Mirant, Calpine extend slide on downgrades, exchange offer; WestPoint Stevens bank debt higher

By Carlise Newman

Chicago, June 4 - Mirant Corp. and Calpine Inc. were again the heaviest contenders in distressed debt trading Wednesday, still reeling from Mirant's announcement of an exchange offer late Monday and news that the struggling company is shopping a bankruptcy plan to creditors.

Not helping was a downgrade to Mirant Tuesday by Standard & Poor's after the close. S&P downgraded Mirant's corporate credit rating and senior unsecured debt ratings to CCC from B.

The ratings remain on CreditWatch, but the implications were revised to developing from negative. The rating action is based on Mirant's request Monday for the bondholder vote on a prepackaged Chapter 11 reorganization plan and the potential for a bankruptcy filing if the restructuring offer is unsuccessful, S&P said.

Mirant's 7 5/8% notes due 2006 were seen sliding a point and a half to land at 76.5 bid, 78.5 bid, a trader said, from 78 bid, 80 offered Tuesday. The 7.20% notes due 2009 were quoted at 59 bid, 61 offered, one point lower than Tuesday. The 7.40% notes due 2004 were quoted unchanged at 74.5 bid, 75.5 offered.

"We had thought Mirant would tank on the open but they held up well considering all the pressure," said a distressed debt trader.

Seeking to restructure its bond debt, Mirant on Monday offered to exchange new secured notes due in 2008 for $1.45 billion of existing bonds due within three years.

Mirant is offering to exchange new senior secured notes due 2008 for $750 million of 2.5% convertible debentures due 2021 and $200 million of 7.4% senior notes due 2004 at the rate of $1,000 of new notes for each $1,000 of the old notes.

The Mirant Americas Generating LLC unit is offering $1,000 principal amount of new secured debt in exchange for each $1,000 principal amount of the $500 million face amount of its outstanding 7.625% senior notes due 2006.

The exchange offers will expire on June 27, unless extended.

"I think there is about a 50% chance that (Mirant) will end up in bankruptcy," said one trader. "It's just been a rough road for them. But there's also a good chance the bondholders could approve. It's really not a clear situation."

The Atlanta-based energy company, which is also seeking to refinance its bank debt, said it is negotiating with its bank lenders to obtain new senior secured revolving and term loan credit facilities to refinance existing credit facilities for itself and its Mirant Americas Generation unit.

In a press release late Monday, the energy company said it is asking holders of the bond debt to vote in favor of a "fast track" pre-packaged plan of reorganization in case an insufficient number of banks or bondholders agree with its out-of-court restructuring plan.

Calpine Corp., which had not been faring well since S&P downgraded the San Jose, Calif.-based energy company on Monday, headed down Tuesday and furthered the drop Wednesday, traders said.

Calpine's 8½% notes due 2011 were quoted at 63 bid, 64 offered Wednesday "a good two points lower than yesterday and a big fall from last week," said a trader. "They're not doing so well."

S&P downgraded Calpine's secured debt to B from BB, its senior unsecured debt to CCC+ from B+ and its convertible preferred securities to CCC from B. The rating on the secured revolver and the secured term loan was lowered to BB- from BBB-, two notches above Calpine's corporate credit rating. The outlook remains negative.

WestPoint Stevens Inc.'s bank debt traded higher at levels between 95 and 96 on Wednesday, according to traders. "Since bankruptcy it has traded from 90 to 95, 96. And a lot has traded," a trader said.

The West Point, Ga.-based home fashions manufacturer filed for Chapter 11 bankruptcy protection on Monday, listing $1.3 billion in assets and $2.1 billion in liabilities as of March 31. The company retained Rothschild Inc. as financial advisors and Weil, Gotshal & Manges LLP as restructuring counsel.

As part of its restructuring, the company entered into an agreement with lenders for a $300 million revolving debtor-in-possession financing facility. Bank of America is the administrative agent, Wachovia Bank is the syndication agent and Banc of America Securities LLC is the book manager and sole lead arrangers.

The revolver, which has a term of one-year with provisions for two extensions of six months each, provides for a $75 million sub-limit for standby and documentary letters of credit. Interest on the DIP is Libor plus 275 basis points.

Interim approval was granted by the court on Tuesday for the company to access $175 million of the DIP.

In other news, Adelphia Communications Corp. was "moderately active," a distressed debt trader said. He saw the company's "old" Century term loan B "a smidge" higher, meaning 1/8 of a point, at 80 7/8 bid, 83 offered. Its "new" Century term loan B was quoted at 81 5/8 bid, 83½ offered, also up 1/8 of a point.

There was no fresh news to impact the company but the trader said the debt had been "hot" in the last week.

Last week Adelphia reached an agreement with the initial debtor-in-possession lenders on the covenants for its $1.5 billion facility. The lenders also approved Adelphia's operating and capital budget through June 2004, which enables it to access the full $1.5 billion DIP facility.

And on May 21 the Wall Street Journal reported the Blackstone Group is taking a significant position in the company's bonds.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.