Mirant continues to power up on amended plan, statement; Calpine debt higher

By Paul Deckelman and Sara Rosenberg

New York, Sept. 23 - Mirant Corp.'s bank debt and bonds continued to trade higher during Friday's session, still spurred on by the company's recent release of its second amended reorganization plan and disclosure statement.

The bankrupt Atlanta-based energy operator's 2003 bank paper was up a little over a point, closing out the day at 103 bid, 103.75 offered, up from Thursday's levels, which were also stronger on the day by a bit over a point, at 101.75 bid, 102.25 offered, according to a trader.

The company's 2004 paper was also up by about a point, moving to 102 bid, 102.75 offered, the trader said.

Lastly, the 2005 paper was up about a half to a full point, with levels closing out the day at par bid, 101 offered, the trader added.

A trader in distressed bonds meantime saw Mirant's notes "definitely improved by the end of the day." He quoted its 2½% convertible notes due 2021 a point better at 98 bid, 99 offered, while its 7.40% notes that were to have come due last year and its 7.90% notes due 2009 were likewise also each up a point, at 113 bid, 114 offered for the 2004s and 114 bid, 115 offered for the 2009s.

Mirant's rally began on Thursday after the company filed its amended plan of reorganization and disclosure statement that, it said, reflects its agreement with a number of the key constituencies in its Chapter 11 case.

According to the disclosure statement, the consolidated business will have $4.28 billion of debt, compared to $8.63 billion at the start of the Chapter 11 cases.

Under the plan, holders of $155.1 million in secured claims will receive 100% recovery in either a 5% five-year secured promissory note, the collateral securing its claim, a one-time cash payment or the right of set-off.

Holders of $6.36 billion in general unsecured claims will receive 96.25% of the new common stock in the reorganized company.

Holders of old equity interests will receive 3.75% of the new common shares in the reorganized company plus warrants to buy 10% of additional new common stock.

And, all Mirant Americas Generation debt obligations will be satisfied in full and its $1.7 billion of long-term debt will be reinstated. In addition, Mirant Americas Generation's $1.5 billion of short-term debt and other obligations will be satisfied with common stock in the reorganized parent company in exchange for 10% of the amount owed with the balance to be paid in cash.

Calpine steadies after gyrations

Also in the power generating sector, Calpine Corp.'s bonds were little changed on the day, although a trader said they'd had "a wild ride" for the week. He saw the San Jose, Calif.-based power provider's 8½% notes due 2008 at 62 bid, 64 offered - "down 10 points on the week, but unchanged on the day."

Another trader said that the Calpine bonds, which had been beaten down over several sessions, "started recovering in the morning - but then just petered out."

He quoted Calpine's 8½% notes due 2011 as "looking unchanged" at 54.5 bid, 56.5 offered, while its 10½% notes due 2006 were perhaps half a point higher at 85.5 bid, 88 offered.

In the bank debt market, Calpine's second-lien paper headed higher Friday on no particular news, quoted at 79 bid, 82 offered, up from Thursday's levels of 78.25 bid, 79.25 offered, according to a trader.

Calpine's bank debt had a pretty volatile week before that, as news surfaced that the Bank of New York, the collateral trustee for senior secured note holders, will be holding proceeds from the July sale of domestic gas assets because of a dispute over how these proceeds were used.

Calpine said it is currently evaluating its options in response to Bank of New York's letter and added that it intends to pursue all of its legal rights and remedies to resolve the dispute as soon as possible.

The company claims that the proceeds from the sale were offered to first-lien noteholders, and approximately $139 million were tendered in response to the offer.

Calpine also says that under the indentures, it is permitted to use the proceeds from the sale of its gas assets to acquire eligible natural gas and/or geothermal energy assets. Calpine has utilized about $360 million of the proceeds to acquire eligible natural gas assets, although some of the bondholders who complained to the trustee said that this was not permitted.

Following these acquisitions, approximately $400 million remains in the gas sale proceeds account with the trustee.

On Thursday, after Calpine officially released a response to the Bank of New York letter, the second-lien bank debt had plummeted to the 74 bid, 76 offered context, but it was reenergized later in the day as some investors had sent the low levels as a good buying opportunity.

Delphi bonds gain, loan dips

Apart from the power names, Delphi Corp.'s bonds were heard to have firmed handsomely, in line with a stock surge that followed a Merrill Lynch equity upgrade, although its revolving credit loan was easier.

A trader quoted the company's 6.55% notes due 2006 up two to three points at 75 bid, 76 offered, while its 7 1/8% notes due 2029 were "maybe a point or so higher" at 64 bid, 66 offered.

Another trader estimated the 6.55s to be up as much as four points on the session, at 75 bid, 77 offered, and the 7 1/8s about three points ahead at 64.5 bid, 66.5 offered.

Another trader stated what everyone was thinking - "it looks like they had a pretty good day," with the 6.55s at 75.25 bid, 75.75 offered, up some three points on the session.

Delphi's bonds seemed to follow the stock up; the New York Stock Exchange-traded shares firmed by 34% (10.90%) to $3.46, on volume of 13.1 million, about double the usual.

The bank revolver dropped off about a quarter of a point or so, a trader said Friday as a huge piece of the paper was being offered in the secondary market, creating some heaviness in the name.

He saw the revolver quoted at 97 bid, 97.5 offered, down from previous levels of 97.5 bid, 97.75 offered.

"There was a big block of it overhanging the market," the trader said.

Delphi's term loan levels remained unchanged during Friday's session with quotes going out at 101½ bid, 102 offered, the trader added.

Troy Mich.-based automotive electronics maker Delphi is currently looking to former corporate parent General Motors Corp. for some sort of financial bailout and has warned that it could be forced into Chapter 11 if it does not get concessions from the United Auto Workers union and help from GM.

The company has also said that a filing would come before Oct. 17 when federal bankruptcy laws will change, becoming less friendly to debtor companies as they will be given less time to come up with a reorganization plan.

Investors have been swaying in the wind on the bankruptcy issue, with one week brining stronger expectations that a Chapter 11 filing would emerge and the next week bringing expectations that a deal with GM will be worked out. Currently, it appears as if more people are leaning towards the possibility of an out-of-court restructuring.

One observer who seems to have come around to that conclusion is Merrill Lynch analyst John Casesa, who said in a research note that "despite the speculation surrounding a possible bankruptcy, we believe it is probable that Delphi, GM and the UAW will come to an agreement to avoid Chapter 11 because bankruptcy would be too costly to GM and the UAW."

That helped give the shares a boost in Friday trading, and took the company's bonds up with them.

The analyst acknowledged, however, that there had been no new reports on the three-way talks between Delphi. GM and the UAW, or whether the three parties have recently softened their positions. Delphi said it needs help from its former corporate parent, GM, and from the UAW, in getting out from under high-cost facilities it inherited from GM when it was spun off several years ago. Delphi chairman Robert S. "Steve" Miller has talked about going into bankruptcy if no assistance is forthcoming, although he said this past week that he would prefer to not see that happen.

Delphi also got a boost from its revelation in a mid-week filing with the Securities and Exchange Commission indicating that the company still has some $300 million of remaining availability under its bank credit line, contrary to assertions by some market participants that Delphi was already fully tapped out.

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