WorldCom up again; Enron faces more trouble in court; airlines hanging in there; Loral steadier

By Carlise Newman

Chicago, Sept. 25 - WorldCom Inc. and Enron Corp. were active on Thursday in a distressed trading session that was somewhat lackluster. In addition, airlines remained higher, boosted by UAL Corp.'s report of a profit during the month of August.

WorldCom saw its senior notes rise 1.5 points to 34¼ bid, 35 offered, a trader said.

WorldCom has been rising steadily in recent weeks; two weeks ago, the paper was around 29 bid. On Monday the bonds traded at 32 bid and Wednesday at 33 bid.

Late Wednesday, the bankrupt telephone company asked a bankruptcy court to find AT&T Corp. in contempt, saying it violated bankruptcy rules by filing a lawsuit against it and seeking damages for the routing of telephone calls.

WorldCom said a complaint filed by AT&T on Sept. 2 in federal court in Virginia violated a bankruptcy provision that prevents certain civil suits from being brought against a company during a Chapter 11 reorganization.

"The rise in WorldCom paper may be due to the court filing, or it may be just that it's been better since they filed the plan and are closer to getting out [of bankruptcy]. Either way the bonds haven't seen these levels in a while," the trader said.

Meanwhile Enron bonds were weaker Thursday after news reports said the company filed a complaint against six of its former banks and investment banks. The debt had risen in recent weeks after Enron filed a reorganization plan that increased returns to creditors.

The 8% notes due 2005, last seen trading at 42 bid, were quoted at 40 bid, 41¾ offered Thursday, a trader said.

The Houston energy company alleged that its banks gave bad financial advice that contributed to its unraveling in late 2001. Named in the complaint are Citigroup Inc., J.P. Morgan Chase & Co., Merrill Lynch & Co., Deutsche Bank AG, Barclays plc and Canadian Imperial Bank of Commerce.

The complaint alleges that the banks "bear substantial responsibility" for Enron's downfall because they participated "with a small group of senior officers and managers of Enron in a multiyear scheme to manipulate and misstate Enron's financial condition," according to news reports.

"This just puts them back in a big mess again and that seems to be having an effect on the bonds," the trader said.

UAL paper firmed Thursday after the bankrupt airline reported a profit in the month of August the previous day. UAL posted August net income of $68 million, excluding $114 million in costs related to its reorganization. The airline said it had an operating profit for the month of $105 million.

The parent of United Airlines said it continued to generate positive cash flow in August and met the requirements of its debtor-in-possession financing for the seventh straight month.

UAL's 9¾% notes due 2021 were seen at 19 bid, 21¼ offered, a rise of 1 points from Wednesday, when they were up 2 points.

"They got as high as 20 bid mid-day Wednesday, and today the news wore off a bit," a trader said.

As part of its debtor-in-possession financing agreements as part of its bankruptcy filing, UAL's lenders required the company to achieve a cumulative EBITDAR loss of no more than $219 million between Dec. 1 and Aug. 31.

United ended August with a cash balance of $2.4 billion, including $698 million in restricted cash and up slightly from $2.3 billion at the start of the month.

The trader said Delta Airlines Inc.'s 8.30% notes due 2029 were up 1 point at 70 bid, 72 offered. American Airlines parent AMR Corp.'s 9.73% notes due 2014 were up 1.5 points at 62 bid, 64 offered.

Loral Space & Communications Inc. debt appeared to stabilize on Thursday. The bonds had been sinking of late after news that its ailing Telstar 4 communications satellite was a complete loss.

The satellite was insured for $141 million. Loral had agreed to sell the satellite along with five others to another operator, Intelsat, for $1 billion, but said on Monday that losing the satellite would reduce the amount Intelsat pays. The size of the reduction will depend on how much insurance it can recover, but it still expects the Intelsat deal to go ahead in a timely manner.

The New York-based satellite operator's 10% notes due 2006 were up 1 point to 61 bid, traders said, and the 10% notes due 2007 were unchanged at 40 bid.

"Frankly, I'm surprised Loral is hanging in there. The bonds fell pretty hard right after this news was out, but with no solution or further news I thought they'd be lower," a trader said.

Elsewhere, Revlon Cosmetics Inc.'s 8 5/8% notes due 2008 were down 4 points to 51½ bid, a trader said, although there was no news on the struggling cosmetics company.

WestPoint Stevens Inc.'s debt was down 1 point to 21¾ bid, while Owens Corning's 7½% notes due 2018 were "up a little" to 46 bid.

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