Chapter 11 Rewind: Calpine’s New Plan

The electricity producer's debtors have submitted bids for another emergence plan to replace the one announced in June.
Stephen TaubJuly 27, 2007

Calpine, which recently filed a reorganization plan to emerge from Chapter 11 bankruptcy during the fourth quarter, says a new plan could be submitted later this summer.

Under the current plan, announced in June, the bankrupt power producer had estimated that unsecured creditors’ claims would be paid in full. Common stockholders and holders of subordinated equity securities claims would receive between nothing and as much as $3.53 a share. In addition, a group of banks — including Goldman Sachs, Credit Suisse, Deutsche Bank, and Morgan Stanley — had upped their exit financing to $8 billion in secured financing, or $3 billion more than the existing exit facility.

However, on Friday, just about a month after the initial plan announcement, Calpine revealed that “certain parties” have given the company and its affiliates a new idea for restructuring the company, which filed for Chapter 11 protection in December 2005. The alternative plan would provide guaranteed distributions to the debtors’ stakeholders.

As a result, Calpine and its affiliates have decided to take “a brief period of time” to investigate the possibility of this structure, which potentially could offer recoveries superior to those under the current plan.

With the assistance of investment banker Miller Buckfire & Co., Calpine and its affiliates have begun to gauge potential investors’ interest in sponsoring such a plan “that would not compromise what the debtors believe is an appropriate balance sheet upon emergence,” according to the regulatory filing. Calpine and its affiliate debtors have asked for commitment letters from potential plan sponsors by August 16. Calpine still expects to emerge from bankruptcy no later than January 31, 2008.

In related news, earlier this week Calpine won court approval of a settlement with its Canadian affiliates that will eliminate about $8.5 billion in claims against the company, according to The Toronto Star. The paper says the settlement reduces $12 billion in claims tied to bonds in a Calpine unit to a single $3.5 billion claim.