Mirant resilient after weak earnings; Denny's drops on wider loss; Solutia firms

By Carlise Newman

Chicago, Oct. 29 - Mirant Corp. managed to firm up Wednesday, one day after reporting a steep second-quarter net loss caused by writing off all the goodwill associated with its North American businesses.

Mirant said it recently reviewed $2.1 billion of goodwill on its balance sheet that was associated with its power generation and energy marketing operations in the United States and Canada, in compliance with accounting rules. As a result Mirant, which filed for Chapter 11 bankruptcy protection on July 14, concluded that it must fully write off the goodwill and record a non-cash charge.

Mirant's 7 5/8% notes due 2006 firmed to 83½ bid from 82¾ on Tuesday, according to a trader. "It's quite a rebound," he said.

Mirant reported a second-quarter net loss of $2.2 billion, or $5.44 a share. The company's restated second-quarter net loss was $182 million, or 45 cents, a year earlier.

Mirant said the charge does not affect the company's plans to emerge from Chapter 11 bankruptcy protection or drain its cash balances.

In other news, Solutia Inc.'s 7 3/8% notes due 2027 were quoted up 1 point at 59 bid, 60 offered, an improvement since reporting weak third-quarter earnings recently.

The chemical company reported last Friday that it had lost $178 million, or $1.70 a share, for the quarter that ended Sept. 30. The results include charges of $156 million, or $1.49 a share, for various items.

The charges also included the adoption of an accounting rule, which Solutia didn't include in its Oct. 9 guidance because the adoption hadn't been finalized at that point. The company's guidance on Oct. 9 was for a loss of between $1.65 and $1.70 a share, including charges of between $1.40 and $1.50 a share.

Meanwhile, Denny's Corp. paper fell after the company released weaker earnings before the bell. The 11¼% notes due 2008 dropped to 55½ bid from 56¾ bid Tuesday.

The company reported a net loss for the third quarter of $6.3 million, or $0.15 per share, versus last year's net income of $56.1 million, or $1.39 per share. Operating income was $12.9 million, declining by $6 million for the quarter from a year ago.

In other news, WorldCom Inc. was quoted 2 points higher at 37½ bid, 38 offered, one trader said.

The bankrupt Ashburn, Va.-based telephone company has been rising slowly but steadily, even when it released lower income figures for August a few weeks ago. WorldCom said its net income totaled $132 million in August, compared with $207 million in July. Revenues fell to $2 billion, down from $2.1 billion in July.

Elsewhere, HealthSouth Corp. was stronger, with buying interest seen late in the session. The 7 5/8% notes due 2012 firmed 1 point to 86 bid, 88 offered, one trader said.

"HealthSouth paper has gradually firmed to the mid-80s levels over the past few weeks, for no particular reason," he said.

Congoleum's 8 5/8% notes due 2008 were quoted unchanged at 50 bid, but traders said the paper has been active this week after the company said it has begun soliciting final approval for a Chapter 11 plan of reorganization and settlement of asbestos claims.

Congoleum said it finalized documents relating to its pre-packaged reorganization plan and mailed them to asbestos personal injury claimants and creditors, and expects to receive the required number of votes for approval.

"The paper was up as they take the next step in the bankruptcy process," a trader said.

Under the terms of the plan, Congoleum will contribute certain insurance rights and a note for $2.7 million to a trust to be formed pursuant to the plan for the benefit of asbestos personal injury claimants, and all current and future asbestos claims against Congoleum will be channeled to the trust.

Congoleum's other creditors will be paid in full and its shareholders will maintain their equity holdings in Congoleum. To comply with statutory disclosure requirements, Congoleum's trade creditors, bondholders and minority shareholders will also receive documents describing the plan of reorganization, but will not be entitled to vote on the plan as it does not impair their interests.

Adelphia Communications Corp.'s 9 7/8% notes due 2007 were off "nearly a point" at 81 bid, one trader said.

"The fire has died down a little," he added.

Elsewhere, Revlon Inc. bonds were active a day before the cosmetics company is to release its third-quarter earnings report. Revlon's 8 5/8% notes due 2008 were up ½ point at 54 bid.

"I think most people expect to see a slow improvement in the next couple of reports. The second-quarter news was a little bit better than the previous, and so on. People aren't ready to give up on them yet," one trader said.

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