Mirant bank debt, bonds gain as energy sentiment improves

By Paul Deckelman and Sara Rosenberg

New York, Nov. 2 - Mirant Corp.'s bank debt started the day badly Wednesday as it continued to feel the pressure from Reliant Energy Inc.'s release of numbers this week that included a third-quarter loss and weak outlook. But things picked up for Mirant by day's end after another power generator, Duke Energy, came out with its own numbers, giving the sector a bit of a boost.

The bankrupt Atlanta-based power generating company's 2003 paper traded as low as 100.5 in the morning hours, but rallied during the remainder of the session to close out the day at 103.25 bid, 104.25 offered - up a quarter of a point on the day, according to a trader.

Mirant's junk bonds were likewise better, with a trader in that market pegging the company's 2½% convertible notes due 2021 as having started the session at 98 bid, par offered, then having dropped to session lows around 96 bid, 98 offered before coming back from those depths to end at 99 bid, 101 offered - up about a point. The trader saw Mirant's 5¾% converts due 2007 likewise up as point on the session at 109 bid, 111 offered.

Mirant in general was "up a point across the board," the trader said "after they had been about two to three points lower in the morning.

"All of them dropped a couple of points" initially "but then they came back."

The company's 7.90% notes due 2009 finished up a point at 115 bid, 117 offered, while its 7.40% notes that were to have come due last year came off their day's lows to improve to 114 bid, 115 offered, up a point.

On Tuesday, Mirant's bank debt had fallen off by about two points to 103 bid, 104 offered after the Reliant numbers came out, and its bonds and converts were seen down between two and three points across the board.

For the third quarter, Reliant reported a loss from continuing operations of $267 million (88 cents per share), a sharp deterioration from income from continuing operations of $75 million (23 cents per share) for the same period of 2004. Adjusted EBITDA was $462 million for the latest quarter, compared to $391 million for the third quarter of 2004, with the improvement primarily a result of asset sales.

Houston-based Reliant also revised its outlook for 2005, saying that it expects adjusted EBITDA to be closer to the bottom of the range of the $650 million to $850 million guidance.

But on Wednesday Duke Energy released third quarter numbers which, despite a year-over-year decline, sparked optimism as the company beat analyst estimates, helping Mirant to recover.

For the quarter, Duke reported basic earnings per share of four cents, or $41 million in net income, compared to a gain of 41 cents per share in third quarter 2004, or $389 million in net income. Results included charges related to the previously announced plan to exit substantially all of Duke Energy North America's business outside of the Midwest, which totaled 84 cents per share.

Excluding one-time charges, EPS for the quarter would have been 56 cents, well up from 36 cents in third quarter 2004, and beating analyst estimates of 48 cents per share.

Solo higher

Elsewhere, traders saw Solo Cup's 8½% notes due 2014 up two points on the session at 83 bid, 85 offered, although one said it was "on no news"

Refco bounces around

A trader likewise saw Refco Inc.'s 9% notes due 2012 "moving around a little bit," falling from Tuesday's closing levels around 70 bid, 71 offered to as low as 67 bid, 69 offered, before coming off those lows to close essentially unchanged at 70 bid, 72 offered.

He said he had not seen any new developments in the battered New York-based financial company's bankruptcy case that might explain the volatility, chalking it up to "just buyers and sellers, moving around."

The company filed for bankruptcy Oct. 17, after revelations of an improper loan hidden on its books led to the ouster of its then chief executive officer, Phillip Bennett, who was later indicted on securities fraud charges.

Curative recoups some losses

Also bouncing around was Curative Health Services Inc., whose bonds fell sharply on Tuesday on the news the company had chosen not to make the scheduled Nov. 1 interest payment on its 10¾% notes due 2011.

Those bonds had fallen on Tuesday to 63 bid, 64 offered from Monday' pre-news levels of 67 bid 68 offered, and were seen trading flat, or without their accrued interest. On Wednesday, they moved back up to around 66.5 bid, a trader said, although he noted they still were trading flat, as usually happens to the bonds of issuers who experience some sort of occurrence of default.

The Hauppauge, N.Y.-based medical services company, rather than make the coupon payment, instead invoked the standard 30-day grace period while it open talks with the noteholders and other creditors and examines its options.

Delta Air Lines Inc.'s bonds were seen little changed at 17 bid, 18 offered, the market apparently ignoring the news that the bankrupt Atlanta-based Number-Three U.S. airline carrier had asked the judge overseeing its reorganization to toss out the company's contract with its 6,000 unionized pilots, so the restructuring Delta could impose additional further wage and benefit cuts totaling $325 million annually on the captains - this on top of the $1 billion of permanent concessions that the pilots reluctantly agreed to last year.

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