Mirant bank debt continues rebound, Calpine off; airlines unaffected by fare hikes

By Paul Deckelman and Sara Rosenberg

New York, Aug. 11 - Mirant Corp.'s bank debt was seen rebounding for the second straight session Thursday, its gyrations linked to the release of quarterly numbers for the bankrupt Atlanta-based energy company earlier in the week.

Also on the energy front, Calpine Corp.'s bank debt and bonds were easier for a second straight session, as investors mulled over the revelations in a regulatory filing that indicated that Calpine used some of the proceeds from a recent asset sale for purposes other than the promised debt paydown.

And the bonds of the major airlines - particularly Delta Air Lines Inc. and Northwest Airlines Corp. - were seen pretty much unchanged, despite the news that Delta, along with rivals United Airlines and Continental Airlines, had decided to take ticket prices higher in an effort to replenish bottom lines bled white by continually mounting fuel costs and other burdensome expenses.

Mirant's 2003 bank debt was seen up about a quarter of a point, closing out the session at 87 bid, 88 offered, according to a trader.

On Tuesday, the company revealed second-quarter numbers that included a net loss of two cents per share compared with a net loss of eight cents per share in 2004. Operating revenues in the latest quarter were $457 million compared to operating revenues in the second quarter of 2004 of $496 million.

Immediately following the release of earnings earlier in the week, the paper started to trend downwards but on Wednesday it had basically rebounded completely from Tuesday's lows - and continued to move its way up during Thursday's session.

Calpine loans down again

Calpine's second-lien term loan meantime continued its downward spiral, closing out the day down by about a half a point to a point, with levels quoted at 80.5 bid, 81.25 offered, according to a trader.

The San Jose, Calif.-based energy company revealed in its latest 10-Q filing that some of the proceeds from the Saltend Energy Centre sale were used to purchase gas, as opposed to paying down second-lien debt, according to the trader.

As a result, the paper has spent the past two sessions weakening on investor disappointment that the previously anticipated pay down would not be taking place.

The companies' bonds were also seen easier. A trader saw the particular issues he watches still languishing in the same mid-60s context at which they had traded on Wednesday, with the 7½% notes due 2008 at 65 bid, 67 offered, and its 7¾% notes due 2009 at 62 bid, 64 offered. The company's 8¾% notes due 2007 down about three points on the session at 74 bid.

Airlines unaffected by fare raises

Traders saw little or no movement in the bonds of airline issues, which have been a problem spot of late, with mounting investor fears that Delta Air Lines Inc. or Northwest Airlines Corp. might soon be forced into bankruptcy by a combination of sky-high fuel costs (crude oil prices, an indicator of jet fuel price trends, briefly touched $66 a barrel before settling at $65.80 - still a record high), heavy pension obligations, big debt loads, stiff competition from the low-cost carriers, and, in the case of Northwest, thorny labor problems.

Even the news that Delta and rivals Continental Airlines and the bankrupt United Airlines will raise fares to try to recoup some of their increased costs failed to stir anyone up.

"I didn't see too much in the airlines," a trader said, quoting Delta's 10% notes due 2008 around the same 18.75 bid, 19.75 offered context that the troubled Atlanta-based Number-Three 's bonds held on Wednesday.

"There's definitely trading out there," he said, "but we were not involved."

Another trader said the bonds of both Delta and Northwest "were trading out there - where they were." There was trading, but no price movement, with the Delta benchmark 7.70% notes due 2005 around 25, and its 8.30% notes due 2029 around 16-17.

Delta raised its fare by $10 on each leg of a trip, except in markets where it faces low-cost competition; there the fares will rise by $3 to $5 per leg. Continental quickly matched Delta's move, while United said it would raise fares by $2 to $5 on each leg of a one-way trip.

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