Calpine bank paper up on numbers; Dura bonds drop on Chapter 11 prediction

By Paul Deckelman and Sara Rosenberg

New York, Sept. 13 - Calpine Corp.'s second-lien term loan inched higher Wednesday as investors were pleased with projected EBITDA numbers for the month of July, traders said.

In junk bond trading, Dura Automotive Systems Inc. fell as a Lehman Brothers research report predicted that the struggling Rochester Hills, Mich.-based automotive components maker will likely file for bankruptcy in the not too distant future.

Elsewhere, Bally Total Fitness Holding Corp.'s bonds were in retreat for a third straight session, as investors continued to react to the Chicago-based fitness center chain's warning that it may have credit troubles ahead.

Calpine powers up

Calpine's second-lien loan closed out the day quoted at 104.5 bid, 105.5 offered, up about ½ point from previous levels, a trader said.

The projected July EBITDA numbers are assumed to be based on the company's consolidated monthly operating statement, according to the trader.

Based on the reported numbers, investors are projecting that the bankrupt San Jose, Calif.-based power company's EBITDA for July is around $225 million versus about $300 million of EBITDA for all of last year, the trader explained.

He added that although, the market was expecting July EBITDA numbers to be good, these projections are even better than what people were expecting.

In addition, the financials laid out in the consolidated monthly operating statement filed with the Securities and Exchange Commission Wednesday were positive as well.

The company reported income from operations of $171.54 million on revenues of $784.71 million, up from June's income from operations of $33.49 million on $574.42 million in revenues.

Furthermore, net income for July was $92.22 million versus a net loss in June of $336.34 million.

A bond trader saw the company's 8½% notes due 2011 and 8 5/8% notes due 2010 each up 2 points to 51 bid.

However, the trader said, the company's Calpine Canada Energy Finance II ULC 8½% notes due 2008 were off ¼ point at 65 bid. Calpine's 8¾% notes due 2007 lost a point to finish at 72.

Dura drops amid Chapter 11 talk

In the automotive realm, "there's been a lot of interest today in Dura," a trader said, "especially its 8 5/8s," quoting that 2012 senior bond down 4½ points on the day at 66.75 bid, 67.5 offered, while its battered 9% subordinated notes due 2009 lost 1½ points to 12 bid, 13 offered.

Another trader also saw those 9s fall to a 12-13 context from 14 bid, 15 offered previously, while its 8 5/8s lost 3 points on the day to 67 bid, 68 offered from 70 bid, 72 offered.

A market source at another shop saw the 9s dip to 12 from 14.375 previously, while the 8 5/8s ended at 67.5, down from 70.75.

Market participants were trying to digest a Lehman Brothers research note which predicted that Dura might soon join sector peers Delphi Corp., Dana Corp., Tower Automotive Inc. and Collins & Aikman Corp. in Chapter 11.

"We expect Dura to file for bankruptcy in the next few months and believe that no additional coupon payments will be made," Lehman debt analysts Sarah Thompson and Marc Aylett wrote. Dura is scheduled to pay the coupon on the 8 5/8% notes on Oct. 15 and then again on April 15 next year, and on Nov. 1 and again next May 1 on the 9s.

A decision by Dura to forgo the coupon payments would be "a positive for senior note holders, because no additional value would be distributed to subordinated note holders through coupon payments," the analysts added.

But they also warned that Lehman has become "increasingly concerned that the ultimate value of Dura may be lower than we originally expected because the bankruptcy process may become more drawn out, which we believe would erode value in the underlying business."

Dura recently announced that it had retained Miller Buckfire & Co., a well-known turnaround firm, to advise it on reducing or restructuring its debt.

The net effect of all this, the first trader said was "obviously, there were a lot of sellers in the 8 5/8s." He also noted that Dura said that it would defer the upcoming dividend payment on its 7½% convertible preferred securities.

Delphi lower, Dana steady

Looking at the bankrupt suppliers, Delphi's 6½% notes due 2009 were seen down a point at 93 bid, 94 offered, while the Troy, Mich.-based parts producer's 7 1/8% notes due 2029 were down ½ point at 87 bid, 87.5 offered.

Toledo, Ohio-based partsmaker Dana's levels were unchanged, a trader said, pegging its 6½% notes due 2008 at 78.5 bid, 79 offered, while its 5.85% notes due 2015 hung in at 72.5 bid, 73.5 offered.

A trader in distressed notes saw Tower's 12% notes due 2013 little changed at 37 bid, 39 offered. Collins & Aikman's 10¾% notes due 2011 moved up to 7.125 bid, from 6.5 previously.

Visteon better on bidding report

Elsewhere among the auto names, Visteon Corp.'s 8¼% notes due 2010 were up ½ point at 101 bid, 101.75 offered, while its 7% notes due 2014 were ¾ point better at 94.75 bid, 95.5 offered.

The trader cited a DebtWire report indicating that French auto parts maker Valeo SA and India's Tata Group "have become two of the leading bidders in the second round of bidding" for the Van Buren Township, Mich.-based parts maker, formerly a unit of Ford Motor Co. "These two seem to be in the forefront." The report said that Visteon had approached the two companies about their offers after second-round bids were submitted to the company.

Ford board eyes job cuts

The trader also saw Ford's 7.45% notes due 2031 down ½ point at 79.5 bid, 80 offered, while the Number-Two domestic carmaker's Ford Motor Credit Co. finance unit's 7% notes due 2013 were down ¼ point at 93.5 bid, 94 offered.

The Dearborn, Mich.-based company's board began a two-day meeting Wednesday at which it was expected to discuss possible additional further job cuts and plant closings on top of those already slated under Ford's previously announced "Way Forward" turnaround plan, which calls for the closing of 14 facilities and the elimination of 30,000 jobs by 2012.

Ford released no information about the outcome of the first day's session.

Movie Gallery up, Bally off

Apart from the autos, traders saw Movie Gallery Inc.'s 11% notes due 2012, which fell several points on Tuesday, regain some of that lost ground Wednesday. Those bonds moved up to 61 bid, 63 offered, a trader said, up from 59 bid, 61 offered previously. The bonds had fallen Tuesday on investor angst about Apple Computer's upcoming on-line movie rental service.

Bally bonds meantime continued to weaken, dragged downward for a third straight session in the wake of weaker than expected quarterly numbers it posted late Monday - as well as the company's stark warning that it could have major debt problems next year.

A trader saw Bally's 10½% notes due 2011 down 1¼ points at 95.75 bid, 96.25 offered, although he saw the company's 9 7/8% notes due 2007 pretty much unchanged at 84.5 bid, 85.5 offered, with most of the slippage from recent highs seen on Tuesday.

A trader in distressed debt said that Bally - previously of little interest to him - was now on his radar screen due to its warnings of a possible default. He estimated the 10 1/2s at 96.25 bid, 97.25 offered, and its 9 7/8s at 83.5 bid, 84 offered.

Those 101/2s had begun the week around 98 bid, 99 offered, while its 9 7/8s started the week at 88 bid, 89 offered.

The 9 7/8s were by far the more active of the two isssues, traders said.

Bally's bonds started slipping in late trading Monday, and continued sliding on Tuesday - and now again on Wednesday - after the gym operator in its 10-Q for the latest period warned that it was now classifying all $171.4 million of its outstanding term loan and revolver debt on the balance sheet as of June 30 as current maturities, since it might have to repay its credit facility by next April 15 - a year ahead of schedule - if it is unable to refinance the 9 7/8s, which are scheduled to mature in October 2007, by that April 15 deadline.

Bally said that such a failure to refinance the bonds would trigger the credit facility's early termination provision - and added that without an agreement by the lenders to extend the maturity of the credit agreement or Bally's being able to refinance that credit line "the company will have insufficient liquidity to operate its business and be unable to satisfy the credit agreement obligations when due in April, 2007."

In the event that did occur, Bally said that the holders of its two series of bonds could accelerate those debts "and the company would not be able to satisfy those obligations."

Bally reiterated that it is "actively evaluating various alternatives" to address its outstanding debt.

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