More upside for Calpine; Delta bonds gain on exchange talk

By Paul Deckelman and Sara Rosenberg

New York, May 4 - Calpine Corp.'s bank debt jumped up about three to four points on Wednesday as its junk bonds also continued the upward trend that has been seen every day this week.

Owens Corning's bank debt was seen better even though the bankrupt Toledo, Ohio-based insulation maker reported a big first-quarter loss versus a year-ago profit, mostly due to provisions it had to take in connection with its continuing legacy asbestos problems.

And a trader saw Delta Air Lines Inc.'s bonds going skyward - particularly on the short end of the company's capital curve - propelled by rumors that Delta is likely to try to take out its 7.70% notes due 2005 via a note exchange.

Calpine's second-lien paper was being quoted at 80 bid, 81 offered by late day, a bank loan trader said, while a second trader said that the paper was going out at 79 bid, 80 offered.

On Tuesday, one trader had Calpine quoted at 76 bid, 77 offered and said that the paper was only up about half to three-quarters of a point on the day, since he traded it at 76 on Monday. A second trader meantime had the paper quoted at 77 bid, 78 offered and put levels up by three points on the day from Monday's close at 74 bid, 75 offered.

The Calpine paper had also seen gains during Monday's session as well. In fact, since the release of preliminary first quarter numbers last Friday, Calpine's second-lien term loan has gained somewhere in the range of 8½ to 9½ points.

In the bond pits, Calpine "was racing back," a trader said, although he saw the San Jose, Calif.-based power company's secured paper with most of the gains.

The trader saw the company's 8¾% secured notes due 2013 at 74 bid, up "a couple" of points, while seeing the unsecured bonds, like the 8½% notes due 2008 and 8½% notes due 2011, both up half a point at the most, at levels in the upper 50s.

Calpine "just continues to improve," another trader noted, quoting the 8½% notes due 2008 as having gotten better at 61 bid, 63 offered, well up from 58 bid, 60 offered.

"The short side rallied," a trader in distressed bonds said, quoting its 7 5/8% notes due 2006 up four points at 80 bid, 82 offered, while its 10½% notes due 2010 were five points up at 76 bid, 78 offered.

The financial results that Calpine released early - the official numbers are due out Thursday - included expectations of cash and cash equivalents on hand of approximately $800 million, EBITDA, as adjusted for non-cash and other charges, of approximately $240 million and fully-diluted loss per share of approximately $38 cents.

The company announced these results almost a full week ahead of schedule to counter bankruptcy rumors which had been playing havoc with Calpine's equity, bonds and second-lien loan paper, even though the company had been dismissing the market's bankruptcy talk as "false rumors."

Mirant loan higher

Elsewhere in bank loan trading, Mirant Corp.'s 2003 and 2004 debt gained about half a point during the session, with levels closing out the day around 73 bid, 73.5 offered, a trader said.

"Market just felt a little better," the trader said, in explanation of the Atlanta energy company's upward move.

Owens Corning bank debt up

Owens Corning's bank debt was up about two points on the day, with quotes closing out the session around 114.5 bid, 115.5 offered, a trader said.

On Wednesday, Owens reported first quarter numbers that included a $4.28 billion operating loss on sales of $1.4 billion compared to a $34 million operating income on sales of $1.2 billion in first quarter 2004. The sharply widened operating loss was attributed to a $4.34 billion increase in reserves for asbestos-related liabilities.

"I didn't even look at the numbers. It's all legislation driven. And the market was up," the trader added.

Efforts last week to finally get a vote on the long-awaited Senate claims mechanism bill proved to be fruitless, so the process was put on hold, pending the next meeting of the Senate Judiciary Committee on May 12.

Delta short notes jump

Delta's 7.70% notes due 2005 were seen up four to five points on the session, at 80 bid, 81 offered, with a trader citing "rumors swirling around" about a possible exchange offer, "as the company did last year."

He allowed that "it's not concrete at all," but noted what happened last year, when "a large holder" agreed to accept new 8% notes due 2007 in a private exchange deal with the company.

"I guess the assumption is something like that would be happening if [the story] is true."

"If the big holder goes along with this, the bonds remaining - the company may take them out."

However he agreed that at this point, nothing official has been said.

The trader said that virtually all of the movement was in those 7.70% notes, with the Delta 8.30% notes due 2029 unchanged at 26.5 bid, because "all of the focus was on the '05s," he said.

Auto names lifted with GM

News that billionaire investor Kirk Kerkorian has offered to increase his holdings in General Motors Corp. by buying an additional 5% not only sent the giant automaker's recently battered bonds speeding upward on Wednesday, but it towed some of the purely high-yield automotive supplier names upward with it.

Among them was bankrupt EaglePicher Industries' 9¾% notes, which closed at 63 bid, 65 offered, up a point. Also gaining was the bankrupt Tower Automotive, whose 12% notes were also a point higher at 53 bid, 54 offered.

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