Calpine financing monopolizes attention; HealthSouth up on court ruling

By Paul Deckelman and Sara Rosenberg

New York, March 12 - News that Calpine Corp. had finally priced its long-awaited $2 billion-plus financing package dominated much of the conversations in the distressed bond and bank debt markets Friday; the pricing of the combination of bank debt and secured bonds comes not even a month after the San Jose, Calif.-based independent power producer had failed to swing such a deal due to investor reluctance and market conditions.

Bank loan traders said that the Calpine Construction Finance Co. II LLC revolver, which will be refinanced with proceeds from the four-tranche transaction that priced Friday, was quoted at 99 bid, basically unchanged from Thursday's closing levels.

One trader reported seeing a trade take place at 99.5, although another trader said that there was no activity in the paper, since people are just waiting on completion of the refinancing.

Calpine Generating Co. LLC (CalGen), a subsidiary of Calpine Corp., priced its latest offering of term loan and senior notes via lead bank Morgan Stanley - a switch from the failed February transaction, which had been led by Deutsche Bank Securities.

The deal contains an $835 million super secured term loan/floating-rate note due 2009 with an interest rate of Libor plus 375 basis points, a $740 million secured term loan/floating-rate note due 2010 with an interest rate of Libor plus 575 basis points and a discount of 98.5 for a discount margin of 608 basis points.

There is also a $680 million issue of secured floating-rate notes due 2011 with an interest rate of Libor plus 900 basis points and $150 million third lien fixed-rate notes due 2011 priced at 11½%, according to market sources.

That was a little different from what market players had been expecting on Thursday, when the deal was unveiled as an $800 million super secured floating-rate loan talked at Libor plus 350 to 375 basis points, an $855 million senior secured floating-rate loan talked at Libor plus 550 to575 basis points, $550 million secured floating-rate notes talked at Libor plus 875 to 900 basis points and a $200 million secured fixed-rate note talked at 11.25% to 11.5%, according to the sources.

In the junk bond pits, traders saw Calpine's existing bonds firmer, in line with the market's generally firmer tone Friday, and, perhaps on investor relief that the company had gotten over a very big hurdle with its massive financing deal.

A trader characterized Calpine's existing bonds as "up half a point, across the board."

Another trader saw Calpine's 8½% notes due 2008 move up to 77 bid, 78 offered from late Thursday levels at 76 bid, 77 offered. He said the bonds actually got as good as 77.5 during Friday's session, "but they cooled off a bit" to their closing levels.

HealthSouth up

Elsewhere, news that Health South Corp. had gotten a temporary restraining order preventing certain of its bondholders from accelerating repayment of its debt pushed the Birmingham, Ala.-based outpatient services provider's bonds up several points on Friday.

The bonds "definitely were better," said a trader who quoted its 7 5/8% notes due 2012 at a tight 98 bid, 98.25 offered, well up from pre-news levels 96 bid, 97.5 offered.

HealthSouth said it is hopeful it can reach agreements with the lenders who were pushing for the acceleration. While it fell into default on certain notes last year because its revolving credit facility was frozen in the wake of the scandal, the company has since caught up with its debt payments, and said it is current on all principal and interest payments.

The threat that the bondholders might be able to force acceleration of the company's debt "was why the bonds sold off earlier in the week," said a trader who saw the bonds up anywhere from half a point to three-quarters of a point on Friday.

Also on the healthcare front, Tenet Healthcare Corp. bonds - which had fallen several points on Wednesday after an analyst warned the company might be blowing through its cash reserves too quickly and Standard & Poor's downgraded it, and which continued to fall back on Thursday - "were kind of softer, trying to make a stand here at the lower levels" Friday, the trader said.

He quoted the bonds all told off about a point-and-a-half on the week, with the Santa Barbara, Calif.-based hospital owner's 2011 and 2012 paper at 85 .5 bid, 86.5 offered, its 2013 senior bonds at 88 bid, 89 offered, and its 2031 bonds at 80 bid, 81 offered.

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