Mirant bank debt, bonds better on sector M&A news; Calpine gets boost from S&P

By Paul Deckelman and Sara Rosenberg

New York , Sept. 28 - Mirant Corp.'s bank debt rallied on Wednesday after news that NRG Energy Inc. is in advanced discussions to buy Texas Genco in a deal expected to be valued at $5 billion or more hit the market, according to a trader. The company's bonds were also on the upside, apparently on the news.

The bank debt trader saw Mirant's 2003 paper quoted at 107.5 bid, 108.5 offered, up from 104.25 bid, 105.25 offered. And, the bankrupt Atlanta-based energy company's 2004 paper was quoted at 106.5 bid, 107.25 offered, up from 103.25 bid, 104.25 offered, the trader added.

"People were just feeling good about [Mirant] given the NRG and Texas Genco news. I think they like the valuation on [the acquisition]," the trader explained.

A trader in distressed bonds meantime said that Mirant's bonds "were all up."

He quoted its 2½% convertible notes due 2021 two points ahead at 101 bid, 103 offered, while its 5¾% converts due 2007 were a point higher at 111 bid, 113 offered.

In the straight junk bonds, Mirant's 7.40% notes, which were to have come due last year, were up two points at 117 bid, 110 offered, while its 7.90% notes due 2009 were three points up at 118 bid, 120 offered.

Mirant's bonds, converts and bank debt have recently been firming, after it submitted its amended plan of reorganization and disclosure statement to the Houston bankruptcy judge overseeing Mirant's reorganization.

Calpine firmer on S&P comment

Also in the power generating sphere, a trader saw Calpine Corp.'s shorter-maturity paper firmer, citing an opinion Wednesday from Standard & Poor's that the largest U.S. operator of gas-fired power plants has enough cash to avoid filing for Chapter 11 bankruptcy protection until 2007.

"As people took S&P to heart, the short bonds moved up," he said, quoting the San Jose, Calif.-based generation company's 7 5/8% notes due 2006 a point better at 86 bid, 87 offered, while its 10½% notes due 2006 "really moved up" to 88 bid from 85.25 bid, 86.25 offered. He cited "its big coupon" as a factor in the big rise.

However, the trader said, Calpine bonds beyond the 2007 timeframe S&P cited did not join in the rise, with its 8½% notes due 2008 "half a point weaker, if anything," at 59 bid, 60 offered, while the 8½% notes due 2011 were unchanged at 52 bid, 53 offered.

Adelphia weaker

Elsewhere, a trader saw Adelphia Communications Corp.'s bonds weaker, although he had seen no fresh news out about the Greenwood Village, Colo.-based cable operator.

"They were down a couple of points," he said, quoting its 6% subordinated notes due 2006 falling to 2-4 from 4-6, its 10¼% senior notes due 2006 two points down at 76 bid, 78 offered, and its 101/4s due 2011 also down a deuce, at 80 bid, 82 offered.

Delphi down, rebounds

Traders noted some activity in the bonds of Delphi Corp., on news reports that the troubled Troy, Mich.-based automotive electronics manufacturer had asked former corporate parent General Motors Corp. for a bailout totaling as much as $6 billion.

A trader said Delphi's bonds "initially fell down" on a report by the Bloomberg News Service that Delphi was asking GM for a bailout package worth $6 billion to help it avoid bankruptcy, "as people said that GM is not going to go along with that."

However, he said, "after they thought about it a little" and decided the notion might not be so far-fetched, the Delphi bonds came up from their lows to "move up a little bit" and end pretty much unchanged.

He saw Delphi's 6.55% notes due 2006 ending the day at 70 bid, 71 offered, about where they started, while the 7 1/8% notes due 2029 also closed out unchanged, at 62 bid, 63 offered.

Another trader saw Delphi's 6.55s trading at 69 bid, 71 offered in the early going, before heading back up to 70 bid, 72 offered, while the 7 1/8s closed at 61 bid, 63 offered, which he considered to be up a point, as were the 6½% notes due 2013, which ended at 65 bid, 67 offered. He saw Delphi's 2009 61/2s unchanged at 66 bid, 68 offered.

Delphi was "all over the place," yet another trader observed, quoting the 6.55s at 70 bid, 71.5 offered, the 2009 bonds at 66 bid, 67.5 offered, and the 7 1/8s at 60.5 bid, 62 offered, all unchanged on the day.

In bank debt dealings, Delphi's revolver was quoted at 97 5/8 bid, 98 offered and the term loan was quoted at 102 bid, 103 offered, both unchanged on the day.

Delphi's New York Stock Exchange-traded shares meantime lost 13 cents, (4.73%) to close at $2.62 - just a penny up from the all-time intraday low of $2.61, set earlier in the session.

Delphi's bonds and shares have been battered by renewed speculation that the company will soon be forced into bankruptcy.

When it was spun off from GM several years ago, Delphi was saddled with burdensome labor costs heavier than those paid by other automotive parts suppliers as part of that deal, and it now wants GM and the union to give it some relief, the way GM competitor Ford Motor Co. and the union recently agreed to left Delphi rival Visteon Corp. get out from under some unprofitable high-labor-cost plants by transferring them back to Ford.

Delphi has set Oct. 17 - when bankruptcy law changes take effect rendering them less-friendly to debtor companies - as its informal deadline for an agreement.

CEO Robert "Steve" Miller has openly said that Delphi could well be forced into the courts if GM and the UAW don't help the company out. Despite statements last week which seemed to downplay the urgency of a bankruptcy filing by saying that he would prefer to work things out without getting the courts involved, Miller was quoted in Monday's Wall Street Journal as saying that "I make a new judgment every morning . . . Do we have enough time?" - comments widely interpreted to mean that the turnaround expert has likely concluded that a bankruptcy might be the only choice the company has.

A number of analysts have also indicated that they think Delphi could well go bankrupt; earlier in the week, Deutsche Bank equity analyst Rod Lache said that he now thinks that there's about an equal chance that Delphi could file or would reach a bailout agreement with GM and the UAW. Previously, Lache had believed that Delphi, GM and the union would reach some kind of agreement to keep the company out of Chapter 11. However, with few signs emerging from the three-way talks between the two companies and the UAW, he now rates that possibility a toss-up, at best.

"The primary reason for our change of thinking is that there may be a legitimate argument that GM and the UAW would be better off if Delphi files," Lache said in a research note.

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