Prices on NWA Inc.'s bonds rose yesterday after the company's Northweat Airlines Inc. subsidiary reached an agreement with its pilots that could help avert a bankruptcy court filing.
The holding company's 8 5/8% debt of 1996 was quoted at 47, up eight or nine points from Friday's close, one high-yield trader said.
"The pilots are usually the most difficult group to get an agreement with," said an analyst who wished to remain unnamed.
Media reports that the company planned to file Chapter 11 bankruptcy court proceedings as early as yesterday if the agreement failed may have helped convince the union that the airline was not bluffing about its dire financial straits, the analyst said.
A Northwest spokesmen said the company still needs to win approval on agreements from its two other big unions - the teamsters, which represent flight attendants; and the machinists union. Last month, those two unions rejected pacts of their own, he said. Northwest has some smaller unions, which are working with the pilots, the spokesman said.
Northwest will attempt to negotiate agreements with the two remaining unions "as soon as possible," the spokesman said.
The pilots' agreement might make it easier for the airline to get agreements from the other two unions, though nothing is certain, the analyst said.
"It's pretty key," he said.
"It's a major step forward, certainly. A deal could not have been completed without the pilots," said Philip Baggaley, a director at Standard & Poor's Corp. "The machingists would be the next biggest hurdle."
While the machinists rejected the earlier offer, they may be more inclined to ratify an agreement this time around because of the pilots' approval combined with widespread reports that Northwest was nearing bankruptcy, Baggaley said.
In addition, the agreement may contain new aspects that might make it more palatable to the machinists, he said.
The airline is seeking approximately $900 million of givebacks from its employees over the next three years, Northwest spokesman said.
In a brief statement yesterday, Northwest said it had reached agreement with the Master Executive Council of the Northwest Air Line Pilots Association early yesterday morning.
The association's leadership ratified a three-year plan for new contract terms and cost cuts by a 24-to-1 vote. The association said it plans to hold informational meetings with its members to explain the plan over the next three weeks.
The Northwest spokesman declined to elaborate on details of the agreement. He also declined to discuss reports that Northwest was contemplating a bankruptcy filing as early as yesterday.
Assuming all its unions approve the agreement, the carrier would get some much-needed relief on its "very heavy debt repayment" schedule. The agreement, which pushes much of those repayments back to 1997, "gives them potentially three extra years of time," he said.
So, while the company will remain highly leveraged, it will have some "breathing room" to ride out the industry slump, the analyst said.
Aside from NWA debt, high-yield. issues were quiet and unchanged yesterday in secondary trading. Spreads on high-grade issues tightened on the government market's selloff.
McDonald's Corp. issued $200 million of 7.375% debentures due 2033. Noncallable for 10 years, the debentures were priced at 99.578 to yield 7.408% or 75 basis points more than the yield on comparable Treasuries. Moody's Investors Service rates the offering Aa2, while Standard & Poor's Corp. rates it AA. Salomon Brothers Inc. was lead manager.
Southwestern Bell Telephone Co. issued $150 million of 7.250% debentures due 2025. Noncallable for 10 years, the bonds were priced at 98.471 to yield 7.375% or 72 basis points above comparable Treasuries. Moody's rates the offering A1, while Standard & Poor's rates it Aplus. Goldman, Sachs & Co. lead-managed the offering.
Long Island Lighting Co. issued $145 million of 6.250% debenture due 2001. The noncallable debentures were priced at 98.949 to yield 6.42% or 87 basis points more than the 77/a% Treasuries of 2001. Moody's rates the offering Baa3, while Standard & Poor's rates it BBB-minus. Lehman Brothers lead-managed the offering.
Wisconsin Public Service issued a two-part first mortgage bond offering totaling $100 million. The first tranche issued $50 million of 5.25% bonds due 1998. The noncallable bonds were priced at 99.709 to yield 5.317% or 30 basis points over comparable Treasuries.
The second consisted of 50 million of 7.125% bonds due 2023. Noncallable for 10 years, the bonds were priced at 98.284 to yield 7.266% or 60 basis points over comparable Treasuries. Moody's rates the offering Aa2, while Standard & Poor's rates it AA-plus. Kidder, Peabody & Co. lead-managed the offering.
Southwestern Electric Power issued $45 million of 7.25% first mortgage bonds due 2023. Noncallable for 10 years, the bonds were priced at 98.874 to yield 7.343% or 70 basis points more than comparable Treasuries. Moody's rates the offering Aa2, while Standard & Poor's rates it AA-minus. Goldman Sachs lead-managed the offering.