Calpine bonds, bank debt in recovery mode; Tembec tumbles on numbers

By Paul Deckelman and Sara Rosenberg

New York, April 20 - Calpine Corp.'s bonds were bouncing and its second-lien bank debt moved up a couple of points during Friday's session, as the company pre-announced relatively good first-quarter financial numbers and showed that there is ample liquidity on the balance sheet in order to retaliate against recent bankruptcy rumors.

Elsewhere, investors were yelling "timber!" as Canadian forest products company Tembec Industries Inc.'s bonds came crashing to earth early in the session. However, cooler heads prevailed, and those bonds came off their lows to finish down only a couple of points.

And Federal-Mogul Corp. bank debt was lower on uncertainty about when the bankrupt Southfield, Mich.-based auto parts maker might actually be emerging from Chapter 11.

Calpine's bonds were seen by a trader in distressed notes to have "gone on a wild ride," with its 8½% notes due 2008 seen to have opened at 44 bid, 45 offered, then having gotten as good as 51 bid, 53 offered, "but then they went back down" later in the session, zigging down to 46 bid, 48 offered, before zagging back up to close out the day at 48 bid, 50 offered, "all and all, quite a little ride," the trader said.

That was the most active issue that he saw, although other Calpine bonds were also gyrating. However, he saw Calpine's most senior bonds, its 9 5/8% first-lien notes due 2014, "not changing all that much," holding steady at 96 bid, 97.25 offered.

Calpine, a trader at another desk said, "was movin' around, up and down, but mostly up on the day."

He saw Calpine's 10½% notes due 2006 ending at 74.5 bid, and its 8½% notes due 2010 closing at 69 bid 70 offered, both up "at least a couple on the day," while Calpine's 8¾% notes due 2007 traded most of the day at 54 bid, up from Thursday levels "in the high 40s or lower 50s," before climbing to 57.5 bid, 58 offered at the close.

Another market source had those '07 bonds going out at 55, a gain of about five points on the session.

Yet another trader opined that the company's tactic of pre-emptively pre-releasing its key numbers in order to head off any more bloodletting in the debt or the equity markets, "seemed to do the job," with Calpine's benchmark 8½% notes due 2011 having zoomed up as high as 51 bid during the session from opening levels around 42 bid, 43.5 offered, although the bonds subsequently came off those highs to finish at 49.5 bid, 50 offered - still a gain of some 6½ points on the day.

He saw Calpine's 8¼% notes slated to come due later this year up even more - a full eight points on the day, to 89.5 bid, 90 offered - with all the Calpine issues "in very active trading."

In bank debt dealings, the troubled San Jose, Calif.-based power company's second-lien paper was quoted at 73 bid, 74 offered, a traders said, better than Thursday's closing levels of 71.5 bid, 73 offered and well up from Thursday's intra-day trading levels that reached a low of around 69 or 69.5.

Calpine's New York Stock Exchange-traded shares, meanwhile, bounced back from the terrible beating they took on Thursday, when they fell 18.5% on the day, to power back up to $1.79, a gain of 34 cents (23.45%), on volume of 34.9 million, more than triple the usual turnover.

In its early morning statement, Calpine said it ended the first quarter with cash and cash equivalents on hand of approximately $800 million, and restricted cash totaled approximately $500 million.

The company said that EBITDA, as adjusted for non-cash and other charges, is expected to be approximately $240 million for the quarter. And, for the year ended Dec. 31, Calpine still expects EBITDA, as adjusted for non-cash and other charges, to be in the range of $1.6 to $1.7 billion.

The company expects a fully diluted loss per share of approximately 38 cents for the first quarter. For the year ending Dec. 31, Calpine still expects a loss per share in the range of 80 to 90 cents, "based on indications that market spark spreads are remaining in line with our earlier expectations."

It said that it would provide additional details on its first quarter results in a conference call on Thursday.

"Calpine is providing this update to assure investors that first quarter financial results were in line with our expectations and that we remain on track to achieve our 2005 earnings," Bob Kelly, the company's chief financial officer, said in Calpine's news release.

"While preliminary, we believe this update is necessary given the recent equity and bond trading volatility triggered by false rumors in the market. It is regrettable that reckless and unfounded rumors continue to impact the trading in Calpine's securities," Kelly added.

Tembec drops

Elsewhere, Tembec Industries' bonds were heard to have swooned about six or seven points in early trading before coming at least part of the way back to only end down a point or so.

Tembec "was down, but then they came back up," said a trader, who said that at the opening, the company's 8 5/8% notes due 2009 "were getting mushed." He saw those bonds having fallen to around 79 bid, 81 offered in the morning, down from their Thursday afternoon levels at 83.5 bid, 84.5 offered, before coming back to close at 81.5 bid, 82.5 offered.

At another desk, the company's 8½% notes due 2011 were seen down more than six points, as low as 74.5 bid, before they recovered a little to end just four points off the pace, at 77.

Another trader also saw the 81/2s ending at 77 bid, 78 offered, and the 8 5/8s at 81 bid, 83 offered, both "down a couple [of points]."

Tembec late Thursday reported a fiscal second-quarter loss of C$26.2 million (US$21 million), or 31 Canadian cents a share, in the quarter ended March 27, down from a loss of C$93.2 million, (C$1.09 per share), in the same three-month period the year before.

However, Tembec acknowledged on its conference call that the results were helped by a C$14 million currency gain and several other accounting items, without which its loss would have been C$61.8 million, versus a loss of C$73.8 million in the year-before period.

Traders noted that the Tembec retreat also pulled the bonds of other forest-product companies such as Bowater and Abitibi-Consolidated lower.

Federa-Mogul loans dip

Federal-Mogul Corp.'s bank debt was lower by about a quarter to a half a point on Friday with levels falling to 89 bid, 90 offered by day's end, according to a trader.

Recently, the company decided to cancel its $933 million senior secured seven-year term loan B (B1/B+) exit financing facility because it didn't want to keep paying a 50 basis points ticking fee while there was so much uncertainty regarding timing of emergence from Chapter 11.

When asked whether that played into the dip in loan levels, the trader responded, "I haven't heard too many complaints about that. It's more market in autos. The sector drove it down."

Foamex gains

An automotive name that was up solidly on Friday was Foamex International Inc., which makes foam rubber padding and other products used by carmakers in their seats and dashboards, among other industrial uses.

A trader said that "all" of the Linwood, Pa.-based company's bonds "moved up," on the news that Foamex agreed to sell its rubber and felt carpet cushion business and will use the proceeds from the transaction to pay down debt.

Foamex's 10¾% notes due 2009 moved up to 85.5 bid, 86.5 offered, while its 13½% notes were at 94.5 bid, 96.5 offered, and its 9 7/8% notes due 2007 at 51 bid, "all up a couple. They were all better bid throughout."

Foamex announced that it had sold the rubber and felt carpet cushion business, along with its Missouri rubber manufacturing facility and certain assets of its North Carolina felt manufacturing facility, to Leggett & Platt Inc. for about $38.5 million.

Foamex plans to use the proceeds to help bring down its total debt, which stood at $750.5 million as of the beginning of the year.

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