Adelphia bank debt remains firm; Tembec bonds easier

By Paul Deckelman and Sara Rosenberg

New York, June 19 - Adelphia Communications Corp.'s several series of bank debt - Century Old and Century New - continued to be active during Monday's trading session, with some participants placing the paper higher on the day and others basically seeing it unchanged, according to traders.

In a largely becalmed junk bond market, meantime, the bonds of Canadian forest products concern Tembec Industries Inc. were seen a little lower, with traders citing some uncertainty about whether the new agreement between the United States and Canada settling their long-running lumber tariffs dispute will work out all that well for hard-hit companies like Tembec.

Adelphia's Century Old and Century New bank debt closed out Monday at 96 bid, 97 offered, traders said. On Friday, one trader had the debt closing out the day at 95.5 bid, 96.5 offered, which would put levels up by half a point.

However, a different trader had levels going out Friday at 96 bid, 97 offered, which would make Monday's levels unchanged.

Activity on the bankrupt Greenwood Village, Colo.-based cable company's paper picked up last week as various lender calls were held. At least one of those calls dealt with lender concerns over recoveries being escrowed and agents receiving offers from the unsecureds for a settlement and not distributing the information to the broad lender group.

Bond traders meantime generally saw little movement in Adelphi's bonds. One source saw its 10¼% notes due 2011 unchanged at 52 bid, while its 10¼% notes ostensibly slated to be due this upcoming Nov. 1 were unchanged at 48 bid.

However, another junk marketeer saw Adelphi's bonds actually firming, its 9 7/8% notes due 2007 up 1½ points at 49.5.

In general, traders in that market echoed the words of one who said: "We had very low volume, part of it is just nothing going on."

"We're not seeing any change in anything," yet another trader opined in looking at the market in general. "Everything was going on in the new issues. But for the secondary, Monday seems like a wash."

Tembec slips

One area in which there was some activity was in the forest products sector in general - and Tembec in particular.

A trader quoted Tembec's 8½% notes due 2011 as having retreated to 51 bid, 52 offered . He said the bonds, and other forest products issues were suffering from "lack of clarity" regarding the impact of the lumber trade treaty recently negotiated between the U.S. and Canada.

The two countries announced the agreement in April, saying it would mark the end to a four-year-old dispute, which saw American authorities accuse the Canadians of unfairly undercutting domestic timber prices. Canadian companies were fined a total of C$5 billion, although they stand to get back about 80% of that, which in Montreal-based Tembec's case amounts to some C$317 million.

Another trader said he saw Tembec's bonds off a point at 50.5 bid, 51.5 offered.

Sea Containers off on downgrade

Elsewhere, Sea Containers Ltd.'s bonds were seen lower after Moody's Investors Service downgraded the Bermuda-based marine transportation company's debt ratings.

A source saw the bonds half a point lower across the board, with its 7 7/8% notes due 2008 at 90.5 bid, its 10½% notes due 2012 at 93.5 and its 10¾% notes slated to come due in October at 96.

Another trader saw the bonds unchanged - but yet another pegged the 103/4s at 93 bid, 94 offered, down from 95.

In dropping the company's ratings a notch - the senior unsecureds fall to Caa3 - the ratings agency cited "the increased probability of a payment default following Sea Containers' recent disclosure that it is unable to confirm whether it will pay the $115 million principal amount of 10¾% senior unsecured notes due October 2006."

Moody's noted that while Sea Containers recently announced the sale of its Baltic Sea ferry operations, it noted that the company's estimate of excess proceeds ($60 million) after retirement of approximately $510 million of debt secured by the Silja Lines fleet "would be insufficient for Sea Containers to fund expected operating losses and to retire the 10¾% notes at maturity."

Moody's further noted a limited unrestricted cash balance and warned that the new Caa3 senior unsecured rating "reflects Moody's opinion that holders of the notes could receive less than a full recovery."

It further cautioned that the company is not in compliance with some financial covenants of the agreement although, according to the company, the lenders have entered into forbearance agreements that are scheduled to expire at the end of June. "The negative outlook reflects the heightened prospects of a default given the company's cash position and the ongoing discussions with public note holders," Moody's concluded.

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