Mirant bank debt lower; Calpine, Winn-Dixie, Refco rise

By Paul Deckelman and Sara Rosenberg

New York, Dec. 12 - Mirant Corp.'s bank debt fell off by about a point or two during Monday's quiet trading session, according to traders, who said that there was no particular news sparking the downturn.

On the upside, Calpine Corp bonds were sup several points, in response to Calpine's choosing as its new chief executive officer the same man who turned around the fortunes of HealthSouth Corp. and Charter Communications Corp. in out-of-court restructurings.

The bonds of Winn-Dixie Stores Inc. and Refco Inc. were also seen better, carrying the momentum they had built up on Friday forward.

Mirant's 2003 bank debt was being quoted at 111 bid, 113 offered, and the '04 and '05 bank debt was quoted at 109.5 bid, 111 offered, a trader said.

Early Monday morning, the Atlanta-based energy company did file an 8-K with the Securities and Exchange Commission disclosing that in early December one of the generating units at its Chalk Point facility experienced a forced outage as a result of a structural failure.

The unit is expected to be out of service for at least four weeks, but to the extent the unit is unavailable for an extended period the lost revenue could have a material adverse impact on the company's financial performance, the filing said.

Over on the bond side of the ledger, a trader saw the company's 7.90% notes due 2009 and its 7.40% notes that were supposed to have come due last year at 124 bid, 126 offered and 123 bid, 125 offered, respectively.

Calpine better on CEO hire

Elsewhere, the news that Calpine Corp. had picked a veteran turnaround expert as its new chief executive officer was seen giving the troubled San Jose, Calif.-based power generating company's bonds a boost.

A trader saw the company's unsecured 8½% notes due 2008 at 25 bid, 26 offered, up from 23.75 bid, 24.75 offered on Friday, while its 8½% notes due 2011 improved to 19.5 bid, 20.5 offered, up from 18 bid, 19 offered on Friday.

However, the 10½% notes due 2006 were up only half a point at 33.5 bid, 34.5 offered.

Among the company's secured issues, the trader said, Calpine's 8½% notes due 2010 pushed up to 75.5 bid, 76.5 offered, versus Friday's 74 bid, 75 offered.

The bonds apparently reacted to the news that Calpine's board of directors had tapped turnaround veteran Robert May to lead the company.

May, who replaces ousted CEO Peter Cartwright, most recently helped guide Birmingham, Ala.-based health-care provider HealthSouth through an accounting scandal and led a turnaround at debt-plagued St. Louis-based cable television company Charter Communications as interim CEO.

Calpine, he said in a statement, needs to "reduce our debt levels, improve our balance sheet and align our business strategy and operational structure with the current economic climate and energy market conditions."

Winn-Dixie gains

Also on the upside, a trader in distressed notes quoted Winn-Dixie's 8 7/8% notes due 2008 at 78 bid, 80 offered, up two points, continuing the firming trend seen last week after the bankrupt Jacksonville, Fla.-based supermarket operator projected that it will emerge from bankruptcy in about six months, which overshadowed fiscal first-quarter results showing lower sales and wider losses than the year-ago comparative figures.

Winn-Dixie had disclosed in a Securities and Exchange Commission filing as the market was closing on Thursday that it expects to emerge from Chapter 11 in June of next year. The company that emerges will be a much downsized version of its former self, with some 575 stores - about one-third of its pre-bankruptcy size - in its home turf of Florida, in neighboring Alabama and Georgia, and in Louisiana, Mississippi and the Bahamas.

The company will employ about 58,00 people when its restructuring is completed, well down from over 100,000 when it filed for Chapter 11 in mid-February.

The venerable Winn-Dixie - for many years the dominant supermarket chain across the southeastern United States - was forced into its restructuring after several years of sharply declining sales due to aggressive moves into its traditional territories by rival supermarket operators such as Publix and, especially, Wal-Mart Stores's rollout of its "superstore" format, including supermarket-like sections in its discount stores that undercut Winn-Dixie's prices. Winn-Dixie's efforts to remake itself as "your neighborhood store" couldn't compete and the company was forced to file after vendors stringently tightened their terms.

Winn-Dixie - which is in the process of closing and attempting to sell stores which are not part of its core - said in the filing that 81 stores already have been sold, generating proceeds of about $40.8 million. Another 245 stores were closed at the end of November, as well as three distribution centers and two dairies.

Refco keeps moving up

The trader further saw Refco's 9% notes due 2012 - which rose last week - continuing to rise on Monday, to 78 bid, 80 offered from 75 bid, 77 offered.

The bankrupt New York-based financial services company's bonds had bounced solidly on Friday, after having fallen sharply on Thursday when it was reported to have admitted that some time after its Chapter 11 filing, it transferred securities from customer accounts in one subsidiary to another, and later sold most of the securities involved - breaking an agreement to bar such transactions.

GM slips a little on S&P cut

General Motors Corp. bonds and those of its General Motors Acceptance Corp. financial unit were off after Standard & Poor's downgraded the struggling automotive giant and warned that bankruptcy was a possibility - even though, as one trader put it, "I can't believe that it was a surprise to anybody.

"The bonds really didn't do much" in response to the downgrade, "maybe down a half. Maybe some issues are actually up a little bit. It was kind of like a non-event."

He pegged GM's benchmark issue, the 8 3/8% notes due 2033 at 72, down from opening levels around 73.5 bid, "so that was down a point or two." He added that "it was not like they were down five, six seven points on that stuff. The market likely pretty much priced it in."

He further noted that "late in the day, there was talk from an S&P analyst that maybe at some point [down the road], six months or so, maybe they'll have to file if they can't get their union problems taken care of. That came from an S&P analyst late in the day, so maybe that put some low pressure on [the GM and GMAC issues]."

S&P dropped GM's corporate credit rating to B from BB- previously, noting that the downgrade reflected "GM's ability to turn around the performance of its North American automotive operations."

The ratings agency further warned that "if recent trends persist, GM could ultimately need to restructure its obligations (including its debt and contractual obligations), despite its currently substantial liquidity and management's statements that it has no intention of filing for bankruptcy."

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