Calpine bonds up after company files plan; Linens 'n Things off on analyst comment

By Paul Deckelman

New York, June 21 - Calpine Corp. bonds were seen having generally powered up on Thursday, in line with a rise in the bankrupt San Jose, Calif.-based electric power producer's shares, after its late-Wednesday announcement that it had filed its reorganization plan with the bankruptcy courts and anticipates emerging from Chapter 11 by the end of the year.

On the downside, Linens 'N Things Inc.'s bonds were seen having fallen several points on the session after an investment bank had negative things to say about the Clifton, N.J.-based home furnishings retailer.

The explosive rise in Sea Containers Ltd.'s bonds seen over the past several sessions as the company got some idea about its potential pension plan shortfall slowed to a half on Thursday.

And Remy International Inc.'s bonds - which also had been on a tear over the previous few sessions on the news of bondholder support for its restructuring effort - were seen mixed.

Calpine climbs on plan

Calpine's bonds firmed solidly in the wake of the official filing of its plan of reorganization with the U.S. Bankruptcy Court for the Southern District of New York, which is overseeing the troubled power producer's massive restructuring.

A trader saw Calpine's 7¾% notes due 2009 as having jumped 4 points on the session to 123 bid, 124 offered, and also saw the 8½% notes due 2008 issued by Calpine's subsidiary, Calpine Canada Energy Finance ULC, as having also risen to that same level, from 120.5 bid, 121.5 offered. He further saw the company's convertible issues up 1½ points across the board.

At another desk, a trader saw the company's 8½% notes due 2011 up 3½ points at 129 bid, 130 offered, citing the filing of the plan as the catalyst. The 8¾% notes due 2007 were similarly up 3 points, to 127 bid.

Another source saw some very busy trading in the 8¾% notes that are slated to mature on July 15, saying they moved up about 4 points on the day to the 127 level, while the company's zero-coupon notes due 2014 were 5 point winners in active dealings at 116. Another 5 pointer was the 75/8% notes that were to have come due last year, which rose to the 122 level. The widely traded 2011 81/2s were quoted at 129.5, but the source called that only a ½ point gain, noting the bonds had previously been seen moving up there anyway.

Calpine's Pink Sheets-traded shares were meantime seen up 40 cents (13.65%) to $3.33, on volume of 50.4 million shares - more than six times the average daily turnover.

The bonds and shares shot up on investor optimism about the likely return under the company's reorganization plan. Calpine anticipates paying its unsecured creditors somewhere between $8 billion and $8.9 billion total. While the company said hopes to pay the creditors in full, some might only get 91 cents on the dollar, depending on the total value of the company's assets and the amount of allowed claims. Should the latter figure be too high, Calpine shareholders could wind up with nothing - or they might get as much as $3.53 per share, according to published reports, if the numbers shake out according to the company's plans.

Calpine has lined up some $8 billion of financing from a lender group that includes Goldman Sachs and Morgan Stanley.

Before the complex restructuring proposal can be approved by U.S. Bankruptcy Court judge Burton Lifland, creditors, shareholders and other interested parties are expected to mount numerous objections to provision of the plan, delaying the earliest anticipated emergence from Chapter 11 to the end of the year - about two years after its filing.

Linens 'n Things unravels

A trader saw Linens 'n Things' floating-rate notes due 2014 fall about 3 points on the session to 79 bid, 80 offered.

He cited a research piece on the specialty retailer put out by Merrill Lynch &Co. which "tore them apart and pushed the bonds down." He did not have any details about what specifically was said in the report.

A source at another desk, noting some very active trading on size in the bonds, saw them hovering in a 79ish context all day, down more than 4 points on the session.

Sea Containers steadies, surge abates

Sea Containers bonds - which had risen strongly over the past few sessions - seemed to steady out on Thursday at round the same levels they held the session before.

A trader said he "didn't see any change" in the bonds. The 10¾% notes that were to have come due last year were holding at 98 bid, 99 offered, while the 7 7/8% notes due 2008 were at 94 bid, 95 offered and the 10½% notes due 2012 at 97 bid, 98 offered.

Those bonds had gained over the previous several sessions as the British pension authorities finally ruled on the bankrupt Bermuda-based maritime and railroad transportation provider's pension obligations.

Although the pension regulator said the company had to pay about £100 million to cover shortfalls in two pension plans covering the employees of its U.K. subsidiary, Sea Containers Services, traders said the pension liability is actually considerably less than originally feared - about $175 million versus the $240 million worst-case scenario that was being projected.

Sea Containers is considering an appeal of the ruling.

Remy rise may have topped out

Another name which has been sizzling for most of the past week, Remy International, also seemed to be finally fizzling out.

A trader said the troubled Anderson Ind.-based automotive electrical systems manufacturer's Delco Remy 8 5/8% notes coming due later this year "stayed the same" at 110 bid, 112 offered, while its 11% notes due 2009 and 9 3/8% notes due 2012 were both seen at 98 bid, par offered, down from 102 bid, 104 offered.

At another shop, however, a trader was quoting the senior notes at 110.5 bid, 111.5 offered, which he called up 2 points on the session, and said the other bonds in the capital structure had also firmed.

Remy's junior bonds had shot up nearly 30 points over the previous several sessions, and the seniors up nearly 15 points in that time, to current levels, after the company announced last Friday that its bondholders were backing its proposed restructuring plan, which will leave those bondholders owning all of the company's equity, while current stockholders are frozen out.

Remy said that with the blessing of the bondholders, it will soon file a pre-packaged bankruptcy case to implement that restructuring plan.

Among other distressed automotive names, Tower Automotive Inc.'s 12% notes due 2013 issued by its RJ Tower Corp. subsidiary were being quoted at around 8.25, up about ¾ point from prior levels, after the bankrupt Novi, Mich.-based vehicle frame maker said that it had received no other bids from potential buyers, and so its previously announced deal to be acquired by Cerberus Capital Management LLC for about $1 billion would proceed.

A trader said Tower had been "a dead name" which had not traded in quite a while previously.

The trader also saw little or no activity in the bonds of bankrupt parts suppliers Dana Corp. or Delphi Corp.

Hines Horticulture trades lower

He did see a drop in Hines Horticulture Inc.'s 10¼% notes due 2011 to about 79 bid, 80 offered, down from prior levels offered at 82, although he saw no fresh negative news out on the Irvine, Calif.-based supplier of plants to nurseries and home improvement stores.

Another market source saw the bonds down 2 points to 80 bid, while someone at another desk saw them down 3 points to reach that level.

Tembec lower

One of the traders saw Tembec Inc.'s bonds down about a point to 1½ points across the board, although he saw no fresh news out about the troubled Canadian forest products company.

Tembec's 8 5/8% notes due 2009 eased to 65 bid, 66 offered, its 8½% notes due 2011 retreated to 55 bid, 56 offered, and its 73/4s dropped back to 54 bid, 55 offered.

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