Calpine bank debt, bonds trade lower as trustee threatens default declaration

By Paul Deckelman and Sara Rosenberg

New York, Dec. 7 - Calpine Corp.'s second-lien bank debt closed out Wednesday's session lower by about two points as the markets in general felt weaker, according to a trader. The troubled San Jose, Calif.-based power generating company's bonds were meantime seen down about two or three points across the board in the face of a threat to declare Calpine in default on some $3 billion of second-lien debt.

Elsewhere, bankrupt Atlanta-based power generating company Mirant Corp.'s bonds and convertible debt was seen in retreat, ending several days of firming that had followed the approval of its plan of reorganization by the bankruptcy court overseeing its restructuring.

Having had its run up, Mirant's 7.90% notes due 2009 were seen by a trader in distressed issues to have dropped to 124 bid, 125 offered from prior levels at 126 bid, 128 offered, while its 7.40% notes that were to have come due last year backpedaled to 123 bid, 125 offered from 125 bid, 127 offered.

The trader also saw Mirant's 2½% convertible notes due 2021 unchanged at 107 bid, 108 offered, but saw its 5¾% converts due 2007 down a point at 117 bid, 119 offered.

A source at another desk saw the 7.90s at 125 and the 7.40s at 124, each down three points on the session.

Elsewhere, the first trader saw Winn-Dixie Stores Inc.'s bonds moving up for a second straight session to 73 bid, 75 offered, up two points on the session, although he saw no fresh news out about the bankrupt Jacksonville, Fla.-based supermarket operator.

AMR gains

He also saw some upside movement in American Airlines parent AMR Corp.'s bonds, which he said had been "moving up" of late in line with generally easier oil prices and improved investor sentiment about the turnaround prospects of bankrupt American competitors Delta Air Lines Inc., UAL Corp. unit United Airlines and Northwest Airlines Corp.

He saw AMR's 9% notes due 2012 having pushed up to 82 bid, 83 offered, from prior levels at 79 bid, 80 offered, while the Fort Worth, Tex.-based airline industry leader's 9% notes due 2016 had firmed to 81 bid, 82 offered from 78 bid, 79 offered.

AMR and the airline sector in general, were aided by the continued moderating trend of world crude oil prices, which are a leading indicator of the likely future direction of jet fuel prices. After having pushed back above $60 per barrel earlier in the week from previously held levels in the upper 50s, crude moved back below that mark in Wednesday trading.

However, he saw "not much" action going on in the other airline bonds, with Atlanta-based Number-Three U.S. operator Delta's bonds at 21 bid, 22 offered, and Elk Grove Village, Ill.-based Number-Two U.S. carrier United's bonds still at 18 bid, 19 offered. The bonds of Eagan, Minn.-based Northwest, the fourth-largest U.S. air carrier, likewise were unchanged at 37 bid, 39 offered.

Calpine drops on trustee dispute

But clearly, the disaster of the day - as it has been several times in recent sessions - was Calpine, whose bank debt fell and whose bonds were "in the crapper," as one trader colorfully put it.

Calpine's second-lien paper was quoted at 76 bid, 77 offered at the end of the day, but it was seen trading as high as 77 bid, 78 offered earlier in the session, a bank debt trader said. By comparison, on Tuesday, the bank debt was quoted at 78 bid, 80 offered.

Meantime, the company's bonds were on the slide, with a trader seeing Calpine's 8½% notes due 2008 fall to 24 bid, 25 offered from 27 bid, 28 offered, while its 8½% notes due 2011 were likewise down several points at 21 bid.

Even some of the company's shorter bonds, "which have been holding up in the 30s, because there are big shorts in them," were lower on the day, he said, with the 7 5/8% notes due 2006 and the 7¾% notes due 2009 each down three points, at 35 bid, 37 offered and 32 bid, 34 offered, respectively.

A trader at another desk agreed that Calpine was lower, with the 2008 81/2s down two points to that 24 bid, 25 offered level, and its 9 7/8% notes due 2011 down a deuce at 75.25 bid, 76.25 offered.

Another secured issue, the 8¾% notes due 2013, fell two points to 73.5 bid, 74.5 offered.

"They were down across the board," a market source said, with "even the secured issues off," although he saw the 9 5/8% notes due 2014 as the rare exception to the rule, firming half a point to 102.5.

More typical, he said, were the 10½% notes due 2006, which dipped to 37 bid from 39.5, while Calpine's 8½% notes due 2011 fell to 20 bid from 22.125.

On Wednesday, news surfaced that Wilmington Trust Co., trustee for the secured bondholders, notified Calpine that it would declare the company in default on $3 billion in second-lien secured debt unless it immediately repays to the Bank of New York collateral account the approximately $312 million that was ruled to be improperly spent on asset purchases.

Under the recent court ruling, the power company was given until Jan. 22 to return the cash. Calpine - which had sought 90 days in which to repay the funds, or until early March, and which is appealing that court decision, went to court to seek a temporary restraining order to bar issuance of any default notice, which it said would "irreversibly damage" Calpine as it fights to stay out of Chapter 11 - a scenario which most observers now acknowledge is a long shot.

Refco rises again

Elsewhere, a trader saw Refco Inc.'s bonds - which jumped six points on Tuesday - gain another point Wednesday, its 9% notes due 2012 firming to 77 bid, 79 offered.

The bankrupt New York-based financial services company's bonds rose Tuesday, traders said, after it issued a listing of various assets, although it cautioned that no inference could be made that this would be what creditors might recover.

A trader saw Smurfit Stone Container's 9¼% notes due 2008 down a point at 101 bid, 102 offered, citing news that the company was having problems meeting the terms of its credit facility covenants and was seeking relief by asking its lenders for amendments.

At another desk, Stone's 7½% notes due 2013 dipped half a point to 90.5.

© 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.