Leap Wireless bank debt steadies; Primus Telecom nosedives on numbers

By Paul Deckelman and Sara Rosenberg

New York, July 30- Leap Wireless International Inc.'s bank debt stabilized Friday after a rollercoaster day the previous session, with levels quoted pretty much where the San Diego-based telecommunications company's bonds had gone home on Thursday.

On the bond trading scene, Primus Telecommunications Group, Inc.'s unexpected report of a second-quarter loss, when Wall Street had been looking for a modest gain from the McLean, Va.-based telecommer, sent the company's stock and bonds alike careening downward prom prior levels above, or not too far below, par.

Leaps loan went home Friday at 116 bid, 117 offered, traders said. It was quite a different story than Thursday' session, when the bank debt dropped all the way down to 112 bid, 113 offered on the heels of sector peer Metro PCS Communications Inc.'s decision to pull its initial public offering, then went back up to 117 bid, and then finally came off those highs to settle in a 116 to 117 context.

Volatility in Leap's bank debt is nothing new; over the last 10 days or so, the paper has fallen by about 10 points.

Around midnight ET on Wednesday, MetroPCS released a statement that said the Dallas-based wireless communications company's management had decided not to proceed with the IPO at this time pending the review of accounting issues.

Being a comparable company, Leap investors were not pleased, worrying about such things as multiples coming in and not enough demand from the equity side.

Also on the communications front, Adelphia Communications Corp. bonds continued their recent slide, despite the lack of any fresh negative news about the Greenwood Village, Colo.-based cable company, currently restructuring under Chapter 11.

A market source saw Adelphia's 10 7/8% notes due 2010 were seen having declined to 88 bid from 89.5 previously and its 10¼% notes due 2011 lost nearly three points to 89.5.

At another desk, Adelphia's 8 7/8% notes due 2007 lost half a point to about the 87 level.

Primus' surprise earnings

But the big loser clearly was Primus, with its shares getting creamed and its bonds sliced and diced in response to the earnings data.

Primus announced after the close on Thursday that in the second-quarter ended June 30, it lost $15 million (17 cents a share) versus its year-ago profit of $20 million (21 cents a share). Wall Street was truly shocked - analysts had been looking for about 10 cents a share of earnings.

In the latest quarter, Primus had $16 million in net losses from foreign currency transactions and the sale of assets, which was partially offset by a gain on early retirement of debt. Year-ago results included $22 million in net gains from foreign currency transactions and the early retirement of debt, partially offset by a loss on the sale of assets.

The picture was not all bad - on an adjusted basis, net for the most recent quarter was $1 million (one cent a share) versus an adjusted loss a year ago of $2 million (four cents a share).

The company also reported that revenues for the quarter totaled $332 million, up 4% from $320 million in the year-ago period, though down 5% sequentially from $348 million in the first quarter of this year.

Likewise, adjusted EBITDA was $37 million for the second quarter, up 7% over the second quarter of 2003 - but down sequentially from $44 million in the prior quarter, reflecting weaker foreign currencies, increased sales, general and administrative spending and lower net revenue.

But investors didn't seem to want to look for the silver lining in Primus' report; its 8% notes due 2014 were seen to have swooned to 68 bid, a 15-point drop from prior levels, while at one shop its 12¾% notes due 2009 were estimated to have fallen some 32 points on the day to around the 76 bid level.

However, at another desk, a source said the 123/4s were down "only" 24 points on the day to 84 bid, from prior levels around 108. He also pegged the 8% notes really down just 10 points to around 72 bid from 82.5 bid previously.

The stock side of the ledger, meantime saw Primus' Nasdaq-traded shares losing fully half of their value, as they tumbled $1.70 (50.75%) to end at $1.65. Volume of 33 million shares was about 33 times the average turnover.

Primus said that its operating results in the second quarter "reflect increased competition from product bundling in virtually all of the company's markets, together with continued competitive pricing pressures. In addition, wireline long distance usage continued to decline due to increased use of cellular phones and internet services."

Chairman and chief executive officer K. Paul Singh noted in the company statement announcing the results that during the first experienced pricing pressure on its core long distance and dial-up internet service provider products. In the second quarter, he continued, "this competitive challenge became more intense when major incumbent carriers in our markets used long-distance offerings as a 'loss leader' to encourage customers to subscribe to their bundled local, cellular and broadband services."

Looking ahead, Singh was forced to acknowledge that in light of existing competitive pressures and company expectations that meaningful revenues from new initiatives it is taking will not materialize until 2005, Primus now expects sequential revenue on a constant currency basis to be roughly flat in the third quarter, followed by a positive inflection in the fourth quarter of 2004, a downward revision from previous projections.

It said that adjusted EBITDA will be in the $29 million to $31 million range in the third quarter, with a positive inflection in the fourth quarter. Capital expenditures for the full year 2004 are expected to be in the range of $40 million to $45 million. Free cash flow for the last half of the year is expected to be in the range of $5 million to $10 million, and Primus expects a full-year adjusted net loss of around $6 million to $9 million.

Applied Extrusion lower

Also among distressed bond investors, Applied Extrusion Technologies Inc.'s announcement that the New Castle, Del., maker of polypropylene films will file for bankruptcy pushed its 10¾% notes due 2011 down to 62 bid from 63.5 before.

The company also said that it will not pay interest on the 10¾% senior notes that became due on July 1.

Back among bank debt players, WestPoint Stevens Inc.'s bank debt "found a bid" Friday with the paper quoted at 70 bid, 75 offered, according to a trader, who remarked that it was noteworthy since a bid for the paper had not been seen in a while.

No specific news sparked the new buy side interest in the West Point, Ga.-based textile firm's debt. Its nearly worthless junk bonds were quoted at a level about 1¼ for both its 7 7/8% notes due 2005 and due 2008.

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