Air Canada gets slight boost; Global Crossing debt not hindered by weak earnings

By Carlise Newman

Chicago, Dec. 9 - Air Canada bonds were slightly higher Tuesday, one day after a Canadian judge approved a plan from Trinity Time Investments to invest $650 million into the bankrupt carrier.

The judge, however, left the door open for Cerberus Capital Management to outdo the bid by Dec. 12. Cerberus had submitted two bids previously, one of which was unsolicited.

Air Canada's 10¼% notes due 2011 were seen up 1 point at 41 bid. A few weeks ago the bonds had been trading in the 48 bid area.

Meanwhile, Global Crossing Inc. were still rising mildly on the news that Singapore Technologies Telemedia will put $200 million into Global Crossing to ease its transition from bankruptcy, raising its total investment in the telecom company to $450 million.

Even weak earnings - out after the close on Monday - couldn't put a damper on the bonds. The company is expected to emerge from bankruptcy this week.

Global Crossing's 9 5/8% notes were seen at 10 7/8 bid Tuesday, up from 10½ bid on Monday and 9 5/8 on Friday, according to a trader.

"The anticipation of getting out of bankruptcy always brings paper up," he said. "Add in the Telemedia news and you've got Global Crossing bonds over 10 cents on the dollar. That's something."

ST Telemedia obtained regulatory approval in October to buy 61.5% of the bankrupt U.S. fiber optic network operator for $250 million.

Global Crossing's creditors were promised payment in the form of senior secured notes when ST Telemedia received approval to buy the majority stake. Creditors led by billionaire Carl Icahn, who hold about $2.25 billion in Global Crossing debt, were discontented, as they felt the notes did not provide sufficient collateral. Icahn had earlier tried to bid for Global Crossing.

Under the deal announced on Friday, ST Telemedia will take over some senior debt from the creditors, which will reduce the amount of bonds the creditors will receive once the firm emerges from bankruptcy.

On Monday Global Crossing said it posted a loss of about $25 billion for 2000 through 2002 as the telecommunications market weakened and it wrote down the value of its high-speed network.

Global Crossing, which is expected to emerge from bankruptcy this week, also said it would not generate enough money to meet all of its near-term expenses. It said it may need up to $100 million in financing to fund its operations through the end of 2004.

Elsewhere, Aurora Foods Inc.'s 9 7/8% notes due 2007 were quoted at 78 bid, according to a trader. The bonds rose to that level about three or four days ago and settled in, he said.

Aurora filed for Chapter 11 bankruptcy protection Monday to implement its financial restructuring and head toward completion of its pending merger with Pinnacle Foods. Under the plan, lenders will be paid in full.

"There's no real reason for the jump, just thin volume mainly," the trader said.

In other news, Owens Corning 7½% notes due 2005 were still unchanged at 42½ bid, 43½ offered. The bonds had been trading at nearly the same levels since early November, when the company reported third-quarter earnings.

Owens Corning reported income from operations of $104 million for the quarter, including $5 million of Chapter 11-related charges and a $1 million other charge as the result of a contractual post-closing adjustment to the selling price of the Company's metal systems business.

Owens Corning is a Toledo-based flooring company.

Flooring manufacturer Armstrong World Industries Inc.'s bonds were unchanged at 53 bid, 54 offered, according to a trader. The bonds had been trading in the low 50s since November but recently had improved and had been a point better on Friday.

Last week, parent company Armstrong Holdings Inc. said its shareholder meeting scheduled for Dec. 3 will be adjourned to Jan. 7, 2004 in view of a procedural delay in the Chapter 11 case of Armstrong World Industries Inc., which is Armstrong Holdings' only significant asset.

Armstrong is based in Lancaster, Pa.

Also mentioned by traders Tuesday was WorldCom Inc., whose 7½% notes due 2011 were quoted at 35 bid, little changed on the session.

"They've been at the same levels for weeks," a trader said.

(Paul Deckelman contributed to this report)

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