Calpine second-lien lenders seek post-bankruptcy interest on $750 million in term loans

By Caroline Salls

Pittsburgh, Nov. 7 - Calpine Corp.'s second-lien lender agent asked the U.S. Bankruptcy Court for the Southern District of New York to allow post-bankruptcy interest on the $750 million in pre-bankruptcy term loans, including compound and default interest, according to a motion filed Tuesday with the U.S. Bankruptcy Court for the Southern District of New York.

If the court decides not to order the company to pay the interest, lender agent The Bank of New York is asking the court to at least force the company to set up a cash reserve for the entire disputed post-bankruptcy interest amount.

According to the motion, the second-lien term loan lenders, as oversecured creditors of a solvent estate, "are unquestionably entitled to receive post-petition interest, including compound and default interest," on all amounts owed under the term loans.

However, Bank of America said Calpine has "chosen to ignore this reality," opting instead to resolve the dispute in a lawsuit.

Bank of America said Calpine's current plan of reorganization "is a transparent attempt to impede the rights of the second-lien term loan lenders."

A hearing is scheduled for Nov. 27.

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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