of Adelphia unit Century Communications Corp. were also on the downside, its 8 7/8% notes due 2007 off a point at 108.

Loral Orion and its corporate parent Loral Space & Communications were seen holding at recent levels to which the New York-based communications satellite company's bonds have recently pushed.

A trader saw the Orion 10% notes due 2006 firm at 78 bid, 80 offered, while the Loral Space senior bonds were at 35 bid, 37 offered.

RCN notes lower

News that RCN Corp. is looking for a new chief executive officer may have helped push the restructuring Princeton, N.J.-based communications company's notes down a bit to 55 bid, 57 offered from 56 bid, 58 offered Tuesday.

But while chairman /CEO David McCourt, announced late Tuesday that he will lead a search committee to identify and select a successor to serve as the company's CEO, subject to approval by the new equity holders, McCourt said that he will retain his role as chairman of the board.

McCourt founded RCN in 1997.

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