Calpine higher on Saltend sale news, Amkor up too; Tekni-Plex, Rafaella Apparel plan offerings

By Paul Deckelman

New York, May 31- Calpine Corp. bonds were heard to have firmed smartly on Tuesday, up anywhere from two to four points on the day, depending on the issue and on who was quoting it. That rise followed the San Jose, Calif.-based power generating company's announcement that it has reached an agreement on selling its Saltend generating station in Britain for total proceeds of about $925 million.

Also on the upside was Amkor Technology Inc. following the company's revelation Friday in a regulatory filing that its lenders had agreed to amend the West Chester, Pa.-based high tech company's credit agreement to give it more financial flexibility.

In the primary market, Tekni-Plex Inc. announced plans to sell $150 million of new seven-year notes, with proceeds slated to repay debt and for general corporate purposes, while Rafaella Apparel Group Inc. was said to be offering $160 million of new six-year notes to help fund a leveraged buyout of the company.

"It was a pretty quiet day," a trader observed. "The market was obviously strong, with Treasuries up two points [following a lower-than-expected reading for the Chicago Purchasing Managers Index of economic activity], and our stuff was tight. But there really was no two-way flow, and not much going on in any of the sectors that I could see."

Helping keep a lid on things was the fact that some desks were not fully staffed or back up to speed following the three-day Memorial Day holiday break, which had seen an abbreviated session Friday, when the debt markets closed at 2 p.m. ET, and a full closure of U.S. financial markets on Monday.

"Bonds were trading stronger - definitely not near their highs, but well off the lows across sectors, whether it's healthcare, or gaming, or paper and packaging, everything seems to have a decent bid to it," the trader added.

Calpine jumps on sale

A name which did see some measure of activity at higher levels was Calpine, whose bonds were seen having shot up as much as five points in morning trading after it announced the pending sale of the Saltend Energy Centre in Hull, England.

Calpine's bonds "were up five or six points with the news," the trader said, although he saw the notes as having come off their highs later in the session to settle in and close up perhaps two points. He saw the company's benchmark 8½% notes due 2011 closing at bid levels around the 59-60 area, up about 2½ points from Friday's finish at 57.5 bid, 59.5 offered, and saw similar rises "across the board."

Other traders saw bigger going-home gains; one quoted the Calpine 8½% notes due 2008 as having firmed to 59 bid, 61 offered, "up a couple of points" from 55 bid, 57 offered on Friday.

Another trader saw the company's 8 5/8% notes due 2010 having jumped all the way to 59 from prior levels around 51, but saw more conservative gains in other issues, with the 9 7/8% notes due 2011 rising to 72.5 bid from 70, the 11½% notes due 2011 firming to 85.75 bid from 84, and the 8½% 2011 bonds three points better on the day at 60.75 bid.

A market source saw Calpine's 8½% notes due 2010 up nearly three points on the day at 72.75.

Calpine's New York Stock Exchange-traded shares meantime zoomed 28 cents (10.37%) to $2.98, on volume of 24.6 million, nearly double the usual turnover.

Calpine announced that it would sell the 1,200 megawatt Saltend plant to a partnership between International Power plc and Mitsui & Co., Ltd. for a total of $925 million - a clear premium over the $810 million Calpine paid for the plant in 2001. Calpine - which is in the process of selling such non-core assets as Saltend to raise money with which to bring down its debt, solicited bids from a number of would-be buyers before agreeing upon a deal with International Power and Mitsui.

Calpine said that the net proceeds from the sale of Saltend will be used to redeem two existing series of redeemable preferred shares for approximately $620 million, and then "as permitted by Calpine's existing bond indentures." Calpine became embroiled in a legal controversy when a holder of some of the bonds issued by its Canadian subsidiary and backed by revenues from Saltend, sued in Nova Scotia, demanding that the court force Calpine to dedicate the proceeds from any Saltend sale to redeeming its Calpine Canada Energy Finance II ULC 8 7/8% bonds due 2011 and 8¾% bonds due 2008. Calpine is contesting the suit, saying it is legally obligated to first redeem the $620 million of preferred shares, but also promising during last week's annual investors' meeting that "anything above that" would be used to buy back the ULC bonds.

Amkor soars

Elsewhere, a trader said that Amkor was "up, up and away," on Tuesday, with the company's 7¾% notes due 2013 having pushed up to 81.75 bid, 82.75 offered from previous levels at 78.5 bid, 79.75 offered.

"Somebody must have liked them," he said, while not offering an explanation for the rise. Whatever it was, "somebody liked them," he said with some degree of understatement.

One possible explanation is the company's filing Friday with the Securities and Exchange Commission, which revealed that earlier in the week, the company and its lenders had agreed to amend its revolving credit agreement to provide greater flexibility in refinancing and incurring secured foreign indebtedness.

The amendment amends Amkor's existing first lien credit agreement - which provides for a $30 million revolving credit facility available through June 29, 2007 - to permit liens on assets of foreign subsidiaries to secure up to $75 million of indebtedness or other liabilities of Amkor or any of its subsidiaries, the filing said.

Tekni-Plex deal boosts old bonds

The news that Tekni-Plex plans to bring a new deal to market soon was seen by one market source as having given a boost to the Somerville, N.J.-based packaging maker's 12¾% subordinated notes due 2010 to about 69 bid, up two points from previous levels.

However, another trader saw those bonds unchanged at Friday's level of 67 bid, 69 offered, and saw the company's 8¾% senior notes due 2013 as having retreated three points to 83.5 bid,, 84.5 offered.

In mid-May, the company announced weaker-than-expected results for the fiscal third quarter ended April 1, which caused the 12¾% notes to fall as low as 66, from prior levels in the lower 70s, while its 8¾% notes dropped to 82 from prior levels around 90, but the notes had since crept back up from those lows.

Tekni-Plex, Rafaella join calendar

Tekni-Plex said Tuesday that it would sell the $150 million of senior secured notes and would use the proceeds from the upcoming note sale to repay borrowings under its existing senior credit facility, and for general corporate purposes.

High-yield primary market sources said Citigroup and Lehman Brothers will be the joint book-running managers.

The company will shop the deal to potential investors via a short roadshow that includes presentations in New York on Thursday, in Boston on Friday and in Los Angeles on Monday. Pricing is expected to take place Monday following the conclusion of the roadshow (see related story elsewhere in this issue).

Another new deal making its way onto the forward calendar Tuesday was Rafaella Apparel Group's planned $160 million offering of six-year notes, via Jefferies & Co, according to primary market sources.

The deal is being marketed to potential investors via a roadshow which began Tuesday and was slated to take up most of the next two weeks. Pricing could take place late next week or, more likely, at the start of the week beginning June 13.

Proceeds from the note sale are expected to be used to partly fund the planned leveraged buyout of New York-based women's apparel maker Rafaella Sportswear Inc., which said Tuesday that it has agreed to sell substantially all of its assets to Rafaella Apparel Group, a new company that will be controlled by Cerberus Acquisition, an affiliate of Cerberus Capital Management, LP.

Financial terms of the buyout deal were not announced. Cerberus will also make a $40 million equity investment in order to take a controlling stake in Rafaella, which is a designer, sourcer and marketer of women's career and casual sportswear separates, such as pants, sweaters, blouses, t-shirts, jackets and skirts.

The current shareholders of Rafaella will have "a continuing ownership interest in the new company," Rafaella Sportswear said in its announcement.

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