Calpine bank debt up; Refco rebounds; asbestos names gain as bill moves forward

By Paul Deckelman and Sara Rosenberg

New York, Jan. 24 - Calpine Corp.'s second-lien bank debt rallied by about three points during Tuesday's session, traders said, as news of the bankrupt San Jose, Calif.-based power generating company's upcoming payments hit the market.

The bonds of bankrupt New York-based brokerage company Refco Inc. - which were mauled on Monday - seemed to have rebounded somewhat from their oversold condition on Tuesday.

The bonds of such bankrupt asbestos-challenged names as Owens-Corning and Armstrong World Industries were meantime seen better, perhaps given a boost by the news that the bill creating a mechanism handle asbestos-related medical claims will finally be debated in the Senate, more than a year after it was first introduced.

Calpine's second-lien paper closed out the day quoted at 87 bid, 87.75 offered, well up from opening levels on Tuesday morning of 84 bid, 85 offered, a trader said.

He said that news emerged during market hours that Calpine will be current on all first-lien debt and will be making payments on the second-lien debt at the end of March and the end of June of $78 million each.

These payments - essentially, interest payments - on the second-lien debt will be paid on a pro-rata basis across the second-lien bond and bank debt, the trader explained.

Calpine's bonds were meantime not much moved, several traders in that market said. Another had the company's bonds up slightly, with the 8½% secured notes due 2010 better by ¾ point at 86.25 bid, but its unsecured 8½% notes due 2008 up only ¼ point at 33.5 bid, and its 8 5/8% notes due 2010 unchanged at 24.5 bid.

And yet another trader said that the bonds were down a couple of points, with the company's 7¾% notes due 2009 at 36 bid, 38 offered and its 4¾% convertible notes due 2023 at 22 bid, 24 offered, each down two points on the day.

Refco rises

Elsewhere, a trader said that Refco's 9% notes due 2012 "seemed to be recovering" after having gotten crushed on Monday. He quoted the bonds at 68 bid, 70 offered, which he said was up from prior levels in the mid-60s.

A source at another desk called the bonds up 1¼ points at 68.25 bid, although one or two other traders said that Refco had already moved to a 68ish context in late trading Monday, and merely hung in there on Tuesday.

Refco's bonds had fallen from last week's levels around 73.5 bid, 74.5 offered, to as low as the 62-63 area on Monday, before snapping back late in the session to end somewhere in the mid-to-upper 60s.

Refco "firmed up," yet another trader said, pegging them at 68 bid, 69 offered Tuesday versus Monday levels in the lower 60s. Like most everyone, he didn't know what was behind Monday's drastic gyrations, suggesting "perhaps it was something said in bankruptcy court," although he had no factual knowledge of any new developments in the case.

Refco was forced into Chapter 11 last year in the wake of the discovery last August of several hundred millions of dollars of bad loans buried deep within the company's balance sheet, which led to the ouster of chairman Phillip R. Bennett, who was subsequently charged with securities fraud by federal prosecutors. Loss of investor confidence in the company - amid allegations that client funds had been secretly shifted from protected, regulated accounts to unprotected accounts at an unregulated subsidiary - ultimately led to the company's October bankruptcy filing.

Asbestos bonds higher

Bonds of companies forced into bankruptcy by massive asbestos claims were seen better, perhaps helped by the news that the Senate bill creating a $140 billion fund to settle the claims of people alleging they suffered medical problems because of asbestos exposure will finally come before the full Senate.

A trader in distressed bonds saw Toledo, Ohio-based insulation maker Owens-Corning's notes move up to 91 bid from 88, while Lancaster, Pa.-based floorcovering maker Armstrong World Industries' bonds firmed to around 81 or 82 bid from 79.

Senate Judiciary Committee chairman Arlen Specter said that the bill would come before the full Senate for debate starting Feb. 6.

Legislation setting up the industry-funded claims mechanism was first introduced early last year, passed the Judiciary Committee, but has so far been delayed at reaching the floor for a vote.

A trader at another desk saw Owens-Corning up 1½ points at 89.5, and Armstrong up a point at 81, but saw no movement in the bonds of bankrupt Southfield, Mich.-based automotive brake maker Federal-Mogul Corp. - also driven into bankruptcy by asbestos claims - at 36, unchanged.

Ford, GM up, other auto names steady

Elsewhere in the autosphere, Ford Motor Co.'s bonds, and those of its arch-rival, General Motors Corp. were seen stronger for a second consecutive session in the wake of Ford's having posted better-than-expected fourth-quarter and 2005 numbers and having outlined necessary steps to cut production capacity to more realistic levels and to likewise lower overhead by facility closures and headcount reductions. However, the bonds of most of the companies that supply Ford and GM with components, which are normally tethered to the fortunes of the carmakers, were seen largely unchanged.

A market source quoted GM's benchmark 8 3/8% notes due 2033 two points better at 72.5, and saw the carmaker's 7 1/8% notes due 2013 at 75.5 bid, up from 72.75 on Monday. He also saw GM's 8¼% notes due 2023 up by 1½ points at 70 bid.

A market source at another desk saw the 7 1/8s a full three points better at 76.5, and quoted the company's General Motors Acceptance Corp. 6 7/8% notes due 2012 a point better at 94.

GM and Ford "rallied with their stock," another trader said, quoting the GM 8 3/8s 1½ points better at 72 bid, 73 offered, while Ford's benchmark issue, the 7.45% notes due 2031, were also in that 72-73 context, up a point on the day.

Yet another trader, while seeing the GM 8 3/8s up 1¼ points at 71.5 bid 72.25 offered, saw the Ford bonds at 71.75 bid, 72.5 offered, up a point. As for the bonds of the respective financing units, GMAC and Ford Motor Credit Co., he saw GMAC's 8% notes due 2031 up 1¼ points at 101 bid, 101.75 offered, while Ford Credit's 7% notes due 2013 were unchanged at 88.75 bid, 89.75 offered.

GM's New York Stock Exchange-traded shares gained $1.20 (5.49%), to $23.05, on volume of 30 million, almost double the usual turnover, while Ford, in contrast, was up just eight cents (0.96%) to end at $8.40.

Delphi, others near unchanged

While the bonds of the auto giants were doing better, traders said that other automotive-related names were pretty much status quo.

Bankrupt Troy, Mich.-based automotive electronics manufacturer Delphi Corp. - a former GM subsidiary - were seen hanging in around the same levels they had on Monday, with a market source calling its 7 1/8% notes due 2029 up ¼ point at 57.5 bid, while its 6½% notes due 2013 down half a point, to 56.

Delphi's equally bankrupt Troy neighbor, Collins & Aikman Products Corp., was also seen by most in the market to have not moved, although one source saw its subordinated 12 7/8% notes due 2012 down a point at 7 bid. The company's 10¾% notes due 2011 meantime remained around 33 bid.

Bankrupt Novi, Mich.-based vehicular frames maker Tower Automotive Inc.'s 12% notes due 2013 were seen unchanged at 75.75 bid, a trader said, although a source at another shop called that level up ¾ point.

Among the non-bankrupt suppliers - whose bonds have still been recently hit hard by the downturn in the sector's fortunes - Dana Corp.'s 5.85% notes due 2015 were unchanged at 65.25, while the Toledo, Ohio-based vehicle systems maker's 6½% notes due 2009 were perhaps half a point better at 72.25.

A trader - who saw "nothing big" going on among the auto-parts bonds - saw Dura Automotive Systems Inc.'s 9% notes due 2009 half a point lower at 52 bid, while the Rochester Hills, Mich.-based parts supplier's 8 5/8% notes due 2012 were off 1/8 point at 82.75.

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