Werner Ladder, Pegasus lower; Mirant bank debt heads lower as well

By Paul Deckelman and Sara Rosenberg

New York, March 28 - Werner Holding Co. Inc. bonds were seen down several rungs Monday, although no fresh negative news was seen out on the Greenville, Pa.-based maker of metal ladders.

Also climbing down from prior levels was Mirant Corp.'s bank debt, as investors scrutinized its recently filed amended disclosure statement and plan of reorganization - and apparently did not like what they saw.

A market source quoted Werner's 10% notes due 2007 as having dropped to 70 bid from prior levels of 74.

It was the first time that those bonds had been seen around since early last year, when its bonds had briefly been actively traded after the company disclosed that it would stop supplying Home Depot with its products in favor of an exclusive distribution pact with rival home improvement store powerhouse Lowe's.

Another distressed name making its first return visit to the markets after many months off the radar screen was Pegasus Satellite Communications Inc., the bankrupt Bala Cynwyd, Pa.-based satellite television programming distributor.

A trader saw its 12 3/8% notes due 2006 off 2½ points on the session at 58.25 bid. He saw the company's other issues mostly down a half point, with its 9¾% notes due 2006 ending at 58.5 and its 11¼% notes due 2010 at 58.5, although its 9 5/8% notes due 2015 were seen a point down at 56.5

Pegasus sought Chapter 11 protection last summer after a prolonged dispute with DirecTV Group Inc., whose programming it distributed in small-town markets around the country.

In bank debt dealings, Mirant's paper took center stage Monday as its 2003 bank debt fell off to 72.5 bid, 73.5 offered by the end of the day from Friday's levels of 73.25 bid, 74 offered, and traded as low as 72 during the morning hours of the day's session, according to a trader.

"People were spending time trying to figure out what it meant," the trader said about the filing of the bankrupt Atlanta-based power generating company's amended plan. "I think it was at first viewed negatively."

That amended plan of reorganization gives 100% recovery to secured claims, 100% recovery to "California Party Secured Claims" for settlement of claims relating to the state's energy crisis in 2000 and 2001 and 60% recovery to unsecured claims through the issuance of shares of the reorganized company's Mirant common stock.

As for Mirant Americas Generation - which will not be included in the substantive consolidation of the rest of the company - secured claims will receive 100% recovery.

Mirant Mid-Atlantic, LLC owner/lessor secured claims, if classified as financings by the bankruptcy court, will be allowed up to the value of their collateral and will be paid in new secured notes; if treated as leases, they will be subject to assumption or rejection. PG&E/RMR claims will receive 100% recovery. General unsecured claims will receive 100% recovery through issuance of cash or new notes for 90% of the claim and stock for the remaining 10%, and long-term senior note claims will receive 100% recovery and be unimpaired.

Mirant Americas Generation will get a new credit facility of at least $750 million for working capital.

Mirant's MAGI bank debt ended Monday's session unchanged on the news at 107¼ bid, 108 offered, the trader added.

The MAGI 9¼% bonds due 2017 were meanwhile down a point at 113, while its 7.4% notes due 2009 were at 79.25 bid and its 7.9% Notes due 2009 were at 80.25, each down a quarter point.

Mirant also announced that its board has authorized it to sue its former parent company, Southern Co., from which Mirant was spun off in 2001.

Mirant is seeking to recover some $1.945 billion in payments it made to Southern in connection with that separation - $910 million from dividend payments and distributions Mirant made to Southern in 1999 and 2000, and $1.035 billion from repayment of intercompany loans.

Delta falls back

Elsewhere, a trader in distressed bonds saw Delta Air Lines Inc.'s bonds - which had firmed Thursday on indications the troubled Atlanta-based airline will try to improve its liquidity position, possibly through the issuance of new convertible debt - as having come down about a point across the board, its 10% notes due 2008 to 44 bid, 46 offered, its 7.90% notes due 2009 to 38 bid, 40 offered, and its 8.30% notes due 2029 to 31 bid, 33 offered. However, he saw the company's benchmark 7.70% notes due 2005 pretty much unchanged at 74 bid, 76 offered.

At another desk, a trader - who had pegged those '05 bonds lower to begin with - saw them as having firmed two points to that same 74 bid, 76 offered level, and saw the other bonds all off half a point on the day.

Late in the session, Delta did indeed move to bolster its liquidity, filing a shelf registration with the Securities and Exchange Commission to periodically sell up to $500 million in common and preferred stock, debt securities, warrants and other securities.

Delta said it will use proceeds from the offering for general corporate purposes.

But sources among convertible market origination desks said was some heavy competition to get Delta's new business amid a slow new issue calendar.

"We're hearing it is a competitive bid and very, very hotly contested, but we're not involved," said one source, obviously from outside the process. "Of course, one of those guys at the top of the league tables will be the most likely to get it, right?"

Buyside reactions to a new deal from Delta remain mixed, with some sources simply groaning at the thought of a third Delta convertible. A few, however, were cautiously excited about the prospect, asserting that Delta will not go away and this would be an excellent way to get a fresh position in a turnaround story.

In the end, the telling from the existing Delta converts leaned to a negative response. The 8% issue was off about a quarter-point to the 42 bid, 43 offered area and the 2.875% issue lost about a half-point to the 39.5 bid, 40 offered neighborhood, a sellside trader said. Delta shares closed down 9 cents, or 2.21%, at $3.98.

On Friday, while the markets were closed, S&P revised its watch for Delta credit (CC) downward to developing from positive, expressing elevated liquidity concerns in light of further escalation in fuel prices, which S&P said "is the greatest obstacle to reducing losses rapidly enough to avert a liquidity crunch."

Delta CEO Gerald Grinstein suggested last week at a Goldman Sachs conference that a new convertible offering would help the Atlanta-based airline with its lingering liquidity shrinkage.

Northwest Air lower

Also in the troubled airline sector, the second trader saw Northwest Airlines Corp.'s bonds lower, in the wake of a court ruling last week that the Egan, Minn.-based carrier must redeem around $226 million in preferred shares of stock that it issued to employees more than 10 years ago as part of wage-cut negotiations.

Announcement of that decision Monday sent its 8 7/8% notes due 2006 down to 85.5 bid, 87 offered and its 7 7/8% notes due 2008 down to 62 bid, 64 offered, both down 1½ points.

Northwest had agreed to redeem the preferred stock in 2003. But when redemption time came, the airline, facing renewed financial troubles, decided it would be impossible to do so, sending the unions representing its ground workers and flight attendants to the courts.

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