Energy names Calpine, Allegheny, AES the focus; Nextel slides ½ point

By Carlise Newman

Chicago, Aug. 1 - Chicago, Aug. 1 - Energy companies were the focus Friday in a fairly energetic leveraged loan trading session. Calpine announced an offering of term loans and notes, which caused the bank debt to oscillate at higher levels throughout the day, and Allegheny Energy Inc. said it would terminate its 1,000-megawatt tolling agreement it holds with a unit of Williams Cos.

Calpine said it will offer up to $750 million of term loans and secured notes through its Calpine Construction Finance Co. LP subsidiary. The offering will include $300 million of first priority secured institutional term loans due 2009 and $450 million of second priority secured floating-rate notes due 2011. Both tranches will be brought to market by Goldman Sachs and sold off the bank loan desk.

Calpine's existing bank debt "got as low as 90 5/8 bid, before closing at 91½ bid," a market source said, noting those prices were up from Thursday's close of 90.

The San Jose-based energy company said it intends to use the net proceeds from the offering to refinance a portion of Calpine Construction Finance's existing indebtedness, which matures in November 2003.

The remaining balance will be repaid from cash on hand. Outstanding debt, including letters of credit under Calpine Construction Finance's credit facility, is $910 million, Calpine said in a news release.

Allegheny Energy subsidiary Allegheny Energy Supply Company LLC signed an agreement to terminate the 1,000-megawatt tolling agreement it holds with Williams Energy Marketing & Trading Co.

Allegheny's second-lien bank debt was seen at 96 bid, a market professional said.

The Reston, Va.-based energy company will make a $100 million payment to Williams after closing the sale of its long-term energy supply contract with the California Department of Water Resources. Allegheny's obligation to make the payment is contingent on the successful closing of the sale.

"The debt wasn't really affected by the termination announcement. It was pretty much unchanged. The seconds held at 96 bid for most of the week," the source said.

Meanwhile, AES Corp., which on Wednesday reported a wide second-quarter loss, was also unchanged Friday.

AES's bank debt was seen at par 1/2, a trader said.

"There was no change in the credit," the trader added. "The stock was down but the debt stayed where it was. It had a couple of shaky sessions but I think it's stable now."

AES said its net loss stretched to $129 million from $115 million a year earlier. Excluding charges, the Arlington, Va.-based company reported a profit of 11 cents per share, just below the analysts' average estimate of 12 cents.

Revenue rose 10% to $2.2 billion.

AES said in the release it has refinanced or raised about $5 billion of debt in the past nine months. It now has about $1 billion of cash on hand.

The company said it expects to show $1.5 billion of consolidated net cash for 2003, of which $737 million was generated during the first six months of the year.

On Tuesday, the company said it closed amended and restated credit facilities including a $250 million revolving loan and letter of credit facility and a $700 million term loan facility. The company said in a news release that the completed transaction reduces parent debt maturities through 2007.

Elsewhere, a trader said Nextel Communications Inc.'s bank debt was down ½ point to 99 3/8 bid, 99 7/8 offered.

"Most credits that got quoted were flat to lower. The rationale is that it's technical," a trader said. "There's still more paper to sell that has a downside to go."

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