Mirant bonds jump on NRG-Texas Genco news; Federal Mogul climbs

By Paul Deckelman and Paul A. Harris

New York, Oct. 3 - Mirant Corp.'s bonds - which had already been firming in recent days, following the filing of the bankrupt Atlanta-based power generating company's second amended plan of reorganization and disclosure statement - got another big boost on Monday, rising smartly in apparent sector sympathy with NRG Energy Inc. and Texas Genco LLC, both of whose bonds firmed solidly on the announcement that NRG will acquire Texas Genco.

Elsewhere, the bonds of bankrupt Southfield, Mich.-based auto parts maker Federal-Mogul Corp. bonds were seen at least three or four points higher on the session, in apparent reaction to the latest developments in its bankruptcy case.

"Mirant jumped," a market source said, quoting its 7.40% notes that were to have matured last year at 126 bid, well up from prior levels around 120, and its 7.90% notes due 2009 at 127, up from 121.5 bid.

"Mirant was up big time," another trader said, quoting the 7.40s seven points higher on the day at 127 bid, 128 offered, and its 7.90s at 128 bid, 129 offered, also up seven points.

He also saw the company's 2½% convertible notes due 2021 having pushed up six points at 110 bid, 111 offered, while its 5¾% converts due 2007 rose to 121 bid, 122 offered, a gain of seven points on the day.

He further saw the bonds of the company's Mirant Americas Generating Inc. - which were already trading up in the 120s to begin with - get a little better still, with the MAGI 8½% notes due 2021 two points better at 126 bid, 128 offered, and the MAGI 9 1/8% notes due 2031 three points up at 131 bid, 133 offered.

He also acknowledged how odd it seemed that the Mirant corporate bonds - which not too long ago were trading at least 25 points or more below the exalted level that the MAGIs have recently held - were now at the same or even higher level as the MAGI bonds, which are considered to have better security than the unsecured Mirant corporates.

The NRG news, he said, "is probably as good a reason as any" to explain the sharp rise in Mirant on Monday.

"People like the [Mirant] equity, they see someone paying up for the equity of another company [Texas Genco], so they say 'hey, let's buy Mirants up, that's equity.'" Mirant's bonds are expected to be converted into new equity in the restructured company, under terms of the recently disclosed second amended reorganization plan, which has the support, Mirant said, of some key groups of creditors, although others are still dissatisfied.

Calpine higher

Also in the power generation sphere, a trader saw Calpine Corp.'s bonds "all over the place" at higher levels.

He pegged the San Jose, Calif.-based power generating company's 8 5/8% notes due 2010 three points better at 57 bid, its 8½% notes due 2011 five points better at 57 bid. Calpine's 8½% notes due 2008 were up three points at 63.5 . However, further out along the curve, he saw the company's 8¾% notes due 2013 were just a point better at 71.75 bid.

Federal-Mogul gains

Federal-Mogul's bonds, he said, jumped from 28.625 bid to 32.5 offered, while another trader saw them to go 33 bid, 34 offered from 28 bid, 29 offered previously.

"People are just betting that they're going to come out [of Chapter 11] early, and they're going to get equity, and they're going to go along with [financier Carl A.] Icahn, I guess," he said in attempting to explain the sharp rise in those bonds, which seemed to have been tethered to that 28ish area for months.

The company, in its latest court filing on Friday, officially gave notice that its restructuring plan is being amended to the billionaire private investor an option to become the its controlling shareholder. Icahn owns a substantial amount of Federal-Mogul debt, and debt holders are scheduled to become entitled to nearly half the equity in the reformed company.

The financier may pay as much as $775 million to up his stake in Federal Mogul by buying stock from a trust that will be set up to pay asbestos-related claims stemming from Federal-Mogul's acquisition of the British firm Turner & Newell.

If he exercises that option, the trust will be funded instead with $375 million in cash and a $400 million note.

Federal Mogul was one of a number of companies driven into the bankruptcy courts over the past few years under a flood of asbestos-related lawsuits.

Among other asbestos-challenged names Monday, bankrupt Lancaster, Pa.-based floorcovering maker Armstrong World Industries' bonds dropped two points to 75 bid, with no particular news seen, a market observer noted. He also saw bankrupt Toledo, Ohio-based building materials maker Owens Corning's notes up ¼ points to 80.25.

Delphi steady

Among the automotive names, former GM unit Delphi Corp.'s bonds were seen little changed on the day, a trader said, with the troubled Troy, Mich.-based automotive electronics manufacturer's benchmark 6.55% notes due 2006 hanging in around 73.5 bid, and its 7 1/8% notes due 2029 in the same 63-64 context at which they have recently been trading.

However, another source, while seeing Delphi's 6½% notes due 2013 unchanged at 67.5 bid, saw the 6.55s half a point off at 73.75, and the 6½% notes due 2009 down a full 1½ points at 69. He saw the 7 1/8s off 5/ 8 point at 63.875.

Delphi has warned that it may have to file for Chapter 11 this month if former parent GM and the United Auto Workers union do not step up to help Delphi get out from under some of the high-labor cost plants and employees it inherited when it was spun off from GM several years ago.

Adelphia lower again

Adelphia Communications Corp.'s bonds, which were getting slapped around last week on investor angst over possible delays in the resolution of certain disputes, were easier again on Monday.

The bankrupt Greenwood Village, Colo.-based cable operator's 10¼% notes due 2011 were seen down 1½ points at 76 bid, while its 10 7/8% notes due 2010 were half a point lower at 75.

Northwest Airlines Corp.'s bonds were seen unchanged at 28 bid, 29 offered, while Delta Air Lines Inc.'s were likewise steady at 18 bid, 19 offered.

Bank debt traders saw little movement Monday in the loan paper of distressed companies.

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