Calpine bonds, bank debt firmer; Winn-Dixie keeps rising

By Paul Deckelman and Sara Rosenberg

New York, Dec. 13 - Calpine Corp.'s bonds were up and its second-lien bank debt was stronger Tuesday, traders in those markets said, possibly in a belated response to the news that the troubled San Jose, Calif.-based power generating company had hired a veteran turnaround specialist as its chief executive officer.

Fellow power generator Mirant Corp.'s bonds and bank debt were also seen better, apparently recovering from a retreat Monday after the company said one of its plants had gone down and is expected to stay that way for quite some time.

And bankrupt Jacksonville, Fla.-based supermarket operator Winn-Dixie Stores Inc.'s bonds continued to rise in the wake of the company's announcement last week that it hopes to be out of Chapter 11 within the next six months.

Calpine's bonds "looked like they were up," a trader in distressed notes said, quoting its 8½% notes due 2008 at 26 bid, 27 offered, up from 24 bid, 25 offered, while its 7¾% notes due 2009 did even better, up three points on the day to 34 bid, 36 offered.

At another desk, a trader called Calpine "a little stronger today [Tuesday], with the 8½% notes due 2011 a point or so better at 20.5 bid, 21.5 offered and notable strength in the company's convertible notes, with its 4¾% converts due 2023 at 19 bid, 21 offered, up two or three points.

Another trader saw the 8½% '08s up ¾ point to the 26 bid, 26.5 offered level, while its secured 9 7/8% notes due 2011 held steady at 77.25 bid, 78.25 offered.

Calpine's 8¾% notes due 2007 were seen by a market source to have firmed a point to 33 bid. Its Pink Sheets-traded shares meantime were up slightly more than six cents (22.03%) to about 34 cents on volume of 63 million.

Calpine's second-lien bank debt was meantime up by about a point to a point and a half, with levels closing out the session at 77.5 bid, 79 offered - well up from the previous day's close of 76 bid, 77.5 offered, according to a trader.

Late in the day Monday, Calpine announced that turnaround specialist Robert P. May was appointed as its new chief executive officer.

May most recently served as non-executive chairman of the board of Birmingham, Ala.-based medical outpatient clinic operator HealthSouth Corp. from July 2004 to October of this year, and as interim president and chief executive officer of St. Louis-based cabler Charter Communications Inc., from January to August, overseeing out-of-court turnaround efforts at both companies.

Calpine is also moving to strike down a recent Delaware Court of Chancery ruling that it had improperly spent some $312 million of proceeds from a recent asset sale and had to repay that money by Jan. 22. It filed briefs late Monday with the Delaware Supreme Court, seeking to void that order by Chancery Court vice chancellor Leo Strine. Calpine contends that its use of the money - part of the $1.05 billion of proceeds from the sale over the summer of its natural gas assets - to buy gas for its plants, is permissible under its bond indentures and credit covenants, and should not have been struck down.

The company has also warned that assuming Strine's ruling on the impropriety of Calpine's expenditure is upheld, it might not be able to meet his deadline for repayment of all of the money, and has indicated that it might have to seek bankruptcy protection from its creditors in that instance.

Ironically, part of Strine's ruling is also being appealed by Calpine's opponent in the case, Wilmington Trust Co., which is acting on behalf of holders of some $3 billion of Calpine second-lien debt as the trustee for those notes. While Wilmington Trust and the bondholders support the judge's finding that Calpine misspent the $312 million and must repay it, they are concerned that Calpine's deteriorating financial position might lead to its insolvency before the repayment is made, and have petitioned the state Supreme Court to order Calpine to repay the money no later than Jan. 3, if not sooner. The two sides are preparing for oral arguments before the Supreme Court on Thursday.

Mirant higher

Elsewhere, Mirant's 2003 bank debt recouped its losses from Monday and then some, loan traders said, as levels moved up by about two points to 113.5 bid, 114.5 offered.

By comparison, on Monday, that '03 paper had fallen off by about a point to 111 bid, 113 offered.

Mirant's bonds were likewise seen better, a trader in that market said, with its 7.90% notes due 2009 up two points at 126 bid, 127 offered, and its 7.40% notes that had been scheduled to come due last year a point up at 124 bid, 125 offered. Mirant's 2½% convertible notes due 2021 were also up a point, at 107 bid, 109 offered, as were its 5¾% converts due 2007, at 118 bid, 120 offered.

Early Monday morning, the bankrupt Atlanta-based energy company did file an 8-K with the Securities and Exchange Commission disclosing that earlier this month, one of the generating units at its 2,429-megawatt Chalk Point facility in Prince Georges County, Md., had experienced a forced outage as a result of a structural failure.

The unit is expected to be out of service for at least four weeks and Mirant said that there could be a material adverse impact on its financial performance to the extent the unit is unavailable for an extended period.

Winn-Dixie rises

Apart from the power grid, a trader saw Winn-Dixie's 8 7/8% notes due 2008 at 80 bid, 82 offered, up from 78 bid, 80 offered, while a second trader, who saw those bonds at 80 bid, 82 offered, said they were only up a point on the session - but allowed that they had risen at least five points over the last three sessions.

In fact, he said, "at this time a week ago" the bonds were trading at 72 bid, 73 offered.

The Winn-Dixie bonds have been appreciating smartly ever since the stricken supermarket operator said last week that it expects to emerge from Chapter 11 by around June.

When it emerges, the venerable company - for decades a fixture in numerous communities across the Southeastern United States - will be a much downsized version of its former self, with only some 575 stores - about one-third of its pre-bankruptcy size - concentrated in its home turf of Florida, in neighboring Alabama and Georgia, and in Louisiana, Mississippi and the Bahamas, after having closed stores in the Carolinas, and in Tennessee.

The company will employ about 58,00 people when its restructuring is completed, well down from over 100,000 when it filed for Chapter 11 in mid-February.

Refco dips

Also in the distressed precincts, Refco Inc.'s 9% notes due 2012 were seen about a point easier at 77 bid, 79 offered; the bankrupt New York -based financial company's bonds had gyrated around in the 70s for much of last week.

In the automotive area, Allied Holdings Inc.'s 8 5/8% notes due 2007 were continuing to rise, to 81 bid, 83 offered, up two points on the day, after having climbed three points on Monday to the 78 bid from 75 bid, 77 offered on Friday and from 65 bid, 66 offered a week before that.

A trader suggested that the Decatur, Ga.-based transportation company - which delivers new cars to automobile showrooms for major manufacturers - was up sharply on the news earlier in the month that it has kept all of the vehicle delivery business for General Motors Corp. in North America. The contract renewal also increases the rates GM will pay to Allied for vehicle delivery in 2006 and 2007. The agreement is subject to the approval of the U.S. Bankruptcy Court for the Northern District of Georgia, which is overseeing Allied's restructuring.

GM steady

As for GM itself - the subject of renewed market rumors about its possible bankruptcy, in the wake of comments to that effect by Standard & Poor's, which downgraded GM's once-high grade ratings deeper into junk territory on Monday - its bonds "were really range bound," said a trader, who saw GM's benchmark 8 3/8% notes due 2033 in a 70-72 context, "but no real volatility like you had yesterday [Monday], when they were back and forth three or four points," pushed around by the S&P downgrade and the ratings agency's warning that bankruptcy for the once-mighty Detroit-based auto giant was not out of the question. He also saw GM financial unit General Motors Acceptance Corp.'s widely watched 8% notes due 2031 hanging in around 97.5 bid, 98.5 offered.

Another trader, however, did see some volatility in the latter name, pegging the GMAC 8s up half a point, at 97.5 bid, 98.5 offered - after first seeing those bonds drop as low as 96 and then bounce as high as 99, versus their opening levels at 97 bid, 99 offered.

He also saw GMAC's 6¾% notes due 2014 go from an opening level of 90 bid, 92 offered up to 92 bid, 93 offered intraday, and then finish at 91 bid, 92 offered, a one-point gain. He saw a similar advance for GMAC's 6 7/8% notes due 2011 which firmed to 92 bid, 93 offered.

Yet another trader saw the GMAC 8s half a point better at 97 bid, 97.5 offered, while the GM 8 3/8s were a quarter-point higher at 71 bid, 72 offered.

There seemed to be no real market response to the news that the United Auto Workers union has been in talks with GM, aimed at averting a strike at GM's former subsidiary and still largest single components supplier, Troy, Mich.-based Delphi Corp. But a union official said that while those talks had been going on, it was still unclear how GM - which has enough of its own problems - might be able to help its erstwhile problem child, which filed for bankruptcy protection in October. Delphi and the union have not really been talking since then, except for Delphi's submission to the labor group of two wage-cut proposals that would sharply slash the hourly pay and benefits now enjoyed by Delphi's unionized workers; the UAW rejected both out of hand. A union official said Tuesday a strike against Delphi, at this juncture, is "still more likely than not," although he would not give a timetable for such a possible work stoppage. A strike would seriously disrupt GM's production, and would also impact Ford and other automakers who use Delphi's electronic components, although none of them are as dependent on Delphi as GM - Delphi's single largest customer - is.

Delphi's 6.55% notes due 2009 were seen at 53.75 bid, 54.5 offered and its 7 1/8% notes due 2029 at 54 bid, 54.75 offered, both unchanged on the session.

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