Calpine Wrests Free from Chapter 11

After two years of bankruptcy, the power company emerges with $7.3 billion in financing.
Stephen TaubFebruary 1, 2008

More than two years after Calpine Corp. filed for Chapter 11 bankruptcy protection, it has finally found its way out.

The power producer was able to cut about $7.2 billion of its $22 billion in debt used to build what wound up becoming a glut of new power-plant capacity. The company, which has dual headquarters in Houston and San Jose, California, received $7.3 billion in exit financing, including a one-year, $300 million bridge facility that is expected to be paid by the end of the first quarter.

Calpine’s new stock is expected to begin trading on the New York Stock Exchange early next week under the ticker symbol CPN.

“This is a wonderful day for all of us at the new Calpine,” says Robert May, Calpine’s CEO. “Calpine is now a stronger, more competitive power company poised for growth in the energy industry.”

Under the exit plan, Calpine intends to issue a total of 485 million shares of reorganized Calpine common stock to holders of allowed claims.

Initially, general unsecured creditors will receive about 84.8 percent of their allowed claims for principal and prepetition interest, holders of five different issues of senior notes will receive 100 percent of such claims, and holders of the convertible notes will receive approximately 42 percent.

In connection with its first distribution, Calpine also intends to set aside 62 million shares of reorganized Calpine common stock because of disputed unsecured claims. As claims are resolved, Calpine will make further distributions of reorganized common stock on a periodic basis.

Calpine estimates that general unsecured creditors will ultimately recover about 99.9 percent of their allowed claims, holders of the senior notes will recover 100 percent, and holders of the subordinated notes will recover about 75 percent.

Calpine’s old common stock will be cancelled and holders will receive warrants to purchase new common stock. The warrants will expire on August 25, 2008.

Meanwhile, Calpine has announced those that will make up its new board of directors. Seven of the board members have finance or related backgrounds.

David Merritt, appointed to chair the company’s audit committee, has been CFO at iCRETE LLC, a technology company in the building-materials industry, since October 2007. W. Benjamin Moreland, another new audit-committee member, served as CFO of Crown Castle International Corp. Moreland earned an MBA from the University of Houston in 1988 and has a finance degree from the University of Texas, Austin.