Salton bonds remain up from lows; Mirant bank debt better

By Paul Deckelman and Sara Rosenberg

New York , June 16 - Salton Inc. bonds - which fell sharply Wednesday but then bounced off their lows in the wake of the company's announcement that it would not be making the scheduled interest payment on its 10¾% notes coming due this December - continued to firm for a second consecutive session on Thursday.

UAL Corp. bonds, recently up on hopeful projections from the company's CEO, were a little off their recent highs - but still held most of their gains.

In the market for distressed bank debt, Mirant Corp. was the big mover of the day, as one big buyer came in to the market Thursday morning looking for paper and pushed levels up by about a quarter to a half a point on the day.

The Atlanta-based power generator's 2003 and 2004 bank debt closed out the session quoted at 75.5 bid, 76.5 offered, a trader added.

Salton was "a little bit higher," a trader said, quoting the Lake Forest, Ill.-based small appliance maker's 103/4s - which fell into mid 40s Wednesday on the missed-coupon news, before bouncing back above 50 - getting as high as 53 bid early in the session, before coming off that high to end at 52 bid, 54 offered.

He attributed the rise to short covering, since the company's fundamentals have not recently changed for the better. "They're not selling too many George Foreman grills," he said, referring to the company's signature product line, the popular electric hot dog and hamburger grills endorsed by the former world heavyweight boxing champ. Since 1995, Salton has sold an estimated 55 million of the machines worldwide, but sales have recently sagged, particularly in the United States, as barbecue enthusiasts held off on replacing their older grills with the pricier new models, such as the Next Grilleration.

"He's the only one that actually made any money off it," the trader said, referring to the ex-pugilist's lucrative deal with the appliance maker, signed in 1999, which netted him $127.5 million in cash plus $10 million in stock for the perpetual use of his name. "He's smarter than all of them." That money is on top of the 40% share of the profits Foreman had reaped from the sales of the grills when they first came out.

The trader chuckled at the tongue-in-cheek suggestion that should Salton be forced into a restructuring - something some Salton-watchers feel may be coming - Big George could loan them the DIP financing himself.

Another trader saw the 10¾% notes at 51 bid, 53 offered, while the company's 12¼% notes due 2008 were at 44 bid, 46 offered. He noted that having failed to make the $6 million June 15 coupon payment, its bonds were now all trading flat, or without their accreted interest.

Calpine slips

Elsewhere, Calpine bonds - which had recently been firming on the prospect that the San Jose, Calif.-based power generation company would be selling assets and using proceeds to pay down debt - seemed to take a breather and moved lower, on possible profit-taking.

A trader saw its benchmark 8½% notes due 2011 down two points on the session at 66.25 bid, 68.25 offered. The company's Calpine Canada Energy Finance 8½% notes due 2008 were down two points at 69, and its 8½% notes due 2010 were down a point to 75.5.

Meanwhile, activity seemed to come to a halt on Calpine's second-lien bank debt on Thursday after a 2 to 3 point run-up during the previous session as no real bids and few offers seemed to materialize during market hours.

On Wednesday, the second-lien debt closed out the session at 84½ bid, 85½ offered, but traded as high as 85¾ before settling down to those levels. By comparison, the bank debt opened Wednesday morning at 82½ bid, 83½ offered.

The rally, and good trading flow, were attributed to the company's announcement earlier in the week that it has entered into exclusive negotiations for the sale of four gas-fired power plants, representing nearly 850 megawatts of capacity with total proceeds from the sales estimated to be around $357 million.

Completion of these four asset sales is dependent upon the execution of definitive purchase and sale agreements for each plant and other terms and conditions, including regulatory approvals.

Net proceeds from any power plant sale would be used by the company to reduce debt as permitted by its indentures.

UAL active but lower

Back among the bonds, UAL was "still active," a trader said, although the Elk Grove Village Ill.-based airline operator's bonds were seen around 13.5 bid - about a point below their recent highs. Those highs were reached after the company's CEO, Glen Tilton, predicted an emergence from bankruptcy before the end of this year, and a return to profitability next year.

Other airline names - including Delta Airlines Inc. - "went nowhere."

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