Calpine bonds, bank debt off on new woes; Delphi rebounds as company says credit line not exhausted

By Paul Deckelman and Sara Rosenberg

New York, Sept. 21 - Calpine Corp.'s bonds were sharply lower on Wednesday and its second-lien bank debt gave up at least another two points as talk continued that the Bank of New York, collateral trustee for holders of its secured bond debt, has been asking questions about the manner in which proceeds from the company's July sale of oil and natural gas assets were put to use.

Elsewhere, Delphi Corp.'s bonds were seen solidly higher, after the company's chairman and chief executive officer said he hoped to avoid a bankruptcy filing, and as the company disclosed that it still has some liquidity available under its bank credit facility - contrary to market rumors saying otherwise.

But while that helped the company's bonds and its New York Stock Exchange-traded shares, the bank debt - which has recently been rising on expectations of a Chapter 11 filing in which loan holders would be paid off at par - was seen lower on the chance that the troubled Troy, Mich.-based automotive electronics maker might be able to restructure outside the courts.

Calpine's bank debt was quoted Wednesday at 77.5 bid, 79.5 offered, according to a trader, on the heels of the big drop Tuesday. During that session, as rumors of the inquiries by Bank of New York floated around, the paper dropped by about three to four points to 78 bid, 79 offered. However, by the end of trading Tuesday, the San Jose, Calif.-based power company's paper had regained some ground with levels moving up to 80 bid, 81 offered for only about a one point loss on the day, a different trader said.

On the bond side, Calpine "was the big one today," a trader said, noting that as the day wore on, "the bonds, in the afternoon, began to really tail off."

He saw the company's 8½% notes due 2011 fall to levels around 56 or 57 bid, 58 or 59 offered, well down from 61 or 62 bid, 63 or 64 offered on Tuesday and at the open Wednesday, "down six or seven points."

He cited the uncertainty arising from the possible Bank of New York probe, and said he had also heard that "they were supposed to do some preferred deal, and it looks like they did not bring it."

Clearly, he said, "the Street doesn't like that, that's for sure."

He also saw the 8½% notes due 2008 down the same six to seven points, ending around 57 bid 58 offered. "Those are the two most popular bonds," he said, in terms of activity levels.

He also saw the 10 ½% notes due 2006, which "more of the retail-type guys have been buying, because it's short paper and they figure they're protected a little past the '06 maturity," at 88 bid, 90 offered - well down from 94 bid, 95 offered on Tuesday. "So you're definitely seeing a sell-off there."

Calpine "was down points," a trader in distressed bonds agreed. He saw the 8½ 2011 notes at 55 bid, 57 offered, and the company's 8¾% notes due 2013 at 67 bid, 69 offered, "down anywhere from two to four points, depending on where you were."

Another trader said that Calpine "got crushed," although he saw the 9 7/8% secured paper due 2011 down only about half a point on the day to 70.5 bid, 71.5 offered, because it is secured - although he said the paper had come down off much higher levels during the day around 72 bid, 73 offered, "before lunch."

The company's other bonds "fell more. The unsecureds got hit harder" on news of Bank of New York's action, although he said this was "not totally a surprise."

Calpine's NYSE shares fell 38 cents (12.54%) to $2.65. Volume of 27 million was almost triple the average daily handle.

Delphi rises

Elsewhere, Delphi Corp.'s bonds "were all over the place", a trader said, bouncing around at higher levels on CEO Robert "Steve" Miller's comments about his reluctance to enter bankruptcy, as well as the company disclosure in its SEC filing that it still has about $300 million undrawn on its credit line.

"That, plus Miller's comments that he'd be less inclined to go into bankruptcy made people think that they may be less inclined to have to do that."

Another trader agreed that Delphi was "trading pretty actively. They bounced around - they started the day higher" on Miller's comments, which were reported in The Wall Street Journal, "and then settled back down to below those [initially high] levels, and ended here."

He saw the benchmark 6.55% notes due 2006 open strongly higher, rising all the way up to 76 bid, before coming off that peak level to end at 74 bid, 75 offered - still up at least four to five points on the day. The company's other bonds were "up accordingly," with the 6½% notes due 2009 moving up to 69 bid, 70 offered from Tuesday's close at 64.5 bid, its 61/2s due 2013 pushing up to 68 bid, 69 offered from 63 on Tuesday, and the 7 1/8% notes due 2029 going home at 64.25 bid, 65.25 offered, well up from 60 at the close on Tuesday.

Another trader saw the 6.55s - which on Tuesday had dropped below the psychologically significant 70 mark - shoot back up to 73.75 bid, 74.75 offered, a gain of four points, while the 7 1/8s were perhaps "three points and change" better at 63.5 bid, 64.5 offered.

Another trader saw the 6.55s at 74 bid, 76 offered, up six points from what he said was the close Tuesday at a wide 68 bid, 72 offered, while the 7 1/8s ended at 64 bid, 66 offered, "up a couple" of points as well.

Delphi's New York Stock Exchange-traded shares jumped 46 cents (15.23%) to $3.48. Volume of 16.9 million was nearly three times the norm.

But while the bonds and the shares were sizzling, the bank debt was fizzling, with the revolving credit loan off by about a quarter of a point, while its term loan gained about a quarter of a point, traders said, as market players became more skeptical about the likelihood of a bankruptcy filing in the company's near-future.

The revolver was quoted at 97.5 bid, 98 offered and the term loan was quoted at 101.75 bid, 102.25 offered, according to a trader. By comparison, on Tuesday, the revolver had been quoted at 97.75 bid, 98.25 offered and the term loan was quoted at 101.5 bid, 102 offered.

The bank debt traders noted the news articles quoting Miller as saying he would prefer to do an out of court restructuring, causing investors to lean away from the expectation of a Chapter 11 filing - which was obviously good news for term loan holders, but not for revolver holders.

A trader explained that the only thing that was really working in the revolver's favor recently was the hope that the paper would be rolled into a debtor-in-possession facility and therefore, lenders could be paid down at par. Consequently, the news that a court-supervised bankruptcy may not be the path of choice for Delphi led to a softening in this particular debt's levels, the trader explained.

Delphi, in a filing with the Securities and Exchange Commission, also on Wednesday denied the recent market rumors that it had drawn the remaining $300 million under its $1.8 billion revolver. In August the company drew down $1.5 billion under the revolver for liquidity purposes.

Delphi is currently looking to former corporate parent General Motors Corp. for some sort of financial bailout and has warned that it could be forced into Chapter 11 if it does not get concessions from the United Auto Workers union and help from GM, and that a filing would come before Oct. 17 when federal bankruptcy laws will change, becoming less friendly to debtor companies as they will be given less time to come up with a reorganization plan.

Delphi, which was spun off from GM several years ago, inherited high wage and benefit costs as part of the transaction, forcing it to pay thousands of workers auto-manufacturing wages rather than the lower pay scale of most parts suppliers. Delphi is looking for GM to offer it the kind of relief offered to competitor Visteon Corp. by its former corporate parent, Ford Motor Co., which agreed to take back 23 unproductive, high-labor cost plants from Visteon, with an eye toward selling them.

Any such move by GM would need a green light from the UAW - which has said that it can't grant Delphi all of the concessions that the company is asking for.

But despite those bankruptcy warnings from the company, Miller - who took the reins of the problem-plagued auto supplier in July - took pains to assure the financial markets during the Journal interview that he would rather fix the company out of court rather than file for bankruptcy protection.

"Not going into Chapter 11 is much to be preferred," Miller said, after the company's stock had fallen to its all-time low on Tuesday.

Miller, who also serves as the chairman of Delphi, came aboard after stints at such companies that entered bankruptcy to restructure as Bethlehem Steel Corp. and, more recently, Federal-Mogul Corp.

However, the executive - who was also part of the team that successfully restructured Chrysler Corp. in the late 1970s without going into bankruptcy - was quoted by the paper as saying: "I have been through financial stress situations where we succeeded in keeping the company out of bankruptcy. I have been through financial stress situations where we use Chapter 11 as a process to deal with it. It is simpler, cheaper, quicker to avoid it, whereas the Chapter 11 process takes longer, costs more and has a lot of aggravation that goes with it."

Federal-Mogul loan dips

Apart from Delphi, traders said the revolving bank debt at Miller's old stomping grounds, Federal-Mogul, was off by about a quarter to a half point on the day following a private lender meeting that took place during the previous session, according to a trader.

The bankrupt Southfield, Mich.-based automotive components supplier's revolver traded around 94 to close out the day quoted at 93.75 bid, 94.25 offered, the trader added.

Foamex down

Also automotive, a bond trader saw Foamex LP's 10¾% secured notes due 2009 "down a few points" to around the 80 bid, 83 offered level, from prior levels around 84 bid, 86 offered.

The bankrupt Linwood, Pa.-based maker of foam rubber products for the automotive industry and other non-automotive customers sought Chapter 11 protection earlier this week.

The trader saw the company's unsecured, subordinated 13¼% notes, which were to have been paid off when they matured Aug. 15 but were not, and its 9 7/8% notes due 2007, which had previously been seen around 7.5-8.5, fall to around 5 bid, 7 offered - but those deeply distressed bonds "didn't do much" in terms of trading activity, he said.

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