Calpine bank debt firms; Delta bonds hold to lower levels

By Paul Deckelman and Sara Rosenberg

New York, July 22 - Calpine Corp.'s second-lien bank debt was about a point to a point and half stronger on the session Friday, traders said, after the San Jose, Calif.-based power company announced that it had reached an agreement with Siemens Westinghouse to restructure its long-term relationship in order to reduce operating expenses and improve power plant performance.

In bond trading, Delta Air Lines Inc. bonds were seen still hanging around the lower levels to which those notes retreated Thursday, as it posted a big loss for the latest quarter, driven by escalating fuel prices.

Calpine's paper was seen at levels closing out the day at 83.5 bid, 84.5 offered, according to traders.

The restructuring agreed to by Calpine and Siemens Westinghouse includes a five-year arrangement under which Calpine will purchase Siemens parts and services, provides greater operating and turbine maintenance flexibility and, Calpine said, enhances its position as a cost-competitive power producer. It also resolves outstanding issues between the companies and offers extended warranties for Calpine turbines in construction and in storage.

Calpine also plans on restructuring its remaining long-term services agreements with Siemens for added operating and maintenance flexibility and expects to complete this process by the end of the year.

A junk bond market source meantime saw Calpine's 8¾% notes due 2007 at 78 bid, up half a point on the session, while its 8½% notes due 2010 were up ¾ point at 74.75. The Calpine Canada Energy Generating Co. LLC 11½% notes due 2011 were seen up half a point at 90.5.

Elsewhere among bond market participants, not much movement was seen in the distressed issues - or among even the non-distressed bonds as well.

"It was just an incredibly boring, boring day," one trader said.

Delta steady to weaker at lower prices

For instance, he saw Delta Air Lines' 8.30% notes due 2029 at about the same 25.5 level at which those bonds had ended Thursday, when they fell two to three points in response to the troubled Atlanta-based air carrier's latest quarterly numbers, which were deep in the red.

However, the trader did see Delta's benchmark 7.70% notes due 2005 "definitely weaker," at 79.5 bid, 80.5 offered, down from the 82 bid, 83 offered level to which they had retreated on Thursday.

Among other airline issues, the trader saw Continental Airlines Inc.'s 8% notes due 2005 at 100.25 bid, 100.75 offered, unchanged to perhaps slightly higher.

The Houston-based Number-Five U.S. air carrier - which earlier in the week posted a solid second-quarter profit - said Friday in a filing with the Securities and Exchange Commission that it now believes it has enough cash to last through 2006 - although it did warn that it could still run out of money in 2007.

In a previous filing with the SEC, back in April, Continental had warned that it could run out of cash in 2006. However, during the just-ended second quarter, it bolstered its liquidity via a $350 million loan deal, arranged through its Air Micronesia and CMI units.

Continental will use the money to pay off the $200 million of 8% notes when they mature in December, and will also make a pension fund contribution. That will allow the company to continue to have unrestricted cash in the $1.5 billion area by the end of the year.

The trader also saw Northwest Airlines Corp.'s notes "a little better," with the Eagan, Minn.-based Number-Four U.S. carrier's 10% notes due 2009 42.5 bid, 44.5 offered.

He opined that even though Northwest faces daunting labor problems from its unionized mechanics, who have authorized a strike, "after American [Airlines] and Continental reported better numbers, and with oil prices dropping on the week, they bounced a little."

However, he pegged Northwest's 8 7/8% notes due 2006 unchanged at 64.5 bid, 65.5 offered.

Another trader saw Delta pretty much unchanged, with the company's 7.90% notes due 2009 at 32.5 bid, 33.5 offered, with "all of the damage done [Thursday]." He saw the 7.70s at 81.5 bid, 82.5 offered, which he called down two points, though on no fresh news about the third-largest U.S. carrier.

He had the Northwest 8 7/8s at 63 bid, 64 offered, unchanged, and said that with Continentals 8s so close to their maturity - the bonds come due in December - and with the airline easily having enough cash, following the Micronesia loan, to take them out when the time comes, "there's just not much to talk about on those."

Outside of the airlines, not much was going on either, he said, with Collins & Aikman Corp.'s 10¾% notes due 2011 unchanged, at 27.5 bid, 28.5 offered.

Foamex mixed

Foamex bonds were mixed, with the Linwood, Pa.-based foam rubber-maker's 10¾% senior notes at 90 bid, 91 offered, up half a point on the day - up six points on the week, he said - while the company's subordinated 9 7/8% notes were down a point at 36.5 bid, 37.5 offered - but up eight points on the week.

Overall, though, he said, "it was just another Friday summer - by 11 a.m. [ET], the day was pretty much over."

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.