Reliant Energy's term loan and term loan "A" inched up slightly to the 98 3/4-99 1/4 context from the 98 1/4-99 level. Reliant's revolver also strengthened to the 95-95 1/2 range from the 94 1/2-95 1/2 context. A trader attributed the improvement to the agreement reached with the company's Astoria labor union regarding continued operations for the next four years.
Other positive factors include market expectation of the sale of Reliant's Astoria power plants and a $1.60 rise in the company's equity price over the last two weeks. The trader explained that warrants are attached to Reliant's debt. Reliant's stock is trading at $9.60, up from $8 two weeks ago. "Reliant's equity is doing better, therefore your pick-up is better," he said.
Two weeks ago Reliant sold 71 hydropower plants to Brascan Corp. for $900 billion. At the time, bank debt sources interpreted it as a positive that the company had decided to hold on to its Astoria assets. Proceeds from the Brascan sale will be used to pay down bank debt at the Orion Power New York and Orion Power Midwest subsidiaries. The possible sale of the Astoria assets could be used to pay additional debt, the trader said. A Reliant spokesman declined comment on any potential asset sales.