Delphi debt up, bonds off; bankruptcy talk roils GM; Calpine continues slide

By Paul Deckelman and Sara Rosenberg

New York, Oct. 27 - Delphi Corp.'s pre-petition bank debt was stronger across the board as investors received a significant bump in coupon as a request to switch the loans over to Prime from Libor was said to be approved, according to a trader.

The troubled Troy, Mich.-based automotive electronics manufacturer's bonds, however, were lower on the session, in line with a generally weak trend in auto names sparked by the news that the Securities and Exchange Commission has subpoenaed information from General Motors Corp. relating to GM's dealings with its former subsidiary - and by rampant bankruptcy rumors targeted at the giant carmaker.

Elsewhere, Calpine Corp. bonds continued to move lower, amid claims by several large holders of the San Jose Calif.-based power generating company's convertible notes that Calpine had defaulted on those notes.

Delphi's term loan was heard to have gained about 1½ points on the day, with levels closing out the session at 104 bid, 105 offered, a trader said.

Meanwhile, the company's revolving credit loan gained about three quarters of a point, with levels closing out the session at 101 bid, 102 offered.

"The revolver is now Prime plus 400 [basis points] and the term loan is now Prime plus 500 [basis points]. That's like 150 basis points higher than what it was before, so that's probably bumping the paper up," the trader explained.

But while Delphi's bank debt was on the upside, its bonds were going in the opposite direction. A trader in distressed bonds quoted Delphi's bonds all trading on top of one another at 66 bid, 67 offered, down a point on the day.

At another desk, a market source saw the Delphi 6½% notes due 2013 a point lower at 67 bid, while the 6.55% notes due 2006 and 6½% notes due 2009 were both half a point down, also at 67.

Yet another trader saw those 2013 bonds a point lower at 66.5 bid, 67.5 offered.

Delphi's decline was in line with that of just about the whole automotive sector, which was pushed down on the disclosure in a regulatory filing late Wednesday that the Securities and Exchange Commission is scrutinizing GM's handling of retirement benefits and its relationship with Delphi - formerly a GM unit.

GM's benchmark 8 3/8% notes due 2033 were down more than three points, a trader said, quoting the bonds at 74 bid, 75 offered, well down from prior levels at 77.5 bid, 78.5 offered.

"They started out that way, and never regained their footing," he said.

At another desk, a market source saw the GM 8 3/8s dip to 73.75 from prior levels at 76.75, while its 7 1/8% notes due 2013 were two points lower, at 80 bid. The source also saw the 8 7/8% notes due 2012 issued by GM's financing arm, General Motors Acceptance Corp., a point down at 97.5, and its 8% notes due 2031 were about ¾ point lower at 103.25 bid, 103.75 offered.

Besides the subpoena news, the bonds were also roiled by market speculation about a topic that at one time would have been virtually unthinkable - the notion that the might GM might end up in bankruptcy court.

GM was concerned enough about the bankruptcy rumors to flatly deny that it had any plans for such a Chapter 11 filing. "What we're saying is the rumor is absolutely false. We are not preparing a bankruptcy filing," a GM spokesperson said on Thursday, going on to call such talk "bad information, a bad rumor. Shame on the people who continue to spread it."

The rumors appear to have started after Delphi's Chapter 11 filing earlier in the month, which raised the possibility that GM might be stuck holding the bag on as much as $12 billion of its former unit's pension and healthcare costs as a result of the bankruptcy filing.

Indeed, Delphi chief executive officer Steve Miller had recently warned that GM might be "fatally wounded" in the aftermath of the Delphi filing, and said that because it faced many of the same kind of labor cost issues that drove Delphi to the courts, GM is "at risk of ending up where Delphi ended up."

Miller was not the only one to lately raise the possibility - a Bank of America Securities analyst, Ron Tadross, recently wrote in a research note that a Chapter 11 filing by the giant automaker "is increasingly looking like a reasonable way to address the company's retirement liabilities and job security benefits."

Auto sector sinks

That bankruptcy buzz helped to pull just about the whole of the auto sector lower, including names of companies already in bankruptcy. Besides Delphi, a trader saw Tower Automotive's 12% notes due 2013 down a point at 84 bid, 86 offered, while Collins & Aikman Products Co.'s 10¾% notes due 2011 were likewise a point lower at 51 bid, 53 offered.

Dura Automotive Systems Inc. - which is not in bankruptcy - was also seen lower, partly on the GM news and partly on its own bad news - a sharply wider third-quarter loss versus a year ago. A trader said the Rochester Hills, Mich.-based automotive component supplier's 9% notes due 2009 "initially fell about five points, post numbers," to 62 bid, 63 offered. "However, after their conference call, they seemed to stabilize," and the bonds only ended down about two points on the day at 65 bid, 66 offered.

Calpine down

Calpine's bonds could use some stabilizing - but could not find any - as they continued to fall in the wake of the news earlier this week that Whitebox Advisors, a hedge fund, is claiming that Calpine is in default on its 6% convertible notes due 2014. That claim follows similar earlier assertions by Harbert Management.

A trader saw Calpine's 8% notes due 2008 down a point at 52.5 bid, 53.5 offered, while "the short end was down a little more," with the company's 7 5/8% notes due 2006 two points lower at 85.5 bid, 86 offered.

"There was more pressure on the short issues," he reiterated. "In the end, Calpine hasn't coughed up any good news now for a couple of days. There was talk that they were going to sell their geo-thermal assets - but there's been no announcement."

Another trader pegged the Calpine 8½% notes due 2008 and its 7¾% notes due 2009 each down a point, at 54 bid, 56 offered and at 44 bid, 46 offered, respectively.

Mirant loans down but rebound

Also in the power generation sector, Mirant Corp.'s bank debt saw a loss early in the day, but managed to push its way back up to close out the day at unchanged levels, according to a market source.

The bankrupt Atlanta-based power generating company's bank debt had dropped to 104 bid, 105 offered early in the day, before moving back to 105 bid, 106 offered, where it ended the session.

"The markets have been soft, convertibles, high yield, distressed, So, it came off. But, it worked its way back," the trader explained.

Refco bonds volatile

Back among the bonds, Refco Inc.'s bonds "were all over the place," a trader said, although he added that it was the "first day in a while" in which activity in the name was fairly quiet. He saw the bankrupt commodities trading company's 9% notes due 2012 at 65.5 bid, 66.5 offered, up from 64 bid, 65 offered previously, the note apparently buoyed by the emergence of potential buyers for the company's units.

A second trader saw the bankrupt New York-based financial company's bonds starting off the session at 65 bid, 67 offered, falling as low as 62 bid, 64 offered, and then coming off those lows to end "basically unchanged," at 65 bid, 66 offered.

At another desk, a market source pegged the Refco bonds as high as 67.125 bid, well up from prior levels at 64.5.

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