AMR flying high on positive cash flow news; Calpine up four points; Global Crossing higher

By Carlise Newman

Chicago, June 26 - AMR Corp. debt soared Thursday in distressed debt trade on news that it had positive cash flow from operations in May, helped by reduced costs and improved unit revenue.

According to a Form 8-K filed Wednesday with the Securities and Exchange Commission, AMR said that if the improved operating revenue environment continues, it expects to report positive operating cash flow for June.

AMR's 7.8% notes due 2006 were quoted at 53 bid, 58 offered, up three points from Wednesday, a distressed debt trader said. Its 9% notes due 2011 were quoted at 75 bid, 76 offered, also up three points.

According to the filing, unit revenue in May was up 4% from year-ago level and the company is witnessing improved unit revenue in June compared with year-ago level.

The news prompted numerous upgrades and earnings revisions, including that of Credit Suisse First Boston and Goldman Sachs.

"AMR was nuts, just insane today. We could barely keep up," a distressed debt trader said.

Even more active was Calpine Corp., which has been "going like crazy" during the last few sessions.

Calpine said Thursday it plans to sell about $1.8 billion in second-priority senior secured notes and term loans. The final principal amount and note maturities will be determined by market conditions.

Calpine's 8 ¼% notes due 2008 were quoted at 91.5 bid, 93.5 offered, up "a good four or five points" from Wednesday, a trader said.

"They were incredible. They shot up four points right after the news came out and just stayed there and traded at that level," the trader said of the paper.

In a press release Thursday, the San Jose-based power company said the notes and term loans will be secured by substantially all of its directly owned assets, including natural gas and power plants, as well as the stock of Calpine Energy Services and other units.

Calpine intends to use the net proceeds to repay existing debt, including about $950 million in term loan borrowing and $450 million under the company's working capital revolvers.

The company said it expects to establish a $500 million working capital revolver, which will be secured by a first-priority lien on the same assets that will secure the notes and term loans. The revolver will replace Calpine's existing $950 million working capital revolver.

In other news, XO Communications Inc. offered $200 million in cash to certain Global Crossing Ltd. bondholders to encourage them to back its takeover offer for the bankrupt telephone company.

Global Crossing's 9 ½% notes due 2009 were up half a point, to 4.5 bid, 5 offered, a trader said.

In making the latest $200 million overture, XO hopes to get the unsecured creditors to support its proposal rather than Global Crossing's exclusive agreement to sell a 61.5 percent majority stake to Singapore Technologies Telemedia, or STT.

"They don't have much time," a distressed debt trader said of Global Crossing. "They'll run out of money if something doesn't happen soon."

Under the terms of the deal, XO will pay holders of the $2.25 billion senior secured Global Crossing bank debt $220 per $1,000 of principal, or $495 million. XO will pay holders of Global Crossing's pre-petition unsecured indebtedness $200 million in cash in full satisfaction of all unsecured claims.

A disclosure statement hearing for the XO Plan must occur on or prior to August 16, 2003 and a confirmation hearing for the XO Plan must occur on or prior to September 30, 2003.

In addition, allowed administrative and priority claims will be paid in full as and when allowed or on such other terms as holders of such allowed administrative and priority claims may agree but such allowed claims shall not exceed $195 million.

"This is a good deal on both sides, if it ever goes through," a trader said.

XO wants its proposal to be considered concurrently with the STT agreement, rather than Global Crossing getting a four-month extension on its exclusive deal with STT.

Global Crossing, which filed for bankruptcy-court protection from its creditors in January 2002 amid massive debts and sluggish growth, sought bankruptcy court approval on Thursday to extend the exclusivity period by four months, so the STT pact would have more time to get government approval. The exclusivity period prevents Global Crossing from weighing new takeover offers.

XO, which is more than 80 percent owned by billionaire investor Carl Icahn, has increased its offer for Global Crossing assets or debt four times. XO emerged from bankruptcy in January.

Elsewhere, Owens Corning's 7 ½% notes due 2018 were seen at 56 bid, up from 48 ½ bid, 50 offered. Its 7% notes due 2009 were quoted up 3 ½ points to 53 ½ bid.

Adelphia Communications Corp., which has been steadily rising recently "for no particular reason" saw its 8 3/8% notes due 2008 firm to 62 bid, 63.5 offered, from 60 bid Wednesday.

Conseco Inc. was up "a little" on Wednesday and was unchanged Thursday across the board. The insurance and lending company's extended bonds were quoted at 53 bid, 55 offered, while its unextended bonds were seen at 31 bid, 33 offered.

On Wednesday, Conseco sold its finance arm to a group of private investors and a unit of GE, the buyers said in separate statements on Wednesday. The sale of Conseco Finance is the latest step in Conseco's push to exit Chapter 11 bankruptcy protection as an insurance-only company.

Green Tree Investment Holdings' $850 million purchase of the finance unit closed on Monday and follows court approval last week of Conseco Finance's newest reorganization plan.

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