Bankruptcy

Calpine to Eliminate $8B in Claims

Reaches preliminary settlement with ad hoc committee of bondholders.
Stephen TaubApril 19, 2007

Calpine has taken a giant step toward emerging from bankruptcy.

The power company announced that has reached a preliminary settlement with an ad hoc committee of bondholders, which would replace more than $12 billion of claims with a single nominal claim of about $3.5 billion.

The investor group has also agreed that their actual recovery will be no greater than principal, accrued pre-petition and post-petition interest at the contract rate, plus fees.

“We are pleased to have resolved these matters on mutually agreeable terms and to have taken another significant step forward in our restructuring efforts,” said Calpine chief executive officer Robert P. May, in a statement.

If approved, the settlement will reduce multiple bankruptcy claims to a single claim, eliminate more than $8 billion of claims against Calpine’s bankruptcy estate, and avoid potentially time-consuming and expensive litigation, May added.

Calpine filed for bankruptcy in December 2005 under the weight of some $22.5 billion in debt. Bloomberg noted at the time that Calpine had joined Mirant, NRG Energy, and National Energy & Gas Transmission in seeking Chapter 11 protection after the overbuilding of electricity plants knocked down prices.

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