Delphi bonds lower as talks with GM, union continue; Calpine loans, bonds down on asset proceeds suit

By Paul Deckelman and Sara Rosenberg

New York , Sept. 27 - Delphi Corp.'s bonds were seen by several traders on Tuesday to have eased as the troubled Troy, Mich.-based automotive electronics maker said that it was continuing its talks with General Motors Corp. and the United Auto Workers union, hoping to obtain relief from its high labor costs. However, several traders said the bonds ended pretty much unchanged.

Calpine Corp.'s second-lien bank debt fell off by a few points and the company's bonds were also seen lower as the company announced that it has filed a suit against The Bank of New York for withholding proceeds from the July sale of domestic gas assets.

Also in the power generation sphere, Mirant Corp.'s bonds were seen continuing to rise, the momentum from the bankrupt Atlanta-based power producer's amended plan of reorganization and disclosure statement apparently not yet spent.

A trader in distressed bonds saw Delphi's 6.55% notes due 2006 having fallen to 68 bid, 70 offered from 71 bid, 73 offered on Monday, while its 7 1/8% notes due 2021 lost a point to end at 61 bid, 63 offered.

However, he saw the company's 6½% notes due 2009 and 6½% notes due 2011 at 66 bid, 68 offered and 65 bid, 67 offered, respectively.

Delphi's bonds were being called by a trader at another desk unchanged on the day, with its 6.55s at 70 bid, 72 offered, its 6½% notes due 2009 at 66 bid, 68 offered, and its 6½% notes due 2013 at 64 bid, 66 offered.

Delphi said late Tuesday that it was continuing its talks with former corporate parent General Motors Corp. and the United Auto Workers union. Those talks are aimed at winning some relief from its heavy employee costs from GM and the UAW. Delphi has said it must have that assistance worked out before Oct. 17 - when the newer, tougher bankruptcy laws take effect.

Robert S. "Steve" Miller, Delphi's chairman and CEO, said in a statement that while he was "pleased that we continue to be in discussions on a consensual restructuring, as everyone is aware we have been working on this for quite some time and our board is committed to achieving a successful restructuring of Delphi, one way or another."

Delphi also stated that, "until a path is chosen for implementing its restructuring," it does not intend to comment further on these matters.

Federal-Mogul gains on U.K. deal

Also in the auto sphere, Federal-Mogul Corp.'s bonds were seen up a point at 28 bid, 29 offered; the bankrupt Southfield, Mich.-based auto parts maker reached an arrangement with British pension regulators regarding the pension plan for its Turner & Newall unit in the United Kingdom. Federal-Mogul will reportedly pay £250 million to the pension agency out of the total £375 million payout for its British operation's creditors.

Mirant keeps rising

Mirant's bonds continued to improve Tuesday, although a trader marveled: "I don't know what people see in it."

He quoted the company's 2½% convertible notes due 2021 a point better at 99 bid, its 5¾% converts three points better at 110 bid, 11 offered.

In the company's straight bonds, its 7.40% notes due 2004 were two points better at 115 bid, 116 offered, and its 7.90% notes due 2009 were at 115 bid, 117 offered.

The bonds and bank debt were seen having firmed smartly over the last few sessions, coinciding with the company's having filed an amended reorganization plan and related disclosure statement.

Calpine down

Also in the power-generating business, Calpine's bank debt closed out the session quoted at 76 bid, 78 offered, although it did trade a couple of times around the 78 level during market hours, according to a trader. Previously, the bank debt was being quoted around the 79 bid, 82 offered context, the trader added.

Calpine's bonds were also lower, with one market source quoting its 8½% notes due 2008 falling two points to 59.5 bid, its 10½% notes due 2010 retreating to 70 bid from 72.5, its 8½% notes due 2011 two points down at 54.5 bid, and its 8¾% notes due 2013 a point lower at 70.5.

A trader at another desk saw the company's secured 9 7/8% notes due 2011 half a point lower at 72 bid, 72.5 offered, although he saw its unsecured notes down more sharply, with the 7¾% notes due 2009 a point lower at 52 bid, 54 offered, while the 81/2s of '08 were a point lower at 59.5 bid, 60.5 offered.

On Tuesday, Calpine announced that it has filed an action in the Delaware Court of Chancery against The Bank of New York, as collateral trustee for its senior secured note holders, and Wilmington Trust Co., as indenture trustee for first-lien senior secured notes, in response to the recent withholding of the asset sale proceeds because of disputes over how the money was being put to use (see related story elsewhere in this issue).

Last week, The Bank of New York informed Calpine that certain unidentified first-lien note holders have raised disagreements regarding the reinvestment of the gas sale proceeds, and, acting through their counsel, these note holders demanded that the company's previously withdrawn funds be returned to the gas sale proceeds account.

Calpine has already 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.

Calpine claims that the proceeds from the sale were first offered to the noteholders, and that of the $785 million of outstanding notes, approximately $139 million were tendered in response to the offer.

Furthermore, Calpine say that the remaining first-lien note holders were given the opportunity to be bought out at par in the tender offer, and declined the offer.

The San Jose, Calif., power company goes on to argue that the indenture for the notes states that the company may use the remaining gas sale proceeds for "any purpose not otherwise prohibited by this indenture," including reinvestment in natural gas assets.

As such, the lawsuit seeks a declaration that Calpine's past and proposed purchases of natural gas assets are permitted by the indenture for the first-lien notes and related documents, and seeks an injunction compelling The Bank of New York to release the funds requested to be withdrawn for this purpose.

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