Calpine bank debt seen firmer; Mirant bonds, loans continue rise

By Paul Deckelman and Sara Rosenberg

New York, Jan. 5 - Calpine Corp.'s second-lien bank debt was up once again Thursday, with levels jumping by close to two points, bank loan traders said. However, the bankrupt San Jose, Calif.-based merchant power producer's bonds - which had recently been on a technically-driven tear - were finally seen to have run out of momentum Thursday and were mostly unchanged.

The bank debt and bonds of another power generating company - Mirant Corp. - were meantime seen better for a second straight session, following the Atlanta-based company's emergence - finally - from Chapter 11 after a sometimes tumultuous 21/2-year restructuring effort.

Calpine's second-lien bank debt was seen two points better on the day, a trader said, closing out the session at 85 bid, 86 offered. The trader had seen some trades during the session as high as 85.75.

By comparison, on Wednesday the second-lien bank debt closed out the day at 83.25 bid, 84 offered, which was also stronger than previous levels of 81.5 bid, 82.5 offered.

Over on the bond side of the ledger, however, several traders said Calpine was largely unchanged. One of them quoted the company's 8½% notes due 2008 holding steady at 37.75 bid, 38.75 offered, while its secured 9 7/8% notes due 2011 were also "about unchanged" at 84.5 bid, 85.5 offered.

There was also no movement seen among the really short issues - Calpine's 7 5/8% notes and 10½% notes, each of which is due this coming spring; both stood pat at 44 bid, 46 offered.

And the trader saw Calpine's 8½% notes due 2011 actually retreating a little, to 29 bid, 30 offered, from 31.25 bid.

Calpine's bonds had recently been given a boost by technical factors connected with the credit default swaps market, since bonds have to be bought to fulfill settlements on single-name CDS contracts. Those contracts function like an insurance policy in protecting debtholders against bankruptcies and other default events - and require the surrender of the bond to the seller of the contract in order for the holder of the contract to be repaid.

The 8½% 2011s for instance, had risen to their recent peaks above 32 from the 22 bid level right before Calpine's Dec. 20 Chapter 11 filing.

Mirant loans soar

Elsewhere, Mirant's 2003 bank debt headed higher by about seven points, a trader said, as the company's old stock took a 4.41%, or $1.01, leap in price on the Pink Sheets. The trader explained that since the majority of the bank debt will be converted into equity the stock's performance gave the loan a nice boost.

The '03 bank debt was trading in the 124 bid, 124.5 offered context, the trader said.

A trader in distressed issues saw the company's bonds meantime continuing to climb in the wake of its emergence from Chapter 11 on Tuesday, "up two points or more across the board," he said.

He saw the company's 7.90% notes due 2009 having firmed to 130 bid, 132 offered from prior levels at 128 bid, 130 offered, while its 7.40% notes, which were to have matured in 2004, were likewise up a deuce at 128 bid, 130 offered.

The company's convertible notes were also seen much improved, with its 2½% converts due 2021 starting at 109 bid, 111 offered, pushing as high as 115 bid, before ending the day's trading at 113 bid, 115 offered. Its 5¾% converts due 2007 ended three points better at 122 bid, 124 offered.

While Mirant emerged from bankruptcy earlier in the week, its new equity is not expected to start trading until Jan. 11. The company has applied for its to be quoted on the New York Stock Exchange.

In addition, Mirant North America LLC's exit financing credit facility (Ba3/BB-/BB) allocated and freed up for trading on Thursday, with levels on the institutional portion of the deal quoted at 101 bid, 101.375 offered, according to traders.

The institutional portion of the facility is comprised of a $500 million seven-year term loan and a $200 million pre-funded letter-of-credit facility that are currently being traded as a strip, traders said.

The term loan and pre-funded letter-of-credit facility are both priced with an interest rate of Libor plus 175 basis points. During syndication, pricing on both these tranches was reverse flexed from Libor plus 200 basis points.

Mirant's $1.5 billion exit facility also contains an $800 million six-year revolver with an interest rate of Libor plus 225 basis points.

JP Morgan, Deutsche Bank and Goldman Sachs acted as the lead banks on the deal, with JPMorgan left lead.

Proceeds from the exit facility, which closed a few days ago, are being used to fund intercompany restructuring transactions and help pay claims against the consolidated Mirant Americas Generation LLC debtors.

Pliant senior bonds gain

A trader saw Pliant Corp.'s senior bonds better, in the wake of the Somerville, N.J.-based packaging company's filing of a pre-packaged Chapter 11 case to facilitate its previously announced restructuring.

He saw Pliant's 11 5/8% notes due 2009 a point better at 107 bid, 109 offered, while its 11 1/8% notes due 2009 firmed to 90 bid, 92 offered from 87 bid 89 offered.

But Pliant's 13% subordinated notes due 2010 were unchanged at 20 bid, 22 offered.

Owens Corning higher

The trader saw bankrupt Toledo, Ohio-based insulation maker Owens Corning's bond having pushed up to 81 bid, 83 offered from prior levels at 78 bid, 80 offered, but saw no movement in the bonds of another asbestos-challenged company, bankrupt Lancaster, Pa.-based floorcovering maker Armstrong World Industries, which were steady at 73 bid, 75 offered.

Delphi keeps moving up

In the automotive sphere, bankrupt Delphi Corp. - a former General Motors Corp. manufacturing subsidiary - was again on the rise, with most observers chalking that up to short-covering or other technical concerns rather than to any kind of fundamental investor optimism about the name.

A trader saw the bankrupt Troy, Mich.-based automotive electronics manufacturer's 6.55% notes due 2009 at 55.75 bid, 56.5 offered and its 7 1/8% notes due 2029 at 56 bid, 57 offered, both up 1½ points.

Although there was some news out on Delphi, with the federal bankruptcy court overseeing its restructuring having approved an extension of Delphi's exclusive rights to present a plan of reorganization to Aug. 5 from the original Feb. 6 deadline, participants mostly attributed the recent strength in the bonds - this was the third straight session they were solidly higher - to short covering or other technical factors.

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