Delta bonds unmoved on jets sale, Northwest bounces around; Mirant bank debt gains

By Paul Deckelman and Sara Rosenberg

New York, Sept. 7 - Delta Air Lines Inc., in a desperate fight to stave off bankruptcy, announced plans to sell some of its jets, cut schedules out of its Cincinnati hub, and said it would focus more on international routes and less on domestic service, where competition is fierce.

Fellow troubled carrier Northwest Airlines Corp.'s bonds were gyrating wildly during the session, falling by up to three or four points from Tuesday's closing levels - before announcing that the airline would resume its talks with its striking mechanics. That good news caused the bonds to come most of the way back up and only end about a point at the most down from Tuesday's levels.

In bank debt dealings, Mirant Corp.'s debt rallied, as talk of a creditors' and equity holders' agreement circulated throughout the marketplace.

Delta's bonds were "unchanged, day over day," a trader said, despite the company's announcement of its partial restructuring.

"Some people were speculating that this is the kind of move they would make in preparation for a bankruptcy filing, more preparing for it than trying to save the company."

He saw the company's 8.30% notes due 2029 unchanged at 14.5 bid, 15.5 offered, while its benchmark 7.70% notes maturing Dec. 15 were "if anything, half a point weaker" on the announcement, a trader said, pegging the bonds at 20.5 bid, 22.5 offered.

Another trader saw those bonds at 22 bid, unchanged, while the 8.30s were at 151/4, unchanged. He also saw Delta's 7.90% notes due 2009 up ¼ point at 15.75.

Delta said it had agreed to sell 11 of its 767-200 jets to a freight carrier, for proceeds of about $190 million; it also plans to cut back on its service to and from its hub in Cincinnati, the second-largest Delta hub after its home base of Atlanta, and further said that it plans to shift capacity to its more lucrative international runs and away from the domestic arena, where it faces dog-eat-dog competition from not only fellow legacy carriers like Northwest, Continental Airlines and AMR Corp. unit American Airlines, but also from upstart carriers like JetBlue. The changes in Cincinnati could result in the loss of as many as 1,000 jobs.

Northwest gyrates, ends lower

Also on the airline front, Northwest's bonds were bouncing around at lower levels for most of the day, before coming off their lows to end down about a point on the session, traders said.

A trader saw the Eagan, Minn.-based Number Four U.S. carrier's 10% notes due 2009 fall to levels as low as 32 bid, 34 offered from Tuesday's close at 35 bid, 37 offered - but then come back from the earlier lows to end only a point down at 34 bid, 36 offered.

He saw the line's 8 7/8% notes due 2006 fall from Tuesday's 48.5 bid finish to levels as low as 44.5, before coming back on the news that Northwest will resume talks with the striking mechanics' union, to finish down only a point day-over-day at 47.5.

"Northwest was all over the place," a distressed-debt trader said. "They had been lower, but then the union said they would come back and talk, and the bonds moved back up from their lows."

He quoted the carrier's 9 7/8% notes due 2007 finishing down only two points on the day at 38 bid, 39 offered, after having been lower earlier.

Northwest, while resuming talks Thursday with the Airline Mechanics Fraternal Association, warned that it will now demand steeper cuts than those that prompted the workers to walk out. The union's 4,427 mechanics, aircraft cleaners and custodians walked out on Aug. 20 rather than accept 25% pay cuts and the layoffs of some 2,000 workers - cuts aimed at saving the company $176 million annually as part of a move to get $1.1 billion in permanent labor concessions from its various employee groups.

However, Northwest warned in its letter to the union that "our last best offer which was presented to you on August 18 was based on economic circumstances that no longer exist today," given the sharp rise in fuel prices since then.

Northwest has been flying since the strike's beginning using a mixture of management mechanics, replacement workers and outsourcing - and said earlier in the week that it would begin hiring permanent replacements by Sept. 13 unless a deal was reached.

United lower

United Airlines' bonds were seen having retreated to about 11 bid from prior levels at 14, in apparent reaction to the news that the bankrupt Elk Grove Village, Ill.-based Number-Two U.S. airline carrier had formally submitted its reorganization plan to the court overseeing its Chapter 11 proceedings.

"I guess bondholders didn't like the plan," a trader speculated.

Mirant loans gain

Apart from the airline sector, bankrupt Atlanta-based energy operator Mirant's 2003 bank loan paper was quoted at 95.5 bid, 96.5 offered, up three points on the day, according to one trader. However, a second trader had the paper quoted not quite as high at 94.75 bid, 95.75 offered.

"There's news out that creditors and equity holders have reached a settlement. Will probably announce something in the next 24 hours," the first trader said.

Overall, the company's bank debt has gained something like seven points over the last two seeks, the second trader added.

Delphi loans weak, bonds down

Delphi Corp.'s bank debt traded around during Wednesday's session with some calling the paper lower on the day as bankruptcy fears continue to affect the bank debt, while others found the paper to be unchanged.

According to traders, the troubled Troy, Mich.-based automotive electronics manufacturer's revolving bank debt was quoted at 94 bid, 94.5 offered by the close, however, one trader said that these levels were lower by about half a point when compared to Tuesday and another trader said that these levels were unchanged when compared to Tuesday.

Delphi's bonds, meantime, have been skidding steadily lower over the past few sessions, and Wednesday was no exception, with the 6.55% notes due 2006 seen three points lower at 76 bid, 77 offered, while its 6½% notes due 2009 were off four points at 71 bid, 72 offered. Delphi's 61/2s due 2013, were down a trey at 69 bid, 70 offered, as were its 7 1/8% notes due 2029, which retreated to 65 bid, 66 offered from 68 bid, 69 offered previously.

Delphi is currently looking to former corporate parent General Motors Corp. for some sort of financial bailout and has warned that it could be forced into Chapter 11 if it does not get concessions from the United Auto Workers union and help from GM.

Many had thought that Chapter 11 was a very unlikely course of action for the company but over the past two weeks or so bankruptcy concerns have flared up as media reports have been saying that UAW wouldn't support all the concessions being sought by the companies.

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