ATA continues post-ruling climb; Exelon bank debt active, though little changed

By Paul Deckelman and Sara Rosenberg

New York, Dec. 22 - ATA Holdings Corp. bonds were quoted heading off into the wild blue yonder Wednesday, as the distressed bond market continued to react favorably to the Tuesday afternoon ruling officially ratifying Southwest Airlines as the winning bidder in the battle for some of the bankrupt Indianapolis-based airline company's assets.

In bank loan trading, activity was seen continuing in Boston Exelon's bank debt, an energy project loan, according to a trader, who said that the paper was pretty much unchanged at 103½ bid, 104 offered.

The Boston Exelon activity is just another instance in the recent trend of unusual activity in energy project finance bank debt, such as Teco Panda and Lake Road, as banks are trying to sell off some of their positions before year-end.

The Boston Exelon project was owned by Exelon Corp. at one point but now it is owned by lenders.

Meanwhile, USG Corp.'s bank debt has also been relatively active over the last couple of sessions, according to a trader, who had the Chicago-based buildings materials company's paper up about half a point on the day, at 115.5 bid, 116.5 offered.

"All the asbestos names have been creeping up lately," another trader remarked. The bank debt, bonds and even the stock of the bankrupt asbestos-challenged companies have essentially been on a tear since Election Day, with investors confident the incoming Congress, now decisively controlled by the Republicans, will be more likely to enact a legislative solution to the asbestos litigation crisis.

ATA jumps higher

Back among the bond players, ATA's 13% notes due 2009 and 12 1/8% notes due 2010 were seen having pushed as high as 57 bid, 59 offered Wednesday, a trader in distressed issues said, well up from the 49 bid, 51 offered level at which they had finished on Tuesday.

Those bonds had risen three points on Tuesday - and continued to soar skyward Wednesday as well - after U.S. bankruptcy judge Basil Lorch III formally approved the proposed $117 million sale of six ATA-leased gates at busy Midway Airport in Chicago to Southwest, the leader in the low-fare segment of the airline industry. That offer had trumped an earlier $89.3 million bid from a rival low-fare carrier, Orlando, Fla.-based AirTran Airlines, which had offered to buy all 14 of ATA's gates at Midway.

ATA's over-the-counter traded shares, which risen more than 13% Tuesday on the initial word of Lorch's ruling - even though it had been thought of as pretty much a formality - were up another 42 cents (44.21%) Wednesday, to finish at $1.37, on volume of 621,000, more than double the norm.

As part of its deal with ATA, Southwest - already the largest carrier at Midway - will pay $40 million for the six Midway gates, and then invest additional monies in ATA, in which it will take a stake of approximately 35%. Press reports say that although ATA will continue to operate as an independent carrier, Southwest will most likely replace several senior ATA managers with its own people, and proceed to begin cutting the restructuring airline's labor costs by 15% to 20%. Among the monies that Southwest will advance ATA is debtor-in-possession financing to tide ATA over while it gets its financial house in order. ATA declared Chapter 11 bankruptcy last week.

Iridium higher

In other names, a trader saw "a lot of people talking about Iridium [Satellite LLC]," whose 13% and 14% bonds were trading in a 16-17 context," which he saw as "up six or seven points" from recent levels for the Bethesda, Md.-based satellite telecommunications company - the successor to the old Iridium LLC, once a high-flyer which plunged into bankruptcy in 2000, when the current owners bought its constellation of 66 low-earth orbiting satellites and ground stations for what amounted to a firesale price.

Even though the company is under new management and got valuable assets worth several billion dollars for a fraction of that, the trader declared that "I don't know what's going on with them - or why anyone would want to buy into Iridium at any price," as it still tries to market its relatively expensive satellite phone service to a world that has embraced the much cheaper technology of conventional tower-based wireless cellular phone service.

Even so, he said, "they're still out there," as Iridium touts its service as providing coverage in such remote regions of the world as the polar areas, or at sea - where there are no cellular towers. However, in more built-up areas, where cheaper cellular service is readily available, Iridium's phones - which depend on line-of-sight placement relative to its overhead satellites - have trouble operating in buildings, although its paging system does work inside structures. Iridium - whose customers include the Defense Department - announced its 100,000th subscriber in July.

Loral holds at better levels

Satellite communications company Loral Space & Communications' bonds were seen Wednesday continuing to hover at the higher levels they hit on Tuesday, when it announced that its Palo Alto, Calif.-based Space Systems/Loral division has been selected by EchoStar Communications Corp. to build EchoStar XI, a new direct broadcast satellite that will support EchoStar's DISH Network and serve as backup to its existing fleet.

The EchoStar XI, anticipated to be delivered in early 2007, will be the fifth Space Systems/Loral-built satellite in the EchoStar fleet. The contract is subject to standard bankruptcy court approval. Financial details were not announced.

Loral Space & Communications' 9½% notes due 2006 gained two points to 25 bid, 27 offered, while its Loral Orion 10% notes due 2006 were seen at 77 bid, 79 offered, also up two points.

RCN up again

RCN Communications Corp. bonds were up by about a point for a second straight session Wednesday, as the Princeton, N.J. -based telecom company officially emerged from Chapter 11. Its several series of bonds traded in either a 63 bid, 65 offered context, or around 62 bid, 64 offered, depending upon the maturity.

RCN is converting some $1.2 billion in unsecured obligations into 100% of the company's new equity, and eliminating about $1.8 billion in preferred share obligations.

RCN's emergence financing was comprised principally of borrowings under a new $330 million senior secured financing facility syndicated by Deutsche Bank AG Cayman Islands Branch. In addition, RCN issued $125 million of convertible second-lien notes to certain investors and holders of the company's pre-petition bond obligations, the company said.

The proceeds from the Deutsche Bank facility and the convertible second-lien notes were primarily utilized to pay in full secured indebtedness held by a syndicate of lenders led by JPMorgan Chase Bank.

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