Mirant bank debt firms on disclosure statement; Calpine gyrates at lower levels

By Paul Deckelman and Sara Rosenberg

New York, Sept. 22 - Mirant Corp. bank debt had a very active afternoon, traders said, rallying on the company's release of its second amended disclosure statement, although the bankrupt Atlanta-based energy concern's bonds were seen easier.

Elsewhere, Calpine Corp.'s bonds initially slid badly, continuing the downside momentum seen in Wednesday's trading. But traders said that those bonds later firmed off their lows to end pretty much unchanged.

The San Jose, Calif.-based power generating company's bank debt essentially replicated that pattern, sinking in the morning, but coming back in the afternoon, with traders in that market seeing players taking advantage of the dip as a buying opportunity.

In the automotive sector, bankrupt foam rubber products manufacturer Foamex LP's bonds were lower, as the senior secured notes continued to back away from the highs they had hit Monday when the Linwood, Pa.-based company filed for Chapter 11 protection from its bondholders and other creditors.

Meantime, Delphi Corp.'s bonds, after firming smartly in Wednesday's dealings on the news that the company's bank credit line is not yet totally exhausted - some in the market had been saying it was - were seen having come off those highs to end down a point or more on the session.

Mirant's 2003 paper was seen by bank debt traders as having jumped to 101.75 bid, 102.25 offered, up from previous levels of 100.5 bid, 101.5 offered.

"It felt weaker in the morning with the rest of the power sector," a trader said, "traded at 101, got as low as par, but then it rallied after the statement was released. They're just confirming what the real claim values are."

However, a trader in distressed bonds saw the company's 7.40% notes, which were to have come due last year, and its 7.90% notes due 2009, down ¾ point, at 112.25 bid and 113.25 bid, respectively.

Calpine bonds, loans volatile

Calpine Corp.'s bonds and its second-lien bank debt had another rollercoaster day, as levels in each market dropped off by a couple of points early in the session, but then bounced back as some investors saw it as a buying opportunity.

A bank debt trader said that at the opening, its second-lien paper was quoted at 74 bid, 76 offered, down from Wednesday's levels at 77.25 bid, 79.5 offered, which themselves represented a two-point erosion from Tuesday's close.

But by the close Thursday, that paper had moved up to 78.25 bid, 79.25 offered because "people came in to buy it once it got so low", the trader added.

In bond trading, Calpine was seen having fallen initially, traders said, continuing the slide seen Wednesday as controversy intensified over how the company was spending the proceeds from its recent sale of natural gas assets.

A market source said that at one point, Calpine's 8¾% notes due 2007 had plunged a whopping nine points to 63 bid, from 72 on Wednesday, while most other Calpine issues were down anywhere from three to five points. The source saw, for instance, Calpine's 7 5/8% notes due 2006 fall to 85.25 bid from 91.75 on Wednesday.

However, a trader at another desk said, while Calpine "did get hit, it ended up rallying by the end of the day, as the rest of the high-yield market did."

He saw the company's widely traded 8½% notes due 2011 fall as low as 50 bid, 52 offered in the early going, before coming off those lows to finish at 55.5 bid, 57.5 offered, about unchanged, while another widely traded issue, the 8½% notes due 2008, dropped to 56.5 bid, 58.5 offered in the morning, but finished little changed on the session at 62 bid, 64 offered.

Another trader said that Calpine "went all around" during the session. "It got clobbered, but then moved back up and rebounded at the end of the day."

He saw the 7 5/8s ending at 85 bid, 86 offered, up from their lows, while the 81/2s of '08 went out at 62.5 bid, 63.5 offered, "were they went out yesterday [Wednesday], having firmed back up from 56 bid, 57 offered in the morning.

"There was a lot of activity in Calpine," he said, "it seemed like there were a lot of bonds trading today. They all dropped five or six points, but then bounced back. The 81/2s "went on a wild ride."

Another market source initially quoted the 83/4s at 61 bid, which he called down nine points, but then said by the end of the day that the bonds were down only about four or five points to the 65 level.

The first trader said that those movements "will give you an idea about the kind of volatility they were experiencing today."

He said it was a combination of factors; "we did see some buyers step in at the lower levels, because the company got whaled over the past two or three days, with stuff down 10 or 15 points, especially on the long end. People just saw some value there."

In addition, he said, "the high-yield market took a little turn for the better at the end of the day, and I think that really supported the [Calpine] bonds and helped them climb back a little bit."

Those bonds and bank loan paper have been all over the place since Tuesday, when rumors emerged that the Bank of New York, the collateral trustee for senior secured note holders, has been asking questions about the reinvestment of proceeds from the July sale of domestic gas assets.

On Wednesday these rumors were confirmed by the San Jose, Calif.-based power company and on Thursday Calpine put out an official release in response to the Bank of New York inquiry.

As a result of the questions, Bank of New York has informed Calpine that it will be withholding withdrawals from the gas sale proceeds account until these disagreements can be resolved.

Calpine is evaluating its options in response to Bank of New York's letter and "intends to pursue all of its legal rights and remedies to resolve the dispute as soon as possible," the news release said.

The company went on to say that the proceeds from the sale were offered to first-lien noteholders, and that of the $785 million of outstanding notes, approximately $139 million were tendered in response to the offer.

"As previously reported in its quarterly report on Form 10-Q for the three months ended June 30, 2005, and as allowed under the company's indentures, Calpine is permitted to use the proceeds from the sale of its gas assets to acquire eligible natural gas and/or geothermal energy assets. Calpine has utilized approximately $360 million of the proceeds to acquire eligible natural gas assets. Following these acquisitions, approximately $400 million remains in the gas sale proceeds account with the trustee," the news release added.

Foamex drops

Apart from Calpine, there was some activity in the autosphere, with Foamex's bonds lower, "another loser," a trader said. He saw the company's 10¾% senior secured notes due 2009, which had firmed as high as 85.5 in initial dealings after the Chapter 11 filing, continuing to come in, just as they had on Wednesday, when the bonds had ended around the 80 mark. On Thursday, he said, they traded down into the high 70s, going out at 77 bid, 79 offered.

A source at another desk saw those bonds dip to 79 bid from 82.5, while Foamex's subordinated 9 7/8% notes due 2007 and 13½% notes that were to have been redeemed on Aug. 15 - but which were not - down half a point, from 7.5 to 7.

Delphi bonds end rise

Delphi's bonds, which had climbed on Wednesday, were seen having come in somewhat Thursday, with a market observer quoting the troubled Troy, Mich.-based automotive components supplier's 6.55% notes due 2006 at 72.75, down from 74, while its 6½% notes due 2009 eased to 68 bid from 69.5, its 6½% notes due 2013 at 65.5 bid, down from 68.5, and its 7 1/8% notes due 2029 at 62.75 bid, off from 64.25.

A trader at another shop saw the latter bonds fall to 61 bid, 63 offered, before coming off their lows to end at 62 bid, 64 offered.

Delphi's bonds had risen Wednesday after the company said it still had $300 million of capacity on its $1.8 billion of bank credit facilities available, and after chief executive officer Steve Miller said he would prefer not to take the company into Chapter 11.

Northwest, Delta gain

Among the bankrupt airlines, Northwest Airlines Corp. bonds "caught a bid at the end of the day" to finish up half a point, around the 24 bid, 25 offered level, while Delta Air Lines Inc.'s bonds were seen up about half a point, to 16.5 bid, 17 offered, after the Atlanta-based Number-Three U.S. carrier outlined a number of steps it plans to take to restructure the company, including flight route and schedule changes, job reductions and pay cuts for its employees.

© 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.