UAL bonds stay aloft for another session; Mirant bank debt trades around

By Paul Deckelman and Sara Rosenberg

New York, June 10 - United Airlines parent UAL Corp.'s bonds on Friday continued to hang onto the gains that they'd notched over the previous week of trading, although some observers wondered how long the bankrupt airline company's notes could stay up there just on the strength of its chief executive officer's bullish spin on the company's prospects.

In the bank loan market, Mirant Corp.'s 2003 and 2004 paper was relatively active Friday - at least when compared with the rest of the distressed loan market, a trader wryly commented.

The trader saw the levels on the Atlanta-based power generating company's debt even pushing their way higher by about a quarter- to a half-point by the end of the day.

He said that the '03 and '04 paper traded up to around 75 on Friday and then closed out the session at 75 bid, 75.5 offered.

Also trading on Friday was the Mirant MAGI bank debt, with levels closing out the session unchanged at 107.25 bid, 107.75 offered and trades taking place at 107.5 during market hours, the trader added.

Back in the bond arena, it was your typical, sleepy summer Friday session, even though summer technically doesn't begin for another 11 days. With not too much real news happening, since much of the junk bond market's attention this past week was centered on the revived new-deal market - traders were trying to figure why some of the distressed names that have been doing well lately have accomplished this feat.

Case in point - UAL, whose bonds have managed to attain lofty levels around 13 bid, 14 offered, well up from the single-digit territory in which they began the month, and in which they had languished for many months.

That rise has been sparked by investor reaction to UAL CEO Glen Tilton's statements a week ago in the Chicago Tribune, in which he said that the Elk Grove, Ill.-based parent of the nation's second largest airline should emerge from bankruptcy some time in the third or fourth quarter, and should be able to turn a profit next year - after having lost several billion dollars since 2000.

Tilton also said that he did not think that lining up financing would be any kind of an obstacle for UAL - even though it was a federal airline bailout panel's refusal to extend government loan guarantees to United, based on its business plan, that plunged the company into bankruptcy several years ago.

A trader said he hadn't seen any more upside movement in the name and projected that they would "hang out where they've been."

He further declared "I don't see any reason why they should keep moving [up], unless they get some major financing or something like that."

Besides positive reaction to Tilton's jawboning, he said that "the agreement that they reached with the mechanics," providing substantial cost savings over the life of the pact, "and the [Pension Benefits Guarantee Corp.] taking over their pensions certainly helped."

Other airline names quiet

Elsewhere in the airline sector, there seemed to be not much going on, even with Lehman Brothers analyst Gary Chase cutting his assessment on Continental Airlines Inc. to "underweight" from "equal weight" and American Airlines parent AMR Corp. to equal weight from overweight.

Continental's 8% notes due 2005 were steady at 99 bid, par offered, while AMR's 9% notes due 2012 stayed at 80.5 bid, 81.5 offered.

Delta Air Lines Inc.'s bonds were also holding pretty steady, with its benchmark 7.70% notes due 2005 around 85 bid, and its 8.30% notes due 2029 at 27 bid.

Salton steady after gains

He saw Salton Inc.'s bonds holding steady at the slightly higher levels to which they had managed to move by the close of trading Thursday - its 10¾% notes scheduled to mature in December at 52 bid, 54 offered and its 12¾% notes due 2008 at 46 bid, 48 offered.

He noted that late in the day, there was news out on the Lake Forest, Ill.-based maker of small appliances: the company announced that it was recalling nearly 100,000 Kenmore 12-cup percolators because they could put pregnant women at risk for lead poisoning.

Salton made the coffee pots for the Sears department store chain, which sells a number of large and small appliances under its Kenmore house brand.

Salton said that the percolators targeted in the recall carried model number KCP12, and had been sold through Sears stores after shipping between July 2001 and April 2004.

"This is certainly not good news - especially for the coupon payment" on the $125 million of 10¾% notes, "which is due on this coming Wednesday."

With the company having very thin cash reserves, he estimated that it would be "about a 50-50 shot that this coupon payment of about $6.718 million would be made." If and when they make it then they'll pop a little more on that - but this recall does not bode very well."

Allied Holdings off on downgrade

The trader also saw Allied Holdings Inc. get downgraded by Standard & Poor's late in the day, and the Decatur, Ga.-based auto transport company's 8 5/8% notes due 2007 closed half a point lower at 35.5 bid, 37 offered.

"And they could go still lower Monday," he said, "when people are around to react to it."

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