Iridium trades up as Motorola trial end nears; Delta, Northwest ease; Calpine up ahead of business plan

By Ronda Fears

Memphis, Dec. 14 - In another slow day on distressed desks with some seats empty early ahead of the Hanukkah holiday, which officially begins at sundown Friday, traders said most of the traffic was odd lots and obscure issues. There were a few high-profile names, however, like Delta Air Lines Inc. and Northwest Airlines Corp., that were in retreat as their stocks nosedived on a spike in oil futures.

Delta and Northwest Airlines bonds were described as off 1 point across the board, pushing Northwest's issues back to the 93.5 bid, 94.5 area. Delta's 8.30% paper was last seen at 66.75 offered with no bid - which one trader said suggests further downward pressure - and the 7.90% issue went out at 67 bid, 68 offered.

Stocks in both the bankrupt airlines took a hard nosedive, however, with Delta losing more than 13% and Northwest falling more than 18%.

OPEC decided Thursday to pare half a million barrels from its output - but not until February - as it juggled concerns about oversupply and fears that deeper and earlier cuts would send prices skyrocketing. The January contract for light sweet crude climbed $1.14 on Thursday to $62.51 a barrel on the New York Mercantile Exchange, and gasoline futures climbed 4.76 cents to $1.665 a gallon.

Iridium bonds tick up to 30

As the close approaches of the preliminary phase of Iridium LLC creditors' lawsuit against the bankrupt satellite telecom venture's one-time backer and 40% owner, Motorola Inc., or renewed hope of a settlement, the Iridium bonds ticked up about a point Thursday to 30 from previous levels of 29.

"These bonds are either worth zero or 60 to 80," said a distressed bond trader. "There is some confidence that they could reach a settlement."

As a result of the uncertainty, he said, the bonds are trading somewhere in the middle of the possible value lines. Just two weeks ago, before the trial began in New York, the Iridium bonds were trading at around 27.

Iridium bondholders allege Motorola committed breach of contract and other financial misdeeds connected with the 1999 collapse of the once high-promising satellite phone company. Motorola has denied any wrongdoing, pointing to its own substantial losses from the Iridium collapse, which totaled several billion dollars.

The initial trial has begun, having been divided into two parts. In the first, which was scheduled to conclude this week, the creditors are attempting to prove that Iridium was insolvent from at least 1995 and, if so, Motorola should repay all the money it received for equipment and services up to the time of Iridium's bankruptcy filing in 1999.

If the creditors prevail, the next phase of the trial would move into quantifying damages due from Motorola.

The Iridium bonds spiked last year on the lawsuit and investors continue to hold out hope that Motorola would decide to settle the suit for less than the potential $4 billion it would cost if it loses in court.

Collins & Aikman bonds pat

Bankrupt auto parts supplier Collins & Aikman Corp. bonds were pat at 3 bid, 4 offered Thursday on rumors circulating in the market that Cerberus Capital Management LP is the stalking horse bidder for the bankruptcy auction of its Soft-Trim unit. Financier Wilbur Ross is another potential bidder for the Collins & Aikman Soft-Trim unit.

The bank paper, however, was seen moving sharply higher. One trader saw the Collins & Aikman bank debt open at 52 bid, 54 offered and rise to 62 bid, 64 offered before falling back to settle at 60 bid, 62 offered.

Collins & Aikman, which said last month it would sell off its operations rather than emerge from bankruptcy as a stand-alone company, said in a Securities and Exchange Commission filing on Wednesday that a lead bidder had been identified but did not name the bidder.

The Southfield, Mich.-based company said it has entered an exclusivity agreement with the bidder while it completes due diligence and a definitive agreement, but in the auction process a higher bid could be presented.

Details of the bid will be released when Collins & Aikman files a motion with the bankruptcy court to approve the sale; a hearing is expected in January.

The Soft-Trim unit, which makes carpeting and sound-deadening materials, has about 4,100 workers and 14 facilities in the United States, Canada and Mexico.

The company also is seeking buyers for the majority of the rest of its business that produces injection-molded interior parts and convertible tops.

Delphi wavers, ends better

Bonds of Delphi Corp., another bankrupt auto parts supplier, was again all over the map Thursday but ended better in reaction to news that the company will be requesting an extension next week to its exclusivity period to file a reorganization plan.

One trader said most of Delphi's issues settled with a gain of around a point, pegging the 6.55% notes due 2006 and 6½% notes due 2009 at 111 bid, 112 offered, and the 7 1/8% notes due 2029 gaining 1.5 points to that same level.

While Delphi is expected to seek more time to develop its plan, the Troy, Mich.-based company still expects to exit bankruptcy by the middle of 2007.

A big part of the plan will be the divestiture of assets, and Cerberus also has been looking at some of the assets that Delphi wants to divest. Another major factor will be concessions and support Delphi is seeking from its biggest customer and former parent, General Motors Corp., as well as labor unions.

Delphi is expected to file the extension request with the bankruptcy court on Dec. 22. With an extension, the company faces a Feb. 1 deadline to submit a plan to the court.

Calpine plan seen next week

Because of the rapidly approaching holidays and year-end, market sources are expecting that Calpine Corp. will file its business plan next week in bankruptcy court, which will be the basis of its reorganization plan. Calpine bonds added a point or so Thursday, extending a long string of steady gains.

"Calpine is due to unveil its business plan next week. It's at least possible that leaks about elements contained in the plan have fueled this run-up," said one distressed bond trader.

"Whether that's the case or not, we'll all be better informed very soon."

He said Calpine bonds have retraced in fits and starts in the past week or so but for the most part are holding firm. The 8½% notes due 2011 traded up to 81 and better on Thursday, he said, before drifting to close basically unchanged at 79, while the 8 5/8% notes due 2010 added 1.25 points to 79.75 bid, 80.75 offered. Calpine shares have been on a tear, too, he noted. The Pink Sheets stock gained 13.5% on Thursday to $1.43.

Calpine has said the business plan will be the platform for the San Jose, Calif.-based independent power producer's reorganization plan. It will be a five-year plan projecting their business forecast, in detail, along with proposed recovery levels.

Also on Thursday, Calpine reported $99,000 in income from operations for October on revenues of $568.39 million, compared with $17.89 million in income from operations on revenues of $461.44 million for September. The net income for October was $14.23 million, compared with a $151.77 million September net loss.

Cash and equivalents at Oct. 31 were $1.033 billion, compared with $988.98 million at the end of September. The company has been in the process of selling assets through the bankruptcy process.

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