Calpine looks to reduce exit facility to $7.6 billion

By Caroline Salls

Pittsburgh, Dec. 14 - Calpine Corp. requested court approval of amendments to its exit facility that include a reduction in the total commitment to $7.6 billion from $8 billion, according to a Friday filing with the U.S. Bankruptcy Court for the Southern District of New York.

Under the amended $7.6 billion exit facility, $4 billion of the debtor-in-possession facility will still be converted into exit financing, and the facility will still include a $1 billion revolving credit facility.

However, the additional first-lien term loan will be increased to $2.3 billion from $2 billion; the $1 billion second-lien loan will be eliminated; and a $300 million bridge loan will be added to the amended exit facility.

Interest on the $4 billion and $2.3 billion senior secured tranche B term loans will be Base rate plus 100 basis points or Libor plus 200 bps.

The $300 million bridge facility will mature 366 days from closing and will accrue interest at either Base rate plus 100 bps or Libor plus 200 bps.

Calpine said the proposed amendments would also give it more flexibility under financial maintenance tests to allow the facility to close as scheduled.

According to the motion, in November, the exit facility arrangers and the company began discussions regarding Calpine's ability to meet closing conditions, and the arrangers raised concerns about Calpine's ability to satisfy conditions required for funding of the exit facility.

Specifically, Calpine said it disagreed with the arrangers on the interpretation of some financial definitions that were integral to the calculation of financial ratio tests that are required to be met at closing.

Under the $8 billion exit facility, if Calpine satisfied specified closing conditions, including meeting its consolidated coverage ratio, consolidated interest coverage ratio and consolidated senior leverage ratio tests at closing, the company would be able to automatically convert its DIP facility to an $8 billion exit facility.

However, Calpine said the $8 billion exit facility agreement did not include specific financial covenant levels.

Other amendments to the $7.6 billion facility will include a provision giving the company greater room under financial maintenance tests at closing, agreed upon financial ratios going forward and a clarification of the types of financings Calpine is permitted to syndicate or issue, thus allowing greater operational flexibility in running the company's businesses and developing and financing projects.

The amendments will also include a change in permitted capital expenditure and investment baskets to match the company's November business plan update and allow for greater flexibility for maintenance of the assets base and the development and financing of projects, a provision intended to clarify the parties' calculation of the exit facility's financial performance covenants to promote compliance and enhancement of Calpine's ability to manage commodity exposure going forward.

Calpine said its official committee of unsecured creditors supports the amendments.

A hearing is scheduled for Dec. 17.

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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