Calpine bank debt, bonds up on Saltend sale news; Loral gains on XM Satellite contract

By Paul Deckelman and Sara Rosenberg

New York, May 31- Calpine Corp.'s bank debt, bonds, convertibles and shares were feeling mighty powerful Tuesday, after the San Jose, Calif.-based electric generating company said it will sell its 1,200-megawatt Saltend Energy Centre in Britain for $925 million.

Also moving higher were the bonds of Loral Space & Communications Ltd., which gained altitude on news reports that the New York-based satellite communications company has been commissioned to build a satellite for broadcaster XM Satellite Radio.

Calpine's second-lien bank debt shot up by about two points during trading on the Saltend news, with a trader quoting that paper at 76 bid, 78 offered by the end of the day, up from previous levels of 74 bid, 76 offered.

Among junk bond market participants, Calpine's rise was probably the major newsworthy event in an otherwise dull back-to-business day following the three-day Memorial Day Holiday break, which saw an early market close on Friday and full market closure on Monday.

A trader said that Calpine's bonds "were up five or six points with the news," in morning dealings, although he saw the notes coming off their highs later in the session to settle in and close up perhaps two points.

He saw the company's benchmark 8½% notes due 2011 closing at bid levels around the 59-60 area, up about 2½ points from Friday's finish at 57.5 bid, 59.5 offered, and saw similar rises "across the board."

Another trader saw the company's 8 5/8% notes due 2010 having jumped all the way to 59 from prior levels around 51, but saw smaller gains in other issues, with the 9 7/8% notes due 2011 rising to 72.5 bid from 70, the 11½% notes due 2011 firming to 85.75 bid from 84, and the 8½% 2011 bonds three points better on the day, at 60.75 bid.

A market source saw Calpine's 8½% notes due 2010 up nearly three points on the day, at 72.75.

Another traders quoted the Calpine 8½% notes due 2008 as having firmed to 59 bid, 61 offered, "up a couple of points" from 55 bid, 57 offered on Friday.

In the convertibles market, Calpine's paper was quoted up about two points at mid-afternoon - but traders and analysts said that rise was overdone.

Sure enough, the converts eased off their highs of day, with the company's 4¾% converts ending at 59.25 bid, and its 5% converts at 46.25 bid

Calpine's New York Stock Exchange-traded shares meantime zoomed 28 cents (10.37%) to $2.98, on volume of 24.6 million, nearly double the usual turnover.

Calpine said the sale of Saltend is expected to generate gross proceeds to the company of approximately $925 million - the purchase price of £490 million, or approximately $906 million, and adjustments for working capital expected to total $19 million.

The proceeds will be used by Calpine to redeem two existing series of redeemable preferred shares for approximately $620 million, with proceeds over and above that slated for further debt paydown, particularly of the bonds of Calpine's Canadian finance subsidiary.

The plant is being sold to a partnership between International Power plc and Mitsui & Co. Ltd. and the transaction is expected to close on or around July 26, pending regulatory approval and other conditions of closing.

Mirant loans better

With Calpine moving higher, the energy sector as a whole felt like it got a boost including Mirant Corp., a bankrupt Atlanta-based energy company, whose bank debt also posted gains during trading hours.

Mirant's paper was quoted higher by about a point and a half with levels of 74 bid, 75 offered seen late in the day, according to a trader.

A trader in distressed bonds saw Mirant's bonds up about a point from Friday's levels, which had seen the company's 7.4% notes that had been scheduled to mature last year around 73.25 bid, while its 7.9% notes due 2009 were at 74. Mirant Americas Generation Inc.'s 8½% notes due 2011 were around 103.75-104.

Loral gains on contract report

Loral's bonds were seen higher on reports in Tuesday's editions of The Wall Street Journal indicating that the New York -based satellite communications company, currently reorganizing under Chapter 11, has won a contract from satellite broadcaster XM to build its next satellite.

The contract is estimated to be worth about $186 million. The award had not been publicly announced by either company as of Tuesday evening.

The Journal said that Loral was the surprise winner, beating out aerospace giant Boeing Corp., builder of XM's four previous satellites.

The paper said this fifth satellite will be used as a ground spare, to be launched in the event that anything happens to one of the currently orbiting satellites.

A trader saw the Loral Orion 10% notes due 2006 move up to 75 bid from 74, and saw the Loral Space 9½% notes due 2006 firm to 28 bid, 30 offered from 26 bid, 28 offered previously.

Another trader saw the 10s at 76 bid, 78 offered, "up two or three points on the day," while pegging the 91/2s at 30 bid, 31 offered.

Yet a third trader saw the Orion bonds finishing two points higher at 76.5 bid.

Delta's rise continues

Also airborne, a trader saw Delta Air Lines Inc.'s bonds - which have recently been on the rise despite gradually higher world crude prices, usually an indicator of higher future jet fuel costs - as having continued to firm Tuesday.

He saw the troubled Atlanta-based carrier's benchmark 7.70% notes due 2005 "looking better" at 83 bid, 85 offered, up two points from Friday's close, while its 7.90% notes due 2009 were also two points up, at 38 bid, 40 offered.

"Deltas look a point better across the board and the '05s two points," he said, quoting the company's 8.30% notes due 2029 a point up at 28 bid, 29 offered, while seeing Delta's 10% notes due 2008 unchanged at 43 bid.

While Delta's bonds seemed better, its convertible notes were losing altitude, traders in that market said, quoting Delta 8% converts down ½ point to 37.25 bid, 39.25 offered, and its 2 7/8% converts a full point lower at 35 bid, 37 offered.

The traders said that the Delta converts failed to join a rally that lifted the convertible bonds of other airlines after Merrill Lynch upgraded Northwest Airlines Corp.'s stock. That caused Eagan, Minn.-based Northwest's convertibles to gain two to three points, while Continental Airlines was up half a point to a point and AMR Corp. finished half a point better.

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