Calpine bonds up on buyback talk, Qwest firms on S&P upgrade; Adesa sells 8-year deal

By Paul Deckelman and Paul A. Harris

New York, June 16 - Calpine Corp. bonds were seen up as much as three points on Wednesday, with several market players citing speculation that the San Jose, Calif.-based independent power producer might look to repurchase some of its bonds.

Also Up was Qwest Communications International bonds, after Standard & Poor's upgraded the Denver-based telecommunications operator's debt ratings.

In the primary market, Adesa Inc., was heard by syndicate sources to have brought a $125 million issue of eight-year notes.

Among established bonds, Calpine paper was "on fire on repurchase talk," a trader said.

Another trader agreed, citing the talk that the company might buy back its shorter-dated debt, as well as the announcement earlier in the week that Calpine, through two subsidiaries, had priced a $661 million term loan facility in connection with the planned refinancing of its Rocky Mountain Energy Center in Weld County, Colo. and Riverside Energy Center in Beloit, Wis. That plus last week's announcement that the company will look into selling natural gas reserves in the Canadian province of Alberta and other reserves in the U.S and then use the proceeds of such sales for debt paydown all combine to give debt investors a bullish feeling about the company, he indicated.

He quoted Calpine's 10½% notes due 2006 at 91 bid, 92, well up from 86.5 bid, 88.5 offered, "up pretty big."

He also saw the company's 8¼% notes due 2005 as having pushed up to 96 bid from prior levels at 93.5 bid, 95.5 offered.

"The long-dated stuff was better as well," he said, even though the market speculation is that the shorter-dated debt is what is to be repurchased, if the market talk is accurate. He quoted Calpine's 8½% notes due 2008 as going home at 67.5 bid, 68.5 offered - slightly off its highs for the day but still well up from 63 bid, 64 offered on Tuesday. "So it's all up," he said.

At another desk, a market observer quoted the 81/4s as having improved to 96 bid from 94, while the company's 8¾% notes due 2007 went to 71.5 bid from 69.

Among the slightly longer dated issues, the Calpine 8 5/8% notes due 2010 finished at 66.5 bid, up from 63, as did its 8½% notes due 2011.

Qwest gains on S&P action

The observer also saw Qwest Communications paper higher, after Standard & Poor's raised the company's corporate credit by three notches to BB- from B- previously and said the outlook was developing.

Qwest's 7¼% notes due 2008 and 7½% notes due 2008 were each up 1¾ quarters at 94 bid and 95 bid respectively. Its 6¼% notes due 2007 was only up a quarter point at par, but its long-dated 7 3/8% bonds due 2030 and 8 7/8% bonds due 2031 were each up 1½ points at 94.5 bid and 95.5 bid, respectively.

In upgrading the credit on the company's debt, S&P cited "the company's relatively solid overall risk profile."

El Paso rises on extra filing time

News that El Paso Corp.'s lenders have given the Houston-based energy operator more time to file its financial statements gave its bonds about a half point boost, with El Paso's 6 7/8% notes due 2005 firming to 100.75 bid, its 6 5/8% notes due 2008 rising to 91.25 bid and its 7.42% bonds due 2037 improving to 75.75.

The bank waivers give El Paso an extension until Aug. 15 to file its earnings statements for fiscal 2003 and the first quarter of 2004.

Waivers previously issued by the company's lenders expired Tuesday.

Goodyear holds steady

News that Goodyear Tire & Rubber Co. will delay releasing its first quarter results - but still expects to have them in by June 30, the deadline set by its lenders - had little impact on the Akron, Ohio-based tiremaker's bonds.

Goodyear's 6 5/8% notes due 2006 were unchanged at 100.25 bid, while its 11% notes due 2011 were likewise steady at 108.5 bid and its 7% bonds were unchanged at 75. However, at one desk, its 7.857% notes due 2011 were observed up a point at 87.5 bid.

While not releasing its results, Goodyear did issue a summary projecting record first-quarter sales of about $4.3 billion - up from 43.5 billion a year ago - and a sharply narrowed loss of $75 million to $85 million, versus a loss of $196.5 million in the first quarter of 2003.

Hanger recovers somewhat

Hanger Orthopedic Group Inc.'s bonds - down sharply Tuesday after the Bethesda, Md.-based provider of orthotic and prosthetic patient-care services announced that it was looking into claims of alleged billing irregularities by one clinician in one of its 608 patient-care centers - seemed to recover some of their lost ground Wednesday.

Hanger's 11¼% notes due 2009 firmed slightly to 105 bid from 104.5 and its 10 3/8% notes due 2009 bounced to 103.5 bid from 102.

Delta unchanged to lower

Delta Air Lines Inc.'s bonds were seen generally unchanged to down a point, after the Atlanta-based air carrier's chairman, Gerald Grinstein, told a Merrill Lynch & Co. transportation conference that the carrier could not continue to exist as it does now without serious changes in its operations and overall cost structure. But Grinstein also reiterated that the company does not anticipate a Chapter 11 filing, except as a very last resort (see related article elsewhere in this issue).

A trader dismissed the Delta chairman's statement as essentially nothing new, and quoted Delta's 7.70% notes due 2005 a point lower, at 58.5 bid, 60.5 offered, while its 8.30% Notes due 2029 were "still in that same 38-40 context." He characterized Delta's long-running face-off with its pilot's union on the size of concessions the captains will make as "a big game of chicken."

Primary relatively quiet

A quiet Wednesday in the primary market saw Carmel, Ind. auto salvage auctioneer Adesa, Inc. bring the gavel down on the day's only deal - a $125 million issue of eight-year notes that priced to yield 7 5/8%.

And Calif. sporting goods maker K2 Inc. was the only company to announce a roadshow start during the session.

Meanwhile market sources continued to parse Tenet Healthcare Corp.'s massively upsized $1 billion bond offering, which priced during Tuesday's session.

The diagnosis on Tenet's new 10-year bonds: at a 10 ¼% yield they were hard to resist.

Adesa prices lone deal

Terms emerged Wednesday on only one high-yield deal as Adesa, Inc. sold $125 million of eight-year senior subordinated notes (B1/B+) at par to yield 7 5/8%.

The debt refinancing deal, via UBS Investment Bank and Merrill Lynch & Co., came at the tight end of the 7 5/8%-7 7/8% price talk.

When released for trading the new notes were seen at 101 in the secondary market, according to a sell-side source.

A trader saw them push as high as 101 bid, before easing off that high and going home at 100.375 bid, 100.625 offered, up from their par issue price earlier in the session.

K2 starts climb for $150 million

The only roadshow announced during Wednesday's session involved an offering of $150 million of 10-year senior notes from Carlsbad, Calif.-based sporting goods manufacturer and marketer K2 Inc.

JP Morgan will port the books, as well as lead the company's $75 million equity offering.

K2 intends to use the proceeds to help fund the acquisition of Volk Sports, Marker Group and Marmot Mountain Ltd. and to repay debt.

Prospect News also learned Wednesday that North Canton, Ohio natural gas and oil exploration, development and production company Belden & Blake will bring approximately $150 million of bonds, and approximately $200 million of new bank debt to help fund its acquisition by Carlyle/Riverstone Global Energy & Power Fund II, LP. Goldman Sachs & Co. will run the books.

Tenet 10¼% yield "juicy"

With Wednesday's dearth of new issue news, market sources continued to talk about Tenet's $1 billion issue of 9 7/8% senior notes due 2014 (B3/B-), which priced Tuesday at 97.674 to yield 10¼%.

The Santa Barbara, Calif.-based owner and operator of acute care hospitals is using the proceeds from the deal, which was increased from $500 million, to address pending debt maturities.

Stephen D. Farber, Tenet's chief financial officer, stated in a press release that the bond sale "provides a significant increase in Tenet's financial flexibility by extending the maturity of approximately half the maturing debt the company faced over the next three years.

"We have now reduced our 2006 maturities from $550 million to $290 million and our 2007 maturities from $400 million to $210 million. The next significant amount of debt maturity is in 2011," Farber added.

One high yield market source told Prospect News on Wednesday that the company was able to double the size of its deal because investors, who earlier this year had been concerned that Tenet could face a cash shortage after the company said that its banks were limiting its short-term borrowing, found the 10¼% yield on the new 2014 paper quite attractive.

"This deal gives them some meaningful breathing room," added the source.

"It also shows that the capital markets remain receptive to their story - but at a price.

"Of course there is a considerable amount of bad news with Tenet," the source added, "which is why they had to pay up to get this deal done."

The company disclosed some of that news in its most recent 10-Q quarterly report, filed in early May with the Securities & Exchange Commission. Included are:

* An indictment handed down by a federal grand jury in San Diego alleging illegal use of physician relocation, recruitment and consulting agreements;

* Class action lawsuits in California, Tennessee, Louisiana, Florida, South Carolina and Pennsylvania alleging that the company engaged in an unlawful scheme to inflate charges for medical services and procedures, pharmaceutical supplies and other products, and prescription drugs;

* Disputes with managed care insurance companies involving alleged overcharges;

* A consolidated class action lawsuit pending in federal court in Los Angeles, alleging breach of fiduciary duty and insider trading;

* A lawsuit filed in January 2003 by the federal government alleging violations of the False Claims Act; and

* A disclosure that the IRS has completed its examination of Tenet's tax returns for 1995, 1996 and 1997, and proposes to assess an aggregate tax deficiency for the three-year audit period of $157 million plus interest of $126 million through March 31, 2004.

Tenet above issue, off highs

In secondary activity, a reader saw Tenet's new notes bid around the 98.25-98.5 level Wednesday - down from Tuesday's peak level at 99.75 bid, but still well up from their issue price earlier Tuesday at 97.67.

Another trader said the new Tenet paper was "off the highs," trading at 98.75 bid, 99 offered, "but hanging in there."

He saw Tenet's existing 5 3/8% notes due 2006 having firmed to 98.625 bid, 99.625 offered from 98.25 bid, 99.25 offered, while even its longer paper - which had been heard to have eased Tuesday while the shorter-dated issues were firming - as having recovered. He quoted the Santa Barbara, Calif.-based hospital operator's 6 7/8% notes due 2031 as having improved to 75.625 bid, 76.625 offered from 73.5 bid, 75.5 offered on Tuesday.

However, at another desk, Tenet's 7 3/8% notes due 2013 were seen half a point lower, at 87.25, while its 6 3/8% notes due 2011 were a quarter point down, at 83.

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