Calpine bonds firmer as company refocuses; Adelphi continues gains

By Paul Deckelman and Sara Rosenberg

New York, Jan. 31 - Calpine Corp. bonds powered up on Wednesday after the bankrupt San Jose, Calif.-based energy generating company announced what it termed "the initial steps of a comprehensive program designed to stabilize, improve and strengthen the company's core power generation business and its financial health."

Adelphia Communications Corp. bonds continued to firm in the wake of the Federal Trade Commission's OK of the planned purchase of its assets by the team of Time Warner Inc. and Comcast Corp.

And automotive names - including the bonds of bankrupt and distressed parts suppliers - were generally better, as they followed the lead of General Motors Corp. and Ford Motor Co., whose bonds rose smartly in response to better-than-expected January vehicle sales data.

A trader saw Calpine's 8½% notes due 2011 a point better at 27 bid, 28 offered, while its 7¾% notes due 2009 were also up a point at 41.5 bid, 42.5 offered.

Another trader noted the Calpine announcement about its turnaround efforts and also attributed the rise in its bonds to such additional factors as the company's over-subscribed debtor-in-possession financing, and Calpine's move to appeal last week's court ruling that Calpine had to get the permission of FERC, the federal energy regulatory body, rather than the bankruptcy court, to drop money-losing contracts.

"So you have a few things going on there," helping to push Calpine's 2011 81/2s up half a point to 27.5 bid, 29.5 offered, while its 8½% notes due 2008 moved up to 38 bid, 40 offered from 36 bid, 37 offered on Tuesday.

"They came out with this whole new strengthened company refocus on its core," he said. "So it looks like they're trying to lower their operating costs and just kind of pare down their business to focus on the core. So the bonds are up."

Yet another trader said that the 2008 8½% notes were a full 2½ points ahead at 39 bid, 39.5 offered, although he saw its 9 7/8% notes due 2011 actually half a point lower at 88.5 bid, 89.5 offered.

A market source saw Calpine's 8¾% notes due 2007 at 44 bid, up four points on the day, while its 4¾% convertible notes due 2023 were three points up at 26 bid, 28 offered.

Calpine said that effective immediately, it was reducing its activities and curtailing expenditures in certain non-core areas and business units, which it said would result in reduction of about 300 staff positions. It said that combined with other cost-cutting measures, including the closure of non-core offices, those actions are expected to reduce annual operating costs by some $50 million, improving Calpine's financial and liquidity positions.

Adelphia bonds keep rising

Elsewhere, Adelphia Communications' bonds - already up solidly over the past few sessions - continued to gain traction on Wednesday, with its 10¼% notes due 2006 seen at 68 bid, 70 offered, up four points on the day, and its 10¼% notes due 2011 also up four, at 72 bid, 74 offered.

Another trader saw "more fallout" from the news that the FTC had okayed the Time Warner/Comcast deal in pegging the 10¼% notes due 2011 at 71.5 bid, although he said that was up two points on the day and "four or five points higher since Monday."

Besides the FTC news, he said there were probably favorable developments going on in the company's bankruptcy case, which has seen Adelphia's bondholders squaring off against the holders of its Century Communications Corp. bonds on the issue of intra-company claims, which could amount to several billion dollars when the dust settles.

The judge hearing the case recently turned down a request by the Century bondholders that a trustee be appointed to settle disputes, warning that such a step might complicate the already convoluted case and might undermine the $17.6 billion buyout deal with Time Warner and Comcast, who agreed last year to buy the Greenwood Village, Colo.-based cable systems operator's far-flung assets and divide up its systems among themselves.

Solutia rises

A trader in distressed notes saw some activity in the bonds of bankrupt St. Louis-based cable company Solutia Inc., seeing its junior issues - its 6.72% notes and its 7 3/8% notes - two points better at 82 bid, 84 offered.

USG little moved

He saw little in the way of movement in the bonds of asbestos-challenged issues, other than USG Corp. - which on Monday announced plans to set up a trust fund to deal with all of its asbestos medical claims and said it would pay off all of its bondholders and bank debt creditors, with interest, and emerge from Chapter 11 this summer, ending a five-year re-organization.

He saw the Chicago-based building products maker's 8½% notes that were to have come due last year move up to 144 bid from 142, while its 9¼% notes that were slated to mature in 2001 were also two points up, at 147, "as everyone is trying to figure out what the interest on the interest is."

However, he saw "nothing doing" in the bonds of United Airlines parent UAL Corp., which was finally emerging from Chapter 11, after having entered it in December 2001. He saw the Elk Grove Village, Ill.-based Number Two U.S. air carrier's bonds unchanged at 22 bid, 23 offered.

Auto names better

In the automotive sphere, he saw the bonds of bankrupt Troy, Mich. -based auto electronics systems maker Delphi Corp. at 57 bid, 58 offered, up a point on the session, while its equally bankrupt Troy neighbor, interior components maker Collins & Aikman Corp., saw its 10¾% notes due 2011 also a point up, at 30 bid, 31 offered.

However, he saw the bonds of yet another bankrupt supplier, Novi, Mich.-based vehicular frames maker Tower Automotive, unchanged at 72 bid, 74 offered.

Traders said the stronger-than-expected January sales by Detroit's Big Three helped boost GM's bonds, Ford's and the bonds of their respective financing units, General Motors Acceptance Corp. and Ford Motor Credit Co.

A trader saw GM's benchmark 8 3/8% notes due 2033 jump to 75.75 bid, 76.25 offered, a two-point gain on the session. He saw GMAC's 8% notes due 2031 at 103 bid, 103.5 offered, up 1½ points on the day, and saw both Ford's flagship issue, the 7.45% notes due 2031, and its Ford Motor Credit Co. 7% notes due 2013 also up 1½ points - the Ford bonds to 75 bid, 75.75 offered, and the Ford Credit notes to 92 bid, 92.5 offered.

GM reported a 6% increase in overall vehicle sales in January, chiefly due to a 30% jump in fleet sales, mostly to car-rental companies, government agencies, taxicab companies and the like, many of which due their purchasing of new vehicles at the start of the year. Retail sales of vehicles through dealer showrooms actually fell 7% in the month from year-ago levels, but were more than offset by the jump in fleet sales.

The story was much the same at Ford, which saw a 2.7% gain in overall vehicle sales, powered by a 21% surge in fleet sales. While Ford's car sales were up 18%, sales of its large Expedition SUV declined 30%, while its mid-size Explorer was down nearly 23%. The SUVs had been Ford's bread-and-butter for the past few years but sales have declined precipitously as gasoline prices have risen well above $2 a gallon and have stayed there.

Dana higher

Apart from Ford and GM, other auto names - the non-bankrupt parts suppliers - were strong pretty much across the board. As a measure of the sector's strength, a trader noted, Dana Corp's notes bounced off early lows they hit on the news that the Securities and Exchange Commission is formally investigating the Toledo, Ohio-based automotive systems maker's accounting practices, and "actually ended higher on the day."

He saw Dana's 5.85% notes due 2014 ending at 69 bid, 70 offered, up ¼ point on the session.

"They were knocked down on the news" of the SEC probe, to 67 bid, 68.5 offered, but they popped back up, to end higher. I guess this was just considered a minor problem."

The SEC is scrutinizing matters related to Dana's restatement of financial results. Back in December, Dana filed restated results going back several years, after an internal probe found it had inappropriately recognized price increases, supplier reimbursement costs and steel surcharges.

Dana said it cooperating fully with the government investigation.

The trader saw Lear Corp.'s 5¾% notes due 2014 at 82 bid, 83 offered, up ¾ point.

He also saw Visteon Corp.'s 8¼% notes due 2010 up a point on the day at 85 bid, 86 offered.

Another trader saw the Van Buren Township, Mich.-based former Ford parts unit's 81/4s two points better on the day at 86 bid, 87 offered. He saw ArvinMeritor Inc.'s 8¾% notes due 2012 a point better at par bid, 101 offered, while Dura Automotive Systems Inc.'s 8 5/8% notes due 2012 firmed a point to 82.5 bid, 83.5 offered.

He additionally saw the Dana 6½% notes due 2009 a point better at 79 bid, 80 offered, despite the news about the expanded SEC investigation.

In the bank debt market, meantime, not much was seen going on. Traders called the asbestos names quiet. They said that there had been some trading activity in power project names and some auto names - but nothing was a big enough mover to really stand out.

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