Calpine bank debt, bonds power back upward; Primus continues to languish

By Paul Deckelman and Sara Rosenberg

New York, May 3 - Calpine Corp.'s bonds and bank debt continued to recover from their recent lows as market sentiment seems to shift further and further away from the previous bankruptcy buzz, based on the company's pre-released first quarter numbers as well reports that Calpine is seeking an investigation into its recent stock performance.

Elsewhere Primus Telecommunications Group Inc.'s bonds continued to wallow around at the sharply lower levels to which they had fallen after the McLean, Va.-based telecommunications company announced a sharply increased first-quarter loss.

Calpine's second-lien bank debt was being quoted at 76 bid, 77 offered, although a loan trader said that the paper was only up about half to three quarters of a point on the day, since he traded it at 76 on Monday.

Another trader had the paper quoted at 77 bid, 78 offered and put those levels up three points on the day as he saw it close out Monday's session at 74 bid, 75 offered.

"It's running with the equity," the second trader added. The company's New York Stock Exchange-traded shares jumped 33 cents (16.18%) to $2.37, on volume of 25.8 million - more than 2½ times the usual turnover.

In the bond pits, Calpine "was on the move," a trader in distressed securities said.

He estimated the company's 8½% notes due 2008 as having gotten as good as 60 bid from the 54 bid, 56 offered contest they had traded in previously, although he did see the bonds come off their high late in the session, to end at 58 bid, 59 offered, still up four points on the day.

"It was all [baloney], he said of the default and bankruptcy rumors about the San Jose, Calif.-based power generator, which roiled the debt and equity markets as April came to a close and morphed into May. "But it scared enough people" to really take the bonds down from the higher levels they occupied say, a month ago.

Things were particularly rough for Calpine's equity, bonds and second-lien loan debt last week, as rumors of a potential Chapter 11 filing engulfed all markets.

To counter that scuttlebutt, Calpine on Friday pre-announced first quarter numbers that helped put some of the rumors to rest. These results included expectations of cash and cash equivalents on hand of approximately $800 million, EBITDA, as adjusted for non-cash and other charges, of approximately $240 million and a fully diluted loss per share of approximately 38 cents.

Then, The Wall Street Journal reported the company has requested that The New York Stock Exchange investigate the recent trading of its stock and rumors about its finances.

Since the release of preliminary first quarter numbers, Calpine's second-lien term loan has gained somewhere in the range of 5½ to 6½ points.

Back among the bond investors, Calpine "has been all over the place - but they were up today," a market source said, quoting the company's 8¾% notes due 2013 as having firmed to 72 bid from 70.5. He also saw Calpine's 7 3/8% notes due 2008 firm to 59 bid from recent levels around 54, pegged its 7¾% notes due 2009 at 58, up from 52.75, and saw its 8¾% notes due 2007 at 66.5 bid, up two points. The Calpine 8¼% notes coming due on Aug. 15, he said, were at 92 bid, up from 90.5.

Calpine was seen "up nicely," a trader said, with its flagship 8½% notes due 2011 having firmed all the way up to 57.5 bid from prior levels in the 53-54 range. "I don't know if it's short covering" following the recent carnage in the company's issues, "or people just getting comfortable with the idea that all of those bad rumors about the company not being true," the trader added. "And, they have numbers coming out on Thursday."

Calpine "was certainly higher," another trader said, quoting the company's 8½% 2011 notes as having risen to 54.5 bid from prior levels around 52.5, its 8¾% 2013 notes as having firmed to 71.75 bid from 68, its 8½% notes due 2010 as having gone up to 72.75 bid from 71.5, and its 8 5/8% notes due 2010 as having jumped to 58 bid from 51.

"They've been up and down all the past week," he said, noting the volatile behavior of the bonds. He agreed with the suggestion that market participants who had been spooked since about mid-April by rumors making the rounds that Calpine might default on a payment obligation or even file for Chapter 11 now pretty much agree that "probably" those fears are groundless.

Primus plunges further

Elsewhere, Primus Telecommunications' bonds, which were pounded solidly on Monday after the company's first quarter results came out, were down again Tuesday.

A trader saw the company's 12¾% notes due 2009 as having fallen to 55 bid from prior levels at 60, while its 8% notes due 2014 were little changed at 46 bid, 48 offered, "starting to compress their levels," he added.

At another desk, a market source saw the 123/4s at 58 bid, and the 8s at 47.25.

Yet another trader observed the 8% notes at 46.5 bid, 47.5 offered, and saw the 123/4s offered "in the low 50s," with no bid seen.

Meanwhile the Primus 3.75% convertibles plunged into the teens, a trader in that market said, before bouncing back to settle the day with a bid of 25. That issue had fallen into the 30s on Monday along with the Primus 5.75% convertibles. The 5.75s were active again Tuesday, but remained steady in the 30s neighborhood, this trader said.

However, the company's NYSE-traded shares jumped 13 cents (16.88%) to 90 cents a share on volume of 11.7 million, nearly 12 times the usual activity level. On Monday, they had lost 32% of their value, after Primus said that its first-quarter loss more than tripled on revenue declines and inventory write-downs.

It reported that its quarterly loss grew to $34.6 million (38 cents per share), widening sharply from $10.1 million (11 cents per share), a year ago. The results included a $3 million loss from foreign currency transactions and a $4 million write-down of European wireless handset inventory and receivables.

Asbestos names steady

In other distressed issues, a trader said he had seen little or no movement in asbestos-challenged names, speculating that the present levels "are where they will be, unless Congress decides to do something" about setting up a claims mechanism to meet the flood tide of asbestos lawsuits. Lawmakers failed last week to have a bill setting up such a $140 billion industry/insurer-funded claims system, and are not scheduled to meet - and, possibly, vote - on the issue until May 12.

In the interim, the trader quoted Armstrong World Industries Inc. Steady at 82 bid, 84 offered; Owens-Corning's bonds stayed at 79 bid, 80 offered; and Federal Mogul Corp. remained tethered around the 22 mark.

A source at another shop saw Salton Inc.'s 12¼% notes due 2008 firm a bit to 49.5 bid from 48. He also saw the small appliance maker's 10¾% notes due later this year at 57 bid, down from 61.5 previously.

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