Calpine bank debt firmer on headcount reduction plan; Adelphia bonds keep rising

By Paul Deckelman and Sara Rosenberg

New York, Feb. 2 - Calpine Corp.'s second-lien bank debt headed higher on Thursday on the heels of the company's announcement of plans to refocus its attentions to core areas and eliminate some staff positions.

Adelphia Communications Corp.'s bonds meantime continued rising in the wake of the decision earlier in the week by federal anti-trust regulators clearing the acquisition of the company's assets by Time Warner Inc. and Comcast Corp., as well as courtroom skirmishing between bondholders of Adelphia and those of its Century Communications Corp. subsidiary.

Calpine's second-lien debt closed out the session quoted stronger by about half a point at 90.5 bid, 91.5 offered, according to a trader.

On Wednesday, the bankrupt San Jose, Calif.-based power company announced some restructuring moves that include a staff reduction of about 300 positions and a $50 million annual operating cost reduction.

The company's bonds, which had risen Wednesday on the announcement, continued to firm Thursday, traders said. One saw those Calpine bonds up a point across the board, with its 8½% notes due 2008 at 39 bid, 41 offered, its 7¾% notes due 2009 at 43 bid, 45 offered, and its 4¾% convertible notes due 2023 at 27 bid, 29 offered.

A market source at another desk saw the company's 8 5/8% notes due 2010 and 8½% notes due 2011 each up ¾ point, to 29 bid, and 28.25 bid, respectively.

However, he saw the 8½% '08s off half a point at 39 bid, and its 9 5/8% notes due 2014 and 10½% notes due 2006 both unchanged on the day, at 105.5 bid and 42.5 bid, respectively.

In that same power generating area, a bank loan trader saw Integra, a power project financing name, headed lower in the secondary market, probably due to market technicals. Its bank debt was quoted off by about a point at 106 bid, 107 offered, the trader said.

Integrated Electrical soars

Back among the bond traders, Integrated Electrical Services Inc.'s 9 3/8% notes due 2009 "really moved," a trader said, quoting the Houston-based electrical services contractor's bonds as having jumped to 87 bid, 89 offered from prior levels in the 83 bid, 85 offered area.

At another desk, though, a trader saw somewhat more restrained movement, with the bonds ending at 84.25 bid, which he saw up two points on the session.

Nobody offered any insight as to why the bonds were moving around. Earlier in the week, Integrated Electrical said in a Securities and Exchange Commission filing that its bank loan lender, Bank of America, had entered into a forbearance agreement with the company under which B of A agreed to temporarily not exercise its legal rights and remedies under its $80 million credit agreement with the company. That agreement is in effect through the end of this month.

Adelphia bonds stronger

Elsewhere, Adelphia Communications bonds continued to firm, traders said, with one quoting the bankrupt Greenwood Village, Colo.-based cable operator's 10¼% notes due 2006 up two points to 68.5 bid, its 10¼% notes due 2011 up ¾ point at 72.75, and its 10 7/8% notes due 2010 half a point better at 69 bid.

Traders attributed Thursday's gains - and those of the previous two days as well - to the news that the Federal Trade Commission had approved the $17.6 billion plan by cable giants Time Warner and Comcast to acquire the assets of their somewhat smaller rival, Adelphia, and then divide those assets up among themselves.

Traders also said that it appeared that Adelphia's bondholders were gaining the upper hand in a bankruptcy court dispute with the bondholders of Adelphia's Arahova Communications Corp. subsidiary. The latter's bonds - originally issued as Century Communications debt - were seen solidly lower, with a market source seeing the Century 9½% notes that were to have matured last year at 90 bid, down more than three points. He saw Century's 8 7/8% notes due 2007 drop to 88 bid from 91.

Another trader saw Century's 8¾% notes due 2007 three points lower at 86.5 bid. He called the movement in the Century bonds "crazy, positively insane."

GM, Ford in reverse

In the automotive sphere, General Motors Corp., its arch-rival Ford Motor Co., and their respective financial arms, General Motors Acceptance Corp., and Ford Motor Credit Co., were all seen lower, giving up the gains they had notched on Wednesday in reaction to better-than-expected January sales data - sales that were heavily dependent on one-off annual buys by rental-car companies and other fleet operators.

The automakers' bonds - which had firmed smartly on Wednesday in response to the January sales data - were all seen in retreat, a trader said, quoting GM's benchmark 8 3/8% notes due 2033 down a point at 74 bid, 75 offered, GMAC's 8% notes due 2031 also a point lower, at 101 bid, 102 offered, and Ford's 7.45% notes due 2031 down a point as well, at 74 bid, 75 offered.

Another trader saw an even more pronounced retreat, calling the GM flagship issue down 1¾ points at 74.25 bid, 75.25 offered, the GMAC 8s off 2¾ points at 100.25 bid, 100.75 offered, and the Ford bonds off 1¼ points at 74 bid, 74.75 offered. He also saw the Ford Credit 7% notes due 2013 lower by 1½ points at 90.5 bid 91 offered.

The trader noted the bonds were down in tandem with the companies' New York Stock Exchange-traded shares, with GM stock closing down 90 cents (3.67%), at $23.60, while Ford lost 3.4% to finish at $8.37. Besides being pulled down by the overall negative equity market - the Dow Jones Industrial Average lost nearly 102 points, while the Nasdaq fell 29 points - the carmaker's stocks, and hence their bonds were skidding lower as market participants took a second look at the sales data, which had appeared so positive on Wednesday, following as it did several months of year-over-year losses since the end of major sales incentive programs last fall.

While GM reported a 6% increase in overall vehicle sales in January, that rise was purely 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 to regular motorists through dealer showrooms, on the other hand, actually fell 7% in the month from year-ago level.

The story was much the same at Ford, which saw a 2.7% gain in overall vehicle sales - because of a 21% surge in fleet sales. Excluding fleet sales, Ford's retail showroom sales were down 6% from year-ago levels. Analysts fear that those kind of weak non-fleet sales could leave the carmakers with bloated inventories of unsold vehicles, just as they did a year ago.

Besides distorting the companies' sales data by making sales look far stronger than they actually were, the fleet sales did little to add to the profit margins of the carmakers, since the carmakers generally give hefty discounts to encourage such high-volume sales.

"If you're selling a lot of cars," a bond trader said, "but you're not making very much money off of them then where does that leave you?"

Yet another trader saw the GMAC 8% notes fall to par bid, 101 offered from 103 bid, 103.5 offered, while GMAC's 6¾% notes due 2014 declined to 93.5 bid, 94.5 offered from 95 bid, 96 offered, and its 6 7/8% notes due 2011 were at 94.5 bid, 95.5 offered, down from 96 bid, 97 offered. GM's 8 3/8% notes were seen a point lower at 75 bid, 76 offered, while its 7 1/8% Notes due 2013 were a point down, at 78.5 bid.

Delphi down

The falling automaker bonds also towed the auto parts companies lower as well, traders said, with one seeing bankrupt Troy, Mich.-based auto electronics manufacturer Delphi Corp.'s 6½% notes due 2009 down a point at 56.5, and its 6 ½% notes due 2013 off 1¼ points at 56.25.

However, a trader in distressed notes saw "no movement" in Delphi's bonds, or those of either bankrupt Novi, Mich.-based vehicular frames maker Tower Automotive Inc., or bankrupt Troy, Mich.-based interior component maker Collins & Aikman Corp.'s 10¾% notes due 2011. Another troubled supplier, Remy International Inc., saw its 9 3/8% notes due 2012 unchanged at 34.5 bid, 35.5 offered.

At another desk, a market source saw Tower's 12% notes due 2013 up ¼ point at 73.75, while Collins' bonds were unchanged around 30.

A trader saw Visteon Corp.'s 7% notes due 2014 half a point lower at 77.75 bid, while the Van Buren Township, Mich.-based former Ford subsidiary's 8¼% notes due 2010 lost ¾ point to 84.75.

However, he did see Rochester Hills, Mich.-based components maker Dura Automotive Systems Inc's 8 5/8% notes due 2012 up ¾ point at 82.75 bid, while its 9% notes due 2009 were half a point lower at 51.5 bid.

He also saw Toledo, Ohio-based auto systems maker Dana Corp.'s 6½% notes due 2009 at 79.75, up 1¾ point, while its 5.85% notes due 2015 were up ¼ point at 69.25.

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