aaiPharma bonds off, AMR up on guidance; Mirant bank debt easier

By Paul Deckelman and Sara Rosenberg

New York, March 30 - aaiPharma Inc. bonds were seen off several points in Wednesday's dealings, although there was no fresh negative news immediately seen on the troubled Wilmington, N.C.-based pharmaceutical company - which has a coupon payment to make on Friday.

On the upside, American Airlines parent AMR Corp.'s bonds were seen up at least a point on the session, after the Fort Worth, Tex.-based air carrier released optimistic first-quarter revenue and liquidity guidance.

In bank loan trading, Mirant Corp.'s 2003 and 2004 bank debt fell off by a quarter to a half a point on Wednesday, dragged down by sector weakness in the stocks of power generating companies.

aaiPharma's 11% notes due 2010 were quoted by one trader as having dipped to 50 bid from 53.5 previously. There was no new news out on the company, which has been struggling with accounting problems and unusually high senior management turnover in the past year.

But the bond's weakness is more likely attributed to the looming April 1 deadline for paying the coupon on its $175 million of outstanding bonds.

On March 16, the company said in a filing with the Securities and Exchange Commission that "as a result of the registrant's recurring substantial operating losses, it does not anticipate that it will have available sufficient cash on hand or the ability to borrow under its senior credit facilities" to pay the approximately $10.5 million of scheduled interest due on April 1, on the notes.

The company further warned that it may not have enough liquidity to fund its operations in the near term and raised the prospect that it might have to seek Chapter 11 protection if its financial situation continues to deteriorate.

aaiPharma has been wrestling for the past year with accounting problems growing out of the apparent exaggeration of sales levels for a key product, and has seen a parade of chief executive officers and other senior officials in that time. During that span, its bonds have been progressively beaten down to their present levels, from their prior levels slightly more than a year ago around par.

AMR jumps higher on guidance

While aaiPharma's likely non-payment of the bond coupon is a bitter pill for its investors to swallow, AMR bondholders were looking skyward, after the company released strong guidance.

AMR's 9% notes due 2012 climbed a point to 73 bid, 74 offered, while its 9% notes due 2016 were at 72 bid, 73 offered, also up a point, a trader said.

Another trader, though saw the 9s of '12 as having pushed as high as 74.5 bid, 75.5, up 1½ points.

AMR's New York Stock Exchange-traded shares rose $1.10 (11.08%) Wednesday to $11.03, on volume of 14.3 million shares, about quadruple the usual turnover.

The bonds and shares gained after the company said in an SEC filing that revenue per seat, a key airline industry metric, will rise by 3.5% to 4.5% this quarter for the main airline. Revenue per seat for the entire company, including its smaller regional airlines that feed passengers into the main system, will be up 2.9% to 3.9%, the filing said.

AMR said it expects to end the quarter with over $3 billion in cash and short-term investments, including $500 million in restricted cash.

While AMR was gaining altitude, traders said they saw no real movement in Delta Air Lines Inc., whose bonds had climbed earlier in the week on bullish investor sentiment generated by the troubled Atlanta-based air carrier's announcement that it had filed a shelf registration with the SEC to sell as much as $500 million of bonds or shares, heartening investors afraid of a liquidity crunch, and the news that the company hopes to save as much as $240 million over five years by outsourcing some of its aircraft maintenance work.

Delta's 7.70% notes due 2005 hovered at the same 80 level to which they had moved; its 7.90% notes stayed around 40, and its 8.30% notes due 2029 hung in at 33 bid.

Mirant loans lower

In bank loan action, Mirant's '03 and '04 paper was seen trading at 72.25 and ending the day with levels of 72 bid, 72.75 offered, according to a trader.

On Tuesday a different trader had the Atlanta-based energy company's paper closing out the day at levels of 72.5 bid, 73.5 offered.

"Initially, all the power stocks were selling off. NRG was hit hard," the trader said in explanation of why Mirant was down.

Mirant's defaulted 7.40% notes that had been scheduled to mature last year were seen down half a point at 77.5 bid, while its 7.90% notes due 2009 were unchanged at 79.

Adelphia gives back some gains

Adelphia Communications Corp. bonds were seen lower, backing off somewhat from the sizable gains they had seen Tuesday, when news reports indicated that Cablevision Systems Corp. might be on the verge of joining a Kohlberg Kravis Roberts & Co.-led syndicate that made a bid for all of Adelphia at the Greenwood Village, Colo.-based cabler's bankruptcy auction.

A trader saw Adelphia's bonds down about a point on the session across the board, with its 10¼% notes due 2011 dipping to 92 bid, 94 offered from 93 bid, 95 offered. He also saw its 10¼% notes due 2006 a point lower at 87 bid, 89 offered.

At another shop, a market source said that Adelphia's 10 7/8% notes due 2010 were half a point down at 90.

The bonds apparently failed to sustain Tuesday's momentum as Wednesday passed with no official word from either Cablevision or KKR on Tuesday's stories that had the Bethpage, N.Y.-based cable operator joining KKR and Providence Equity Partners,- one of two groups, along with a combination of TimeWarner Inc. and Comcast Corp., to submit bids to buy all of Adelphia.

Tuesday's New York Times, noting that KKR and Providence had submitted an all-cash bid worth about $15 billion for Adelphia, well below the nominal level of the TimeWarner/Comcast team's bid, quoted executives involved in the process as saying that they would submit a "substantially higher" offer if Cablevision decided to join them.

However on Wednesday, there had been no confirmation of the story. Cablevision had other fish to fry, as its chairman, Charles Dolan, seeking to buy Cablevision's money-losing VOOM satellite operation himself, appealed to the Federal Communications Commission to block Cablevision's pending sale of VOOM's satellite to EchoStar DBS. The company's board was scheduled to make a decision Thursday on what to do about VOOM, depending on whether Dolan had lined up the necessary $400 million of financing he promised.

Winn-Dixie lower

Winn-Dixie Stores Inc.'s 8 7/8% notes due 2008 were seen down two points Wednesday, to 56 bid, 58 offered, while its real-estate secured passthrough certificates hung in at 75 bid, 77 offered.

However, traders attributed the retreat to overall market weakness rather than any company specific developments. The bankrupt supermarket chain agreed to move its Chapter 11 case to the bankruptcy court in its home base of Jacksonville, Fla. from New York, at the urging of one of its creditors.

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