Calpine gets another post-bankruptcy boost; Kaiser senior bonds up on court action

By Paul Deckelman and Sara Rosenberg

New York, Dec. 22 - Calpine Corp.'s bonds on Thursday added to the gains they had notched during Wednesday's session in the wake of the company's Chapter 11 filing. The bankrupt San Jose, Calif.-based power generating company's bonds were said by traders to have gotten a boost from short covering as players began squaring up their books ahead of the year-end.

Elsewhere, traders said that Kaiser Aluminum Corp.'s senior notes firmed smartly - at the expense of its already nearly-worthless subordinated debt - citing a ruling in favor of the senior noteholders and against the junior investors by the bankruptcy court overseeing the Houston-based metal and chemicals producer's reorganization.

A trader in distressed notes said that the company's senior notes had firmed to 99 bid, 101 offered from prior levels at 97 bid, 99 offered, while its subordinated paper, already trading down in the single digits at 9 bid, 10 offered prior to the ruling, tumbled to 2 bid, 4 offered, with some post-news quotes as low as 3/8 bid.

"The seniors won and the juniors lost," another trader declared, in quoting the company's senior notes at 99 bid, 101 offered, up four points, he said, from levels in the mid 90s, while the juniors were "down the same four points" at 2.5 bid, 4.5 offered.

The U.S. Bankruptcy Court in Wilmington, Del., overruled objections to the confirmation of plans of reorganization for four Kaiser subsidiaries - Kaiser Aluminum Corp. subsidiaries Alpart Jamaica, Inc., Kaiser Jamaica Corp., Kaiser Alumina Australia Corp. and Kaiser Finance Corp.

Law Debenture Trust Co. of New York and Liverpool LP had objected to the plans because of the subordination of 12¾% notes issued in 1993 by Kaiser subsidiary Kaiser Aluminum and Chemical Corp. to the company's 9 7/8% senior notes issued in 1994 and 10 7/8% senior notes issued in 1996 (see related story elsewhere in this issue).

Kaiser also announced this week that the court had confirmed previously filed plans that would liquidate those four commodity subsidiaries, with the four companies authorized to make partial distributions to certain of their creditors, including $202 million that will go to the senior note holders.

Calpine loans steady, bonds higher

Elsewhere, Calpine's second-lien bank debt was unchanged at 79 bid, 80 offered, in what was described as a very quiet session for distressed loan paper.

However, it was quite another story over in the bond trading pits, where Calpine was once again the biggest mover on what was otherwise a fairly quiet session on the last full trading day of the week, ahead of Friday's abbreviated pre-holiday session and Monday's full market close. Calpine's 8½% notes due 2011 were seen at 27 bid, 29 offered, a trader said, up 1½ points on the day, "on top of yesterday's [Wednesday's] rise."

Those Wednesday gains, in the first trading session after the company filed for Chapter 11 protection, amounted to anywhere from 1½ to four points, traders said. Calpine's bonds began trading flat, or without their accrued interest on Wednesday, as is usually the case after a bankruptcy filing or other event of default, and traders had linked those Wednesday gains with the loss of the interest.

With those gains having already been notched, however, Thursday's additional gains were attributed to year-end short covering.

"Guys are cleaning up their books ahead of the end of the year, one said. Calpine "seemed to have a bid at the end of the day."

He saw the 8½% 2008 notes finishing at 33 bid, though he'd seen no offers at that level. That was up from levels around 31.5 bid, 33 early in the session and up further from 29.5 at the end of Wednesday's dealings, he said.

Another trader saw the company's 7¾% notes due 2009 having firmed smartly to 39 bid, 41 offered from their previous level at 34 bid, 36 offered, while its 8½% '08s had advanced to 33 bid, 35 offered from 30 bid, 32 offered previously.

Calpine's secured bonds were up as well as the unsecureds, with its 9 7/8% notes due 2011 up 1¼ point to 79.5 bid, 80.5 offered.

Calpine announced late Tuesday that it had sought protection from its bondholders and other creditors via the Chapter 11 filing with the Manhattan court, and simultaneously sought protection for its Canadian subsidiaries under the Companies' Creditors Arrangement Act, the Canadian equivalent of the U.S. Bankruptcy Code.

The bankruptcy filing followed Calpine's unsuccessful effort last week to appeal a Delaware Court of Chancery ruling ordering the company to repay $312 million of improperly spent asset-sale proceeds by no later than Jan. 22. Calpine - which had spent the money to buy natural gas with which to fuel its approximately 90 power plants, raising the ire of secured bondholders who contended that this violated their bonds' indentures - appealed the lower court ruling to the state Supreme Court, but the judges there declined to overturn the Chancery Court ruling.

GM weak

Apart from Calpine, things were seen as quiet. A trader saw General Motors Corp. and General Motors Acceptance Corp. debt off a bit "as people shut down positions" ahead of the coming end of the year.

He quoted the giant carmaker's flagship 8 3/8% notes due 2033 at 67.5 bid, 68.5 offered, down ¾ point, while financing arm GMAC's benchmark 8% notes due 2031 were half a point lower at 97.5 bid, 98.5 offered.

Another trader saw those two bonds around the same levels, characterizing them each down 5/8 point. He also saw rival Ford Motor Co.'s 7.45% notes due 2031 at 69 bid, 70 offered, and Ford Motor Credit's 7% notes due 2013 at 86 bid, 87 offered, each down ¼ point.

Also in the troubled automotive sector, Dura Operating's 9% notes due 2009 continued to slide, losing another point to end at 57.5 bid.

A trader saw bankrupt Troy, Mich.-based components supplier Delphi Corp.'s bonds unchanged at 50.5 bid, 51.5 offered, while Dana Corp.'s 5.85% notes due 2015 were down nearly a full point, at 69.5 bid, 70.5 offered, after a ratings downgrade by Moody's Investors Service.

Moody's cut Dana's corporate family rating by two notches to B1 from Ba2, and kept its outlook is negative, meaning another rating downgrade is likely over the next 12 to 18 months. The agency cited the challenging environment for the auto parts business and Dana's prospects for continued weakness.

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