Calpine bonds boosted on settlement; Tropicana up on interest payment; Tekni-Plex trades flat

By Stephanie N. Rotondo

Portland, Ore., Dec. 17 - The distressed market was almost in full holiday mode Monday. One trader noted that if it was not for Calpine Corp., there would be nothing going on at all.

Early Monday, Calpine announced that it had reached a valuation settlement with its creditors and shareholders. The market reacted positively to the news, pushing the power producer's bonds up as much as 8 points.

Meanwhile, Tropicana Entertainment LLC's bonds continued to be actively quoted and were boosted by the news that the company had made its coupon payment. The term loan, meanwhile, continued moving higher on reported asset sales.

Over the weekend, Tekni-Plex Inc. missed its coupon payment. Come Monday, the company announced it had hired a turnaround specialist, adding that it had entered into a waiver agreement with its credit facility lenders. Its bonds have begun trading flat.

Overall, the distressed arena remains under pressure, though trading volume remains very light.

Settlement boosts Calpine

The confirmation hearing on Calpine's reorganization plan began Monday morning. Not long after that began, the company announced it had come to terms with its creditors and shareholders regarding a valuation statement.

The news prompted the San Jose, Calif.-based company's bonds to gain. One trader called the 8½% notes due 2008 up 5.5 to 6 points at 115 bid, 116 offered and the 8½% notes due 2011 up 2 points at 114 bid, 115 offered.

Another trader quoted the 2011 issue at 114.5 bid, 115.5 offered, while another placed the 2008 issue up 7 points to 114 bid, 116 offered. The trader pegged the 7¾% notes due 2009 also up 7 points at 113 bid, 115 offered.

He also saw Calpine's convertible notes up, with its 4¾% notes due 2023 better by 4 points at 101.5 bid, 103.5 offered and its 6% notes due 2014 a point better at 87 bid, 89 offered.

At another shop, a trader saw the 2008 piece up 8 points at 115 bid, 116 offered and pegged its 8½% notes due 2011 a point better at 114 bid, 115 offered.

Another market source had the 2011 paper up more than 2 points, at just below 116 bid.

Under the settlement, valuation of the company was decreased slightly to $18.95 billion from the mid-range level of $19.3 billion. In exchange for approving the lower value, existing shareholders will receive out-of-the-money warrants, which one analyst believes will equal "a value reflecting full par plus accrued interest on the senior notes." Senior unsecured holders will also get a larger portion of the pie.

"We believe that this is a positive announcement for both creditors and shareholders," the analyst said. "Basically, [the bondholders] are giving up nothing." On top of that, he said, the company has "limited objections" that could hold up the emergence process.

He added that the settlement could position the company to exit bankruptcy before its Feb. 7 deadline.

Post-bankruptcy, the analyst - and many other market players - sees Calpine emerging as a solid company. The analyst compared the company's position to that of former bankrupt company Mirant, whose stock "traded very well post-reorganization."

The analyst noted that there are many funds that would like to play in the name, but because of their charters, they are prohibited from getting involved in bankrupt credits. Once the company exits Chapter 11 and begins trading on the stock exchange again, the analyst expects to see "a pop in the stock initially."

Long-term, the analyst believes the company has what it takes.

"They come out with a little more leverage than I would have wanted," he concedes. "But they are doing a great job at growing gross margin and boosting EBITDA. They will be able to service their debt going forward."

Tropicana notes actively quoted

Tropicana Entertainment, also known as Wimar Operating, continues to see its bonds actively quoted in the marketplace, and moved up slightly on news that the company had made its scheduled semiannual interest payment on senior subordinated notes.

One trader called the 9 5/8% notes due 2014 unchanged at 64.5 bid, 65.5 offered. But others claimed the bonds moved up.

A trader said Wimar/Tropicana "continued its rebound grind" from last week, when the bonds fell on the news that New Jersey regulators denied its license renewal and ordered its Atlantic City casino sold.

He saw the bonds at 66 bid, 66.5 offered, up 2 points versus Friday, and said they were "down only a point or two" from the 68ish level the bonds had traded at before the news of the license denial.

"They've come just about all the way back" from their recent lows around 56 bid, 58 offered following the news. "It's been a substantial move."

Another trader saw the bonds a point better at 66 bid, 67 offered.

However, at another desk, a trader quoted them a point lower on the session at 66 bid, 67 offered.

The casino operator's bonds got a jolt last week when news emerged that the company had lost its gaming license. The debt fell about 6 points on the announcement amid active trading. Throughout the week, the name continued to be on the radar, though the levels stabilized.

The first-lien term loan, however, inched its way higher in trading after the company revealed plans to sell two assets, in addition to the Tropicana Resort and Casino in Atlantic City, and said that proceeds will be used to repay all of its senior bank debt, a trader said.

The first-lien term loan was quoted at 98 3/8 bid, 99 3/8 offered, up from Friday's levels of 97½ bid, 98 offered, the trader said.

On Monday afternoon, Tropicana Entertainment said that it will sell its Casino Aztar in Evansville, Ind., and its casino in Vicksburg, Miss., which is under contract with Nevada Gold & Casinos, Inc.

The company also reconfirmed that its Tropicana Resort and Casino in Atlantic City will be sold as well.

Proceeds from the three asset sales are expected to be enough to repay the company's credit facility in its entirety, and if there are any proceeds left, they will be reinvested in the company's business.

Tekni-Plex enters restructuring

It is official: Tekni-Plex has entered the restructuring process.

The pharmaceutical packaging producer said Monday that it had hired James A. Mesterharm, managing director of AlixPartners LLC, as chief restructuring officer. The company said it intends to start talking with its bondholders in an effort to restructure its debt. Previously, the company had announced that it hired Rothschild Inc. as its financial adviser.

The news - along with a missed coupon payment on its 12¾% notes due 2010 - did little to move the bonds. A trader quoted the notes at 61 flat, noting that last week, the bonds traded at 54 with accrued interest. Therefore, he said, the bonds are relatively the same price.

Another trader saw the notes up 6 points at 60 bid, 61 offered. Besides the switchover to trading flat having affected the price, he also said that there was "a lot of technical trading - a short squeeze made the bonds go up." He opined that the bonds were "tremendously overvalued" at this level and "definitely will go down."

A market source at another desk saw the bonds up 7.5 points, above the 62 level.

The company did note that it had entered into a waiver agreement with the lenders under its credit facility and hopes to acquire a forbearance agreement with its senior subordinated noteholders.

Broad market mostly lower

Neff Corp.'s 10% notes due 2015 fell 1.5 to 2 points, a trader said, to close at 56 bid, 58 offered.

"We don't see a lot of upside in that sector," the trader said.

Elsewhere, Technical Olympic USA Inc.'s bonds continue to come in. The 8¼% notes due 2011 fell a point to 41.5 bid, 43.5 offered, while the 9% notes due 2010 were likewise down 1 point at 40.5 bid, 42.5 offered.

"Someone is trying to get out," a trader said.

MAAX Corp., a manufacturer of bathroom fixtures, was scheduled to make a coupon payment over the weekend. A trader said he had not heard if the payment was made or not. Prospect News attempted to contact the company but at press time had not received a response.

A trader called Buffets Inc.'s 12¼% notes due 2014 weaker at 44.5 bid, 46.5 offered. He said the notes had recently been at 47.5 bid, 48.5 offered but did not know whether all of the downside movement came in Monday's session alone.

Tembec Inc.'s 8 5/8% notes due 2009 were off 1 point at 51 bid, 53 offered. Its 8½% notes due 2011 were also lower at 42.5 bid.

A trader said Claire's Stores Inc.'s bonds continued to fall in the wake of disappointing numbers reported last week, with its 10½% notes due 2017 down 3 points at 53.5 bid, 54.5 offered.

Another trader quoted Claire's 9¼% notes due 2015 at 69.5 bid, 70.5 offered, its 9 5/8% notes due 2015 at 65.5 bid, 66.5 offered and its 10½% notes at 53.5 bid, 54.5 offered.

Lifecare Holdings' 9¼% notes due 2013 gained 1 point to 62.5 bid.

Sara Rosenberg and Paul Deckelman contributed to this article.

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