Calpine tweaks CalGen lenders' plan treatment to avoid costs, exit delays

By Caroline Salls

Pittsburgh, Nov. 2 - Calpine Corp. requested court approval to tweak its plan of reorganization to eliminate the CalGen lenders' substantive consolidation concerns in an effort to avoid further costs and bankruptcy exit delays, according to a Friday filing with the U.S. Bankruptcy Court for the Southern District of New York.

Under the proposed plan change, Calpine would pay the CalGen lenders' damages claims in full in cash, regardless of whether the claims are deemed secured or remain unsecured.

Calpine said this change will have "little to no adverse impact on the treatment of other claims," and the company will not have to change its disclosure statement or the plan vote solicitation process.

Calpine said the crux of the CalGen lenders' arguments against substantive consolidation is their claim that the they would recover less under the company's plan of reorganization with substantive consolidation than they would without the consolidation.

According to the motion, "over the last two months, the CalGen lenders have waged a war of attrition against the debtors' proposed substantive consolidation of the CalGen entities with the balance of the Calpine debtors' estates."

Calpine said the CalGen lenders have asked the court to appoint a Chapter 11 trustee, an examiner and a statutory committee. In addition, the lenders have made several extensive discovery requests and filed objections to Calpine's disclosure statement.

Calpine said the lenders will most likely "continue to burden the process with similar motions and objections through and perhaps beyond confirmation."

Although Calpine said the lenders' efforts "are completely lacking in merit," the company said it has still been forced to divert significant time and resources away from its goal to emerge from Chapter 11 bankruptcy by Jan. 31.

Calpine said the company, its official committee of unsecured creditors and official committee of equity security holders have incurred significant costs "in defending against the CalGen lenders' tactics," and Calpine expects the lenders to seek reimbursement for their own expenses, as well.

A hearing is scheduled for Nov. 7.

Calpine, a San Jose, Calif., power company, filed for bankruptcy on Dec. 20, 2005. Its Chapter 11 case number is 05-60200.

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