Refco bank debt firms on Austrian bank settlement; Calpine bonds retreat after numbers

By Paul Deckelman and Sara Rosenberg

New York, June 6 - Refco Inc.'s term loan headed higher Tuesday, as investors reacted to the news of a settlement with Austria's Bank fuer Arbeit und Wirtschaft (Bawag), traders in that market said.

Junk bond market participants meantime saw Calpine Corp.'s bonds lower, partly on a generally easier market in general, but also in specific investor response to news of a big loss the bankrupt San Jose, Calif.-based power company posted in January, as well as other pieces of less than positive news.

A rare upsider Tuesday was Avondale Mills Inc., whose bonds firmed in apparent reaction to news that the stricken Monroe, Ga.-based textile company - which several days ago announced plans to liquidate itself - has found its first buyer for some of its assets.

A bank debt trader saw Refco's term loan closing out the day quoted at 103.5 bid, 104 offered, up about a half a point from the previous session. But the bankrupt New York-based commodities brokerage company's paper was seen trading as high as 105 earlier in the session

Late Monday, news emerged that Bawag has agreed to a $675 million global payment to settle with institutional investors who are the lead plaintiffs in a securities fraud class action case rising from the bank's role in the Refco debacle.

Bawag has agreed to pay $108 million total to Refco stock and bond purchasers, with the possibility of an additional $32 million depending on a possible future sale of the bank.

The settlement is subject to approval by federal judge Gerard E. Lynch in New York, who is overseeing the Refco securities litigation.

Calpine's bonds were seen several points lower across the board, with a trader characterizing the credit as "active once again."

A trader saw Calpine Canada Energy Finance II ULC's 8½% notes due 2008 retreating to 68.5 bid from 70.25 offered, while the parent company's 81/2s due 2011 were half a point down at 52.5 bid, and its 7 7/8% notes due 2008 and 8¾% notes due 2007 each dipped to 73 bid from 74.5. A big loser was Calpine's secured 9 5/8% notes due 2014, which fell to par bid from 105.25 earlier, while its 10½% notes that were to have come due last month backpedaled to 73 from 74.5.

Calpine's nearly valueless Pink Sheets-traded shares fell six cents (12.36%) to 39 cents. Volume of 12 million shares was twice the usual turnover.

Traders noted that the bonds were lower in response to Calpine's disclosure Monday that it lost $371 million in January, according to Calpine's latest regulatory filing.

Calpine on Tuesday meantime said in a separate filing that it had not yet determined whether its second-priority senior notes were fully secured or whether they were under-secured. It added that it was also uncertain whether the value of the assets securing the obligations was equal to the obligations.

A trader said that latest disclosure "just added to the volatility" surrounding the name.

Late Tuesday, well after the close, Calpine separately announced that its Calpine Construction Finance Co., LP and CCFC Finance Corp. have begun soliciting consents from the holders of its $415 million of second priority senior secured floating-rate notes due 2011 and the lenders under its $385 million first priority senior secured institutional term loans due 2009, aimed at waiving certain existing defaults.

Avondale gains on sale

Elsewhere, the biggest gainer on the session was Avondale Mills' 10¼% notes due 2013. A source saw those bonds at par bid, up from 95.75 previously, although another source said the bulk of that movement, to 100.25, had come late Monday, from closing levels of last week at 95.75.

Avondale's bonds were one of the big success stories in May, when they jumped from levels in the lower 60s to the upper 80s on the news that the company would be getting a $215 million insurance settlement for damages arising from a January 2005 railroad crash and chemical spill near one of its South Carolina textile factories. The toxic spill killed nine people, including six employees, disrupted production and forced the company to spend large sums trying to unsuccessfully clean up the factory. The bonds moved up further, into the mid 90s, on the subsequent announcement that Avondale would cease operations, liquidate its assets, and pay its bondholders and other creditors in full.

On Tuesday, Avondale said that it had sold mills in Alexander City and Rockford, Ala., along with a Graniteville, S.C., facility, to Parkdale Mills Inc. for $28 million. Almost all of the 400 jobs at the three sites are to be preserved.

Salton bonds steady amid stock drop

Salton's Inc.'s 12¼% notes due 2008 were seen little changed around the 77 level they've recently held - despite a sharp drop in the Lake Forest, Ill.-based small appliance maker's New York Stock Exchange-traded shares Tuesday, probably on profit-taking off recent gains. The shares began falling precipitously around mid-afternoon and at one point were down more than 17% on the session, before ending down 59 cents (16.95%) at $2.85.

Those shares had, over the past week, pushed to levels above $3.50 from prior levels under $2.50, while the bonds had jumped over that same time period to highs at 78.25 on Friday from around 72 before the surge started.

The shares and the bonds may have risen in response to takeover and merger speculation, which seemed to have been at least partly borne out by the news, announced after the close Friday by the company, that Harbinger Capital Partners Master Fund I, Ltd. had purchased 30,000 shares of Salton's series A voting convertible preferred stock - currently convertible into about 2.647 million common shares - from affiliates of another shareholder, Centre Partners Management LLC. Harbinger, which named a representative to sit on Salton's board, is also a large shareholder of another maker of small appliances, Applica Inc. of Miramar, Fla. - spurring some financial market speculation that it might be thinking of a combination of the two companies in order to produce a combined entity large enough in revenue to survive with significant reductions in expenses that could theoretically result from their consolidation.

GM slips

In the automotive area, General Motors Corp.'s benchmark 8 3/8% notes due 2033 were seen down ¼ point at 75.5 bid, 76, a trader said. He said that the GM paper "didn't get much of a pop" out of the shareholders' meeting, where chief executive officer Rick Wagoner outlined the steps the company has been taking to try to turn its fortunes around.

The CEO said, among other things, that he was "quite pleased" with the level of participation seen so far in the company's offer of early-retirement buyouts to all of its hourly workers. He said that GM was making "significant progress" in improving its liquidity, chiefly through its pending sale of a 51% stake in its General Motors Acceptance Corp. financing unit., and he said that its efforts to cut structural costs were bearing fruit, with $7 billion in cost cuts in its North American operations expected on a run-rate basis by the end of this year. However, he also warned that progress might be slow in reducing its materials costs, due to higher prices for some key commodities.

Wagoner said that key GM goals in the near-term would include completion of the GMAC stake sale, continuing efforts to reach a consensual agreement with bankrupt former subsidiary Delphi Corp. and the latter's unions on labor cost cuts for Delphi, and completing its buyout offer to however many employees sign up to take advantage of it. News reports indicate that 20,000 of GM's 113,000 hourly workers have signed up so far.

Delphi's bonds were meantime seen down about two points on the session, with its 6½% notes due 2009 falling to 83 bid.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.