Calpine, Mirant seen little changed; Integrated Electric bonds quoted higher

By Paul Deckelman and Sara Rosenberg

New York, Dec. 16 - Calpine Corp. bonds - which had been gyrating around all week in advance of the latest skirmish in the legal war between the troubled San Jose, Calif.-based power generating company and its bondholders - were seen little changed Friday, even though the company's shares lost a chunk of what little remaining value they possess.

Mirant Corp.'s recently firming bank debt also closed out trading Friday at pretty much the same levels they had held the session before.

One name seen hanging in at higher levels was Integrated Electrical Services Inc., which reached agreement with its bondholders on restructuring the company.

Calpine bonds were "moving around a little," a market source said, quoting its 8 5/8% notes due 2010 as having moved up to 23.25 bid from prior levels around 21.5, while its 8½% notes due 2011 likewise pushed up to 23 bid from 21.25.

"They were pretty much unchanged, except for the really junior bonds," he said, quoting most of the company's other issues that way - the 8½% notes due 2007 at 27, the 8 7/8% notes and 10½% notes each due 2006 at 35, and among the secured issues, the 8½% notes due 2010 at 75 and the 9 5/8% notes due 2014 at 102.375.

"Not really," a trader at another desk answered, when asked whether anything was going on in Calpine on Friday. He saw the 81/2s due 2011 "virtually unchanged" at 22 bid, 23 offered.

On the equity side of the ledger, Calpine's pink-sheet traded shares dropped 4½ cents (11.64%) to about 34 cents per share, on volume of 31.8 million.

Calpine-watchers were awaiting a ruling from the Delaware Supreme Court, which heard oral arguments Thursday from Calpine and from attorneys for the company's secured bondholders and their trustee, Wilmington Trust Co.

The two sides are battling over whether Calpine improperly spent $312 million of the $1.05 billion of proceeds from its summertime sale of its natural gas reserves by using the money to buy gas to fuel its approximately 90 power plants. The bondholders said that such an expenditure was not a permitted use of the proceeds under the terms of their indentures, and demanded that Calpine return the money to an escrow account; Calpine said it was a permissible use.

Last month, a lower state court, the Delaware Court of Chancery, sided with the bondholders, declaring that the use of the proceeds to buy gas for the plants did not constitute a permitted use of the funds, and it ordered Calpine to return the money. Calpine wanted 90 days from the Nov. 21 ruling, while the bondholders and Wilmington Trust, fearing that a long wait might let Calpine duck the debt by declaring bankruptcy, demanded immediate payment. The Chancery court issued a compromise ruling, setting a Jan. 22 deadline, which caused both sides to appeal the ruling to the state Supreme Court. Besides challenging the time frame - although it did say that if ordered to do so, it could make the payment sooner - Calpine also challenged the basic thrust of the lower court's decision. Wilmington Trust meantime argued for upholding the Chancery court's finding against Calpine, but moving the payment deadline up to Jan. 3.

Mirant holds firm

Also in the power generating sphere, Mirant's 2003 bank debt closed out Friday with levels of 116.75 bid, 117.25 offered, according to a trader, who pegged the bank debt basically unchanged on the day. He said that there had been some trades on Thursday that went off around the 117 level.

However, on Thursday, a different trader had the bankrupt Atlanta-based energy company's bank debt closing out the session quoted more around the 116 bid, 117 offered context.

A source in the bond market meantime quoted Mirant's 7.90% notes due 2009 unchanged at 128 bid, and saw its 7.40% notes that were scheduled to come due last year, at 127, also unchanged.

Integrated Electrical steady at higher level

That source also reported that Integrated Electrical Systems' 9 3/8% notes due 2009 were holding steady at 58 bid, after having taken "a little jump up in price" on Thursday to that level from Wednesday's finish at 56.5.

The embattled Houston-based provider of electrical solutions to the commercial and industrial, residential and service markets said Thursday that it had come to an agreement in principle with an ad hoc committee of its bondholders on a proposed pre-packaged Chapter 11 restructuring that would give the noteholders 82% of the equity in the reorganized company in exchange for all of their notes. Holders of Integrated Electrical's outstanding common stock and its management would retain or receive about 15% and 3%, respectively, of the common stock of the reorganized company.

Integrated said that the proposed plan also allows for customers, vendors and trade creditors to be paid in full. The company's $50 million in senior convertible notes due 2014 would be reinstated or the holders would be provided the full value of their note claims. The company's senior bank credit facility would be reinstated or refinanced at the time of the restructuring. The company is already in talks with its bank lenders on this.

The company also said it will delay the filing of its form 10-K for the fiscal year ended Sept. 30 with the Securities and Exchange Commission, to allow additional time for the completion of its annual audit. It also rescheduled the release of its fiscal 2005 fourth quarter and year-end results.

Airlines unchanged

Elsewhere, traders said even airline bonds were pretty much unchanged, after having been up over the past several sessions on market reaction to generally lower prices for crude oil and for home heating fuel - the former's price movements are seen as a fairly reliable leading indicator of future price trends for jet fuel, while the latter's prices closely track those of jet fuel, an increasing large expense for the struggling airline industry.

Benchmark light, sweet crude oil futures for January settled $1.93 lower at $58.06 a barrel on the New York Mercantile Exchange on Friday, a two-week low. Heating-oil futures for January fell 5.53 cents to $1.7320 a gallon at settlement.

Despite the continued easing of oil prices, the airline bonds were largely unchanged - a symptom of the overall lack of activity in the junk bond market on Friday.

A source saw AMR Corp.'s 9% notes due 2012 and due 2016 each unchanged at 85.25. AMR is the parent of Fort Worth, Tex.-based American Airlines, the U.S. airline industry leader. Those bonds have recently risen from prices in the lower 70s last month.

Also unchanged were the bonds of bankrupt Atlanta-based Number-Three U.S. air carrier Delta Air Lines Inc, which continued to fly at around the 20.5 level.

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