Calpine distressed paper steady as rumors fly of imminent filing; GM, GMAC issues 1-2 points off

By Ronda Fears

Nashville, Dec. 20 - Distressed bond traders joked about trying to find parking spots for their bicycles as the Transport Workers Union strike in New York City ground mass transit to a halt Tuesday but, in all seriousness, were frustrated with the lack of commissions as a result of the very light session of trading.

It was New York's first citywide transit walkout since 1980, but most of the financial community found their way to work, traders said.

The lack of activity was nonetheless a thorn.

General Motors Corp. and General Motors Acceptance Corp. bonds saw the most trading volume, as might be expected, but distressed bond traders noted little activity in bankrupt auto part supplier Delphi Corp., which in the face of a potential strike by United Auto Workers conceded some of its demands Monday.

Market chatter was rampant that beleaguered independent power producer Calpine Corp. would file bankruptcy after the close Tuesday, but even the threat of an imminent filing did not produce much activity in those distressed bonds. In the more elevated high-yield market, however, Calpine bonds were seen higher.

Calpine '06 bonds steady

Calpine remained a focal point in the secondary trenches, but distressed bond traders said there were no changes to the 2006 bonds that are lingering in the 20s to 30s neighborhood and very little volume.

"There was a rumor that they would file tonight [Tuesday]," said one trader. "But we show no changes in the bonds."

Calpine's 8½% bonds and the 7 5/8% bonds closed the day basically unchanged, he said, but another distressed trader said he saw the 7 5/8s trade up to the mid-30s early in the day before falling suddenly around noon to 31 or so. The second trader noted, too, that Calpine shares plunged more than 16% on Tuesday.

By 6 p.m. ET Tuesday there was no confirmation of a bankruptcy filing by San Jose, Calif.-based Calpine. The only news on the wires about the company involved the Delaware court's final order requiring the company to repay $312 million to creditors who challenged its use of proceeds from asset sales to buy natural gas for its plants.

Calpine has said it will be able to repay the money by the Jan. 22 deadline.

Calpine junk bonds better

While the distressed Calpine paper showed no big changes at the end of the day, its junk bonds were more active and described as better in high-yield circles, but traders on those desks also lamented light volume.

For the second-lien paper, traders said Calpine issues were up around a half point with the 8¾% due 2013 at 75.5 bid, 76.5 offered and the 9 7/8% due 2011 at 76.5 bid, 78.5 offered and the 8½% due 2010 at 75.5 bid, 76 offered.

"At this point trading is so thin, if you get lifted on a bond, guys are just going to make their markets a little higher on the next run they go out with," one high-yield trader said.

"People are just waiting to see what happens with the cash. Do they put it back in the account by Jan. 22, or do they have to tender for second-lien bonds at some point? It's a waiting game at this point."

GM tumbles on Toyota plans

General Motors Corp. saw the most bond activity and probably its shares, as the stock fell to a new 52-week low and in fact the lowest point in 18 years, after Toyota Motor Co. released a 2006 forecast that would put it ahead of the embattled auto giant.

Traders pegged GM and GMAC paper off by 1 point Tuesday on the headlines.

GM's 8 3/8% notes of 2033 were quoted moving to 67 bid, 69 offered from 68 bid, 70 offered on Monday and the 7 3/8% notes of 2048 at 59 bid, 61 offered, down from 60 bid, 62 offered on Monday.

GMAC's 8% notes of 2031 dropped to 96 bid, 98 offered after closing Monday at 97 bid, 99 offered. The 6 7/8% notes were seen off by 1 point to 90 bid, 92 offered and the 6¾% notes also lower by 1 point at 89 bid, 90 offered.

The huge drop in GM shares Tuesday was largely blamed on Toyota's forecast that it will for the first time sell more cars and trucks than GM in 2006 with plans to make a record 9.06 million cars in 2006, just shy of the 9.15 million cars and trucks that some analysts expect GM to build next year.

More pressure was placed on the credit as derivatives players start tallying up potential massive losses should GM default.

GM drops more after-hours

Meanwhile, GM shares fell even more in after-hours trading on news of big sell-offs in the stock by big shareholder Kirk Kerkorian, handled by his investment arm Tracinda Corp.

After losing $1.20, or 5.7%, in the regular session to end at $19.85, in after-hours trading GM shares were seen lower by another 55 cents, or 2.77%, at $19.30.

Headlines after the closing bell Tuesday revealed that Kerkorian had sold 12 million shares of the automaker in the past two sessions, cutting his stake in GM to 8% from 10%. The billionaire investor had been loading up on GM stock earlier in the year, then made a failed attempt to get a board seat for his longtime investment deputy Jerome York but the sides were unable to come to terms.

A buyside market source said "The only way out of this mess is re-structuring in bankruptcy. So, even with some of the bonds in the neighborhood of 68 to 70, I'm not sure why anyone buys at this price."

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