Calpine bank debt firmer, bonds little changed; Kaiser rise continues

By Paul Deckelman and Sara Rosenberg

New York, Dec. 23 - Calpine Corp.'s second-lien bank debt seemed to feel a touch stronger in Friday's quiet and generally uneventful pre-holiday loan market, traders said. The bankrupt San Jose, Calif.-based power generating company's bonds were meantime little changed on the session after having firmed for two straight sessions following its late-Tuesday Chapter 11 filing.

Kaiser Aluminum Corp.'s senior notes were seen higher for a second consecutive session following a U.S. Bankruptcy Court ruling that favors the senior noteholders over the holders of the company's senior subordinated notes. Those notes, in turn, continued to languish low in the single-digit area.

Bankrupt Troy, Mich.-based automotive electronics manufacturer Delphi Corp.'s bonds were seen several points lower.

Calpine's second-lien bank debt was seen about half a point to full point above Thursday's close, a trader in that market said.

He saw the paper in the 79.5 to 80 bid range and the 80.5 to 81 offered range, adding that it was hard to pinpoint exact levels since activity was so light.

Previously the bank debt was being quoted at 79 bid, 80 offered, and had been there since Calpine's Chapter 11 filing with the U.S. Bankruptcy Court for the Southern District of New York in lower Manhattan.

Calpine's bonds, meantime, after having surged sharply over the previous two sessions following the bankruptcy filing, were seen having steadied.

A trader saw the company's 8½% notes due 2008 at 33 bid, 34 offered, its 8½% notes due 2011 at 27 bid, 29 offered, and its shorter debt, such as its 10½% notes due 2006, at 38.5 bid, 39.5 offered, all unchanged on the session.

At another desk, a trader said that the embattled merchant power operator's bonds "continued to be well bid for," although there was little price movement.

He said, for instance, that the '08s were at 33.25 bid, 34 offered, "about where they had been, but there still seems to be buying interest out there."

He saw Calpine's 8 5/8% notes due 2010 offered at 28.75, while the 10½% 2006s were at 38 bid, 29.5 offered. He said that he "didn't really" see any quotes on the company's secured bonds.

Another trader saw the 2nd lien notes "all in the 80s," although he modified that to around 80 bid, 82 offered.

Calpine's 8¾% notes due 2007 were quoted a point better at 39 bid.

A trader at yet another desk reported "having a hard time even finding any [quotes on] Calpine notes."

Calpine's notes had firmed on Wednesday, the first trading session after the bankruptcy filing, in connection with the switchover from the bonds trading with their accrued interest to trading flat, as is usually the case after a bankruptcy filing or other event of default. Typically, when an issue begins trading flat, traders said, the nominal price of the bonds rises by several points to offset the loss of the interest.

On Thursday, however, the Calpine bonds kept climbing, although traders attributed this rise to short covering as market players began squaring up their positions ahead of the end of the year.

Over in the equity market, Calpine's nearly-worthless penny stock continued to lose a big chunk of its little remaining value. Those Pink Sheets-traded shares retreated slightly more than two cents (9.67%) to 22.5 cents. Volume was 13 million shares.

Calpine's bankruptcy filing followed its unsuccessful effort the previous 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 - had appealed that lower court ruling to the state Supreme Court, but the judges there declined to overturn the Chancery Court decision.

Kaiser senior notes up more

Elsewhere, it was a second consecutive session for solid gains in Kaiser Aluminum's senior notes, which on Thursday had risen to about 99 bid, 101 offered from prior levels in the middle-90s. In Friday's action, a trader saw those senior notes firm by another two points to 101 bid, 102 offered. However, Kaiser's subordinated notes were seen still mired around 4 bid, 6 offered - up slightly from their lows at 2 bid, 4 offered seen Thursday, but still well below the 9 bid, 10 offered levels they held before the news of Thursday's court ruling hit the tape.

The bankruptcy court in Wilmington, Del., on Thursday issued a decision in a long-running dispute between the holders of the senior notes and the subordinated notes, ordering that the claims of the subordinated noteholders against four company subsidiaries in the process of being liquidated - Alpart Jamaica Inc. and Kaiser Jamaica Inc., which had owned the company's interests in an alumina refinery in Jamaica that were sold in July 2004, and Kaiser Alumina Australia Corp. and Kaiser Finance Corp., which had owned Kaiser's interests in an alumina refinery in Australia that were sold in April - are contractually subordinated to the claims of senior noteholders against those liquidating subsidiaries. As a result of the ruling, which is subject to appeal, holders of the subordinated notes will receive no distributions under the plans of liquidation for those subsidiaries.

Kaiser said that it believes the subordinated noteholders are likely to appeal the court's ruling and seek a stay of the ruling pending their appeal. The ruling has been temporarily stayed for 10 days or, if a motion to stay the decision pending appeal is filed, until the conclusion of argument on the stay motion, which is scheduled for Jan. 10.

Kaiser further said reserves of approximately $213 million will be maintained by its bankruptcy trustee until the decision on the dispute between the senior and subordinated noteholders becomes effective, which will occur upon the expiration of any stay, irrespective of whether an appeal is pending.

Delphi weak

In the troubled automotive sector, a trader saw Delphi Corp.'s bonds "seeming easier, with a lot of paper for sale." He quoted those bonds at 48 bid, 50 offered, down two points on the session.

Another trader saw Delphi's 6.55% notes due 2009 down ¾ point on the day to 49.5 bid, 50.5 offered, while its 7 1/8% notes due 2029 were down just ¼ point at 50.25 bid, 51.25 offered.

The first trader also saw Delco Remy International's 9 3/8% notes in the lower 30s, while its 8 5/8% notes were at 75 bid, 77 offered, both "about where they had been."

A trader saw Dana Corp.'s bonds mixed, after Standard & Poor's downgraded the Toledo, Ohio,-based automotive component maker's Dana Credit Corp. financial unit's senior unsecured debt rating to B- from BB, citing its recent downgrade of the parent company's debt ratings and "the fact that a default by Dana Corp. would trigger cross-default provisions contained in Dana Credit's debt."

The S&P action follows a similar downgrade Thursday by Moody's Investors Service.

A trader quoted the company's 5.85% notes due 2015 actually up slightly at 70.25 bid, 71.25 offered versus Thursday's levels at 69.5 bid, 70.5 offered.

He quoted Dana's 7% notes due 2028 about unchanged at 71.5 bid, 72.5 offered, while its 6½% notes due 2009 were down half a point at 79.5 bid, 80.5 offered.

He called the movements "technical" in nature, saying that the ratings agency downgrades really came as no big surprise.

Given the thin level of activity in the pre-holiday market (which officially wrapped up trading Friday at 2 p.m. ET ahead of Monday's full-day closure for the Christmas legal holiday), "it doesn't take much to move these bonds."

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