NRG steady as it files for Chapter 11; distressed market otherwise seen quiet

By Paul Deckelman and Sara Rosenberg

New York, May 14 - NRG Energy Inc. bonds were holding steady at their recent levels above 40 on Wednesday, after the Minneapolis-based energy company filed for Chapter 11 protection from the holders of its junk bonds and other creditors. Otherwise, things were pretty quiet; as one distressed-debt trader put it, "there just hasn't been movement in anything."

At his shop, for instance, they were trading odd lots of Polaroid Corp. bonds around the 6.625 bid level, while he saw Finova Corp. bonds "up a nip" at around 40 bid. Metromedia Fiber Network Inc. odd lots were moving around at four cents on the dollar, "real bottom of the barrel stuff."

The trader noted that those companies' bonds were all trading around the same levels they've held for a while. Earlier in the week, Metromedia filed its Disclosure Statement with the U.S. Bankruptcy Court for the Southern District of New York in Manhattan - moving it one step closer to possible emergence from bankruptcy. The filing of the Disclosure Statement follows its March 14 submission of a plan of reorganization to the court.

The lack of substantial movement in the distressed bond area mirrors the overall quietude seen in the high yield market secondary, where traders have complained that with tons of cash sitting around, waiting to be put to work, good-quality paper has been bid up to such tight-yielding levels that it no longer makes sense for junk bond accounts looking for yield to play in them; meantime, the less-secure, more risky credits have also been bumped up to unrealistic levels, given the economic fundamentals of those companies, and the low regard in which they are held by the major ratings agencies.

One area which has seen movement of late has been the energy group, with utility and merchant power producer names all moving up as many of them have been able to swing refinancing deals.

On Wednesday, NRG Energy bonds were seen hanging in around their recent levels above 40 bid, after the company's not unexpected Chapter 11 filing; its 8¼% notes due 2010 were seen at 42 bid/45 offered. Those bonds had languished around 38 bid for the longest time, but then climbed to around their current levels in stages starting earlier this month.

There was meanwhile some discrepancy on NRG's bank debt as one trader felt the paper was unchanged, while another thought it was stronger after the Chapter 11 filing.

According to one trader, the energy finance facility was quoted in the low to mid 30s and the Energy Inc. facility was quoted in the low 40s, unchanged from previous levels since many people expected the company to head in the Chapter 11 direction,

However, according to a second trader, the paper was stronger with the energy finance facility quoted at 34 bid, 37 offered and the Energy Inc. facility quoted at 44 bid, 46 offered.

NRG, a partially owned unit of investment-graded rated Xcel Energy Inc., which is not involved in the filing, said in its statement Wednesday that in order to supplement its liquidity position it had secured a $250 million debtor-in-possession financing facility from GE Capital Corp., subject to Bankruptcy Court approval.

The DIP funding would be utilized by its NRG Northeast Generating LLC subsidiary and some NEG subsidiaries. The company said that it expects that the DIP financing, together with its cash reserves and its ongoing revenue stream, "will be sufficient to fund its operations, including payment of employee wages and benefits, during the reorganization process."

The company further announced that it filed its Plan of Reorganization with the court, and anticipates the support of the majority of its creditors for this plan. The plan incorporates the terms of an overall settlement among NRG, Xcel Energy and NRG's major creditor constituencies that provides for payments by Xcel Energy to NRG and its creditors of up to $752 million. (See story elsewhere in this issue for full details.)

Also among the energy names, Pacific Gas & Electric's troubled National Energy Group wholesale unit - which may itself soon be headed for bankruptcy, according to the parent company - was seen a little lower on Wednesday, its 10 3/8% notes due 2011 dipping two points, to 49 bid, from 51 on Tuesday.

San Francisco-based PG&E said that National Energy Group is continuing to talk with lenders and bondholders about restructuring options, but with no agreement reached yet. The parent expects that any restructuring would be implemented with a Chapter 11 proceeding, with a filing possible even before the current quarter ends in June.

Calpine Corp.'s bank debt traded at 97.5 on Wednesday, according to a trader, who said the paper was sideways to up a tad.

On Tuesday, the bank debt moved up by three-quarters of a point to 97.25 bid, 97.75 offered and traded at 97.25 after the company released its earnings numbers and announced a plant sale.

For the quarter ended March 31, Calpine reported a $0.12 loss per share, or a $45.3 million net loss, compared with a $0.25 loss per share, or a $75.7 million net loss for the first quarter of 2002. The company achieved approximately $2.2 billion of revenue for the first quarter 2003, compared with approximately $1.3 billion for the first quarter of 2002.

Calpine bonds were holding steady on Wednesday, a trader said, with its 8½% notes due 2008 at 72 bid/offered. "Nothing was seen today." he said. He also did not see anything going on in other distressed energy names seen recently in the market such as Aquila Corp., which on Tuesday said it agreed to pay Calpine nearly $106 million to get out from under a long-term contract to supply natural gas to and buy saleable electricity from Calpine's Louisiana-based Acadia joint venture.

At another desk, however, a trader saw those same Calpine bonds a little weaker, down two points, to about 70 bid.

Apart from the energy names, not much was going on. Airlines, a trader said, were mostly grounded . He saw UAL Corp.'s 10.67% notes at 9-9.5 bid, but said "we couldn't get anyone to care" at that level. Other air carrier bonds stayed in the hanger Wednesday.

In the communications constellation, Western Wireless Corp.'s bank debt was said to be unchanged to up about a point, depending on which trader was asked.

One trader quoted the term loan B at 90½ bid and the revolver and term loan A at 91.5 bid. Although the paper was up on the bidside no offers were really floating around the market, the trader added.

However, according to a second trader the loans were unchanged, since he saw the term loan B trading at 90.5 on Monday and Tuesday.

When asked what's causing this firmness, the first trader replied that the bank debt could just be following the stock, which was up by a little over 20% on the day.

In general though, the rural cellular names have done pretty well recently as many market participants are beginning to feel like these companies may be able to access the capital markets again due to an overall improvement in performance.

Elsewhere, Revlon bonds were up a little, the cosmetics company's 12% notes pushing up to 97 bid from last week's levels around 94 - "nosebleed seats," as one market observer put it.

But the formerly busy Fleming Companies Inc. bonds "have dried up and widened out," the trader said, with the bankrupt food distribution company's 10 1/8% senior notes at around 17 bid/18 offered, and its 10 5/8% subordinated paper trading at under a penny on the dollar.

"It's been very quiet, and we've been doing a lot more odd-lot trading than normally," a trader said, "because there's nothing more to do."

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