Calpine convertibles up, notes dip; Insight Health bonds up on filing; Dura bonds, loan firm

By Stephanie N. Rotondo

Portland, Ore., May 30 - Traders were all about Calpine Corp. on Wednesday as rumors and an equity surge prompted the company's convertibles issues to climb and the bonds to drop.

The rumor mill is circulating a story that Calpine's bankruptcy exit plan could include a total bond buyout, giving equity and convertible holders the best bang for their buck. One trader, who had not heard the buzz, said it sounded "interesting" and not altogether impossible.

Another trader seemed amused that the name was popping up again.

"I have been talking about Calpine since 60 points ago," he said. "They have had a heck of a run."

Meanwhile, InSight Health Services Corp. filed its long-awaited prepackaged reorganization plan, prompting its debt to gain a few points but on light activity.

Under the plan, bondholders will receive the bulk of the reorganized company's stock, which one trader believes will have good value.

Despite a weak start in the morning, Dura Automotive Systems Inc. saw its bonds get better by the end of the trading day. Its loan also moved higher as investors hoped for a par recovery.

On the whole, traders indicated that, while better than Tuesday, Wednesday was still rather quiet.

One trader said he just saw a lot of "jockeying" in distressed names.

"I kind of got the feeling that things were down [early], but then came back as equities rallied," he said, adding the morning's lows were a "false weakness."

"There is more noise, but still certainly not a ton of activity," he continued. "[Investors] were not looking to sell things."

"It's heating up," said another trader. "Things are happening."

Calpine paper mixed

Calpine was called the big name of the day as traders saw the convertible issues drive upward and the bonds dip downward.

A trader said the 7¾% convertible due 2015 was up 6.5 points from Tuesday's close, trading as high as 141 during the day. The 8½% notes due 2011, however, he saw slip a point to around 127.

"They are off big," he said, noting that just three days prior the bonds had traded around 133, an all-time high.

Another trader said the convertibles were "way up," with both the 6% and 7¾% issues up 3.5 to 4 points. He pegged the 6% paper at 118.5 bid, 119.5 offered and the 7¾% issue at 139 bid, 140 offered.

The first trader said he thought the convertibles to be up on the back of the equity, which was also higher. The San Jose, Calif.-based power company's stock closed up 17 cents, or 4.82%, to $3.70.

However, the trader had not heard of the rumor swirling around that the company's exit plan would include retiring its unsecured debt - which other traders had pointed to as the cause for the day's movement.

"That's interesting," he said. If the rumor is true, that would mean that the upside would no longer be in the bonds, he noted, but in the convertibles.

"If you want to come out of [bankruptcy] whole, don't give the bond guys anything else than what they are owed," he said, which would likely include the defaulted interest pre- and post petition, as well as possible penalties. "I mean, if you have the money to do it. But if you have the money to do it, guess what? You are not in bankruptcy anymore."

The trader said it was not impossible - the situation has been seen before with companies like Foamex and Westmoreland Coal in 1998.

The second trader heard a slightly different rumor, but with essentially the same outcome.

According to the trader, he said the convertible holders were looking to organize. He said he was "fuzzy" on what they were trying to do, but that it seemed to include getting rid of the subordinated debt portion of the paper and simply holding on to the equity.

Still, "I don't know how you get that done," he said.

"Everybody wants something," he continued, "and there is not enough to go around."

InSight Health gains

As InSight Health Services announced it filed a prepackaged reorganization plan, the company's bonds got better by a couple of points, traders reported.

One trader said the senior floating-rate notes due 2011 was up to 97.5 bid, 98.5 offered, while another quoted the debt in the "high 90s." The first trader also saw the 9 7/8% notes due 2011 at 34.5 bid, 36.5 offered, and the other pegged the senior subordinated paper at 35 bid, 36 offered.

Under the prepackaged plan - filed with the U.S. Bankruptcy Court in Wilmington, Del. - bondholders will receive 90% of the company's new stock in exchange for $194.5 million in bonds. Shareholders will receive the remaining 10% of the equity.

The first trader said he thinks the case will go "rather smoothly" and sees good value in the reorganized company.

"The new equity could definitely have some value," he said. "That's what people are buying the juniors for."

The Lake Forest, Calif.-based company has been in process of exchanging the junior debt for equity. It recently extended the deadline for the holders to get in on the exchange to July 31.

Dura bonds, loan firm

Dura Automotive Systems bonds were seen weaker in early trading but came back by the end of the day to close higher.

A trader quoted the 8 5/8% notes due 2012 at 54 bid, 55 offered.

The Rochester Hills, Mich.-based automotive parts maker's loan was also firming as investors continued to feel good over the prospects of a par recovery, according to traders.

One trader said that the second-lien loan was trading around the 97 to 97½ area, mentioning that the debt has gained a couple of points over the past few weeks.

A second trader had the second-lien loan ending that day around 96¾ bid, 97¼ offered, up about three quarters of a point on the day.

The bankruptcy court overseeing the distressed company's case granted a four-month exclusivity extension Wednesday, which extended the plan-filing deadline to Sept. 30 from May 23 and the solicitation period to Nov. 30 from July 23.

Aveta loan better

Aveta Inc.'s term loan traded up on Wednesday as some buyers stepped in to the market, according to a trader.

The term loan ended the day at 76 bid, 78 offered, up about a point from previous levels, the trader said.

According to the trader, nothing has been resolved regarding the company's struggling Puerto Rico business, however, because buyers surfaced, levels strengthened.

Aveta is a Fort Lee, N.J., for-profit company focused on Medicare Advantage and the health care needs of the chronically ill.

Broad market mixed

Movie Gallery Inc.'s bonds traded as high as 89.5, a trader said. However, the 11% notes due 2012 did see an odd lot trade near the end of the day at 86.5 bid, 87.25 offered.

Doral Financial Corp.'s preferred issue "traded off a bit," according to a trader, who placed the paper around 139.

Sara Rosenberg contributed to this article.

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