Energy companies ride refinancing wave; Bombardier active on subway contract, equity offering

By Carlise Newman

Chicago, April 7 - AES Corp.'s announcement Friday that it would refinance its debt sparked a mild rally in energy companies Monday, with Calpine Corp. and Dynegy Inc. rising on the news and an overall grand week for the companies. Mirant Corp. also saw a spike in its bonds after rumors of refinancing circulated.

Canadian plane, train and snowmobile maker Bombardier Inc. was active after it unveiled plans to restore its battered finances last week. Fellow Canadian company Air Canada managed to move slightly higher as well.

The bright spot Monday was energy. Last week, Reliant Resources and Dynegy completed deals considered critical to the survival of each while AES Corp. Friday unveiled a $1 billion offering of notes to pay off outstanding debt from a senior bank facility.

AES, which currently has $5.7 billion in parent company debt, said it would use the proceeds from its $1 billion junk bond sale to acquire some of its senior and subordinated notes and to pay off $475 million of borrowings from the senior bank facility.

In December AES completed a $2.1 billion bank and bond refinancing that averted a bankruptcy filing and pushed off most of its maturing debt.

The third such announcement of refinancing pushed Calpine's 7 3/8% notes due 2008 to 67 bid/68 offered Friday, up from 63 bid Thursday. The bonds were off a point from that level at mid-day Monday, but firmed up to Friday's levels by day's end.

"Calpine was off about a point maybe from profit-taking, but it was nothing to worry about. They've been going like gangbusters for a while now," said a distressed debt trader.

Dynegy's 8¾% notes due 2012 rose to 80 bid/81 offered Monday from 79 bid/80 offered late Friday.

"A big one today was Mirant. There were rumors that financing is near," said the trader.

He said there was "a buzz" about a soon-to-be-announced refinancing deal in the market, but "whether they come true is anyone's guess. People may be talking about it because of the other deals."

Also Monday, Mirant said the Public Utilities Commission of Nevada had approved three long- term power contracts signed by Mirant and Nevada Power Co. in January. Under the contracts, which extend to April 2008, Mirant will provide 325 megawatts of capacity and electricity to Nevada Power.

Mirant Corp.'s 7 5/8% notes due 2006 were seen bid at 70 and offered at 71, up from 68 bid/70 offered on Friday.

Energy companies have been in and out of the distressed sector for a lengthy time now, and it can be hard to pin them down as one or the other, the trader said.

"Tesoro Petroleum was bid in the 60s four to five months ago, and now they're trading above par," he said. "What's regarded as distressed one minute is not the next. You're going to see that with these companies, Reliant, Dynegy, all of them. "It's a volatile business and it's compressed.

"The same goes for the chemical sector," he added.

Montreal-based Bombardier was seen trading actively higher Monday after the company announced it had won contracts to modernize the London Underground subway system and on expectations of an equity offering - which was then priced after the close.

A distressed trader quoted Bombardier's 6 1/8% notes due 2006 having traded at 87 "a few times" and "the same for the 6¾ of 12."

"Bombardier is a top player. They should announce an equity offering in the next day or two," the trader said.

In fact, late Monday afternoon Bombardier said it priced 340 million class B subordinate voting shares at C$3.25 each in a C$1.2 billion ($811 million) offer led by CIBC World Markets Inc. Proceeds will be used to supplement Bombardier's working capital and for general corporate purposes.

Bombardier has also granted the underwriters an option exercisable for a period of 30 days from the date of closing of the offering, to purchase up to 30 million additional class B shares.

The company also said Monday it had received a C$7.9 billion ($5.3 billion) contract over 15 years to modernize the London tube, the world's oldest city subway. The company said the contract involves supplying 1,738 metro cars.

Last Thursday, Bombardier unveiled a C$1 billion ($680 million) fourth-quarter loss and a sweeping restructuring program as it struggles to cope with a sagging aviation sector and heavy debt. Bombardier said it will offer at least C$800 million ($544 million) of equity and sell assets, including its recreational products division, which makes Ski-Doo snowmobiles and Sea-Doo watercraft, to raise another C$1.5 billion.

Another Canadian company, Air Canada, which filed for bankruptcy last week, was seen trading slightly higher Monday. The Toronto-based company's 10.25% notes were quoted at 26 bid/28 offered, close to in line with Friday's price of 25.5 bid/27.5 offered.

"Air Canada's paper has been trading sideways since last week. There's nothing new coming out about them. They just filed the other day," said a distressed trader.

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