Calpine files plan of reorganization, obtains commitment for $8 billion upsized exit facility

By Caroline Salls

Pittsburgh, June 20 - Calpine Corp. filed its plan of reorganization and related disclosure statement Wednesday with the U.S. Bankruptcy Court for the Southern District of New York that distributes new common stock in the reorganized company to a majority of creditor classes.

According to a company news release, Calpine expects the plan to be confirmed in the fourth quarter of 2007.

Calpine said in the release that allowed claims will range from $20.1 billion to $22.3 billion after completion of its claims objection, reconciliation and resolution process.

"The filing of our plan of reorganization is a significant milestone on our road to recovery and takes us one giant step closer to successfully reorganizing Calpine for the benefit of our stakeholders, employees and customers," chief executive officer Robert P. May said in the release.

Under this range of potential allowed claims, Calpine said general unsecured creditors will recover 91% to 100% of their claims, and common stockholders will receive roughly $1.80 per existing share.

In order to clarify further its recovery estimates, Calpine said it recently filed a lawsuit challenging "make-whole," premium, or "no-call" claims asserted by its second-lien debtholders and unsecured creditors.

In addition, Calpine said it obtained a commitment for an $8 billion amended and upsized exit facility from Goldman Sachs Credit Partners, LP, Deutsche Bank and Morgan Stanley to include a $6 billion first-lien secured term facility, a $1 billion first-lien secured revolving facility and a $1 billion second-lien secured facility.

The $8 billion exit commitment represents an increase of $3 billion over the company's current exit facility plans, the release said.

The commitment to fund the exit facility expires on Jan. 31, 2008.

According to the commitment letter, interest on the first-lien facilities will be based on the ratings of the loans.

If the loans receive a Moody's Investors Service corporate family rating of B1 or higher or a Standard & Poor's corporate credit rating of B+ or higher, interest will be Base rate plus 75 basis points or Eurodollar rate plus 175 bps; if Moody's rating is B2 or lower or S&P's rating is B or lower, the interest rate will be Base rate plus 100 bps or Eurodollar rate plus 200 bps.

Interest on the second-lien facility will be either Base rate plus 225 bps or Eurodollar rate plus 325 bps, provided that if Calpine elects to capitalize the interest, the payments will be increased by 75 bps for that payment period.

The second-lien facility will mature on Sept. 29, 2014. Maturity on the first-lien facilities be the earlier of the effective date of a plan of reorganization or the second anniversary of the DIP closing date, not changing from the original exit commitment.

Calpine said its official committees of unsecured creditors and equity securityholders have not yet endorsed the plan, but the company is in discussions with both committees and other stakeholders to gain their support.

The plan calls for Calpine to be substantively consolidated with its debtors for purposes of plan distribution.

The reorganized company's enterprise value has been set at $20.3 billion.

Calpine said it will issue 1.5 billion shares of new common stock, with up to 50 million shares to be issued under the plan.

After all new common stock has been issued to satisfy other claims in full, including claims for management and equity incentive plans, any remaining stock will be distributed to new common stock pools for holders of subordinated debt securities claims and for shareholders.

Plan creditor treatment

Treatment of creditors under the plan will include:

• The company's DIP facility will either be converted into an exit facility or paid in full in cash;

• Holders of administrative claims and priority tax claims will be paid in full in cash;

• Holders of first-lien debt claims have already been paid in full, and holders of first-lien secured make-whole claims will be paid in full in cash, without interest;

• Holders of second-lien debt claims and other priority claims will be paid in full in cash, plus interest;

• Holders of other secured claims will either be paid in full in cash, will have their claims reinstated or will receive the collateral securing the claim;

• Holders of senior notes claims, general note claims, Canadian intercompany claims, rejection damages claims, unsecured make-whole claims, subordinated debt securities claims and subordinated equity securities claims will recover 100% through shares of new common stock in the reorganized company;

• Holders of subordinated note claims will receive their share of new common stock in the reorganized company until paid in full, provided, however, that the subordinated noteholders' new common stock will first be distributed to senior noteholders until those claims are paid in full;

• Holders of ULC1 settlement claims will receive a share of new common stock in the reorganized company, with distribution to be based on a formula, with the total settlement amount not to exceed $3.505 billion and the total distribution amount not to exceed the principal amount outstanding on the ULC1 notes, plus contract interest, plus $8 million in fees;

• Holders of Canadian intercompany claims will receive their share of new common stock in the reorganized company, subject to a cap set in a related Companies' Creditors Arrangement Act settlement;

• Holders of general unsecured claims will receive their share of new common stock in the reorganized company until paid in full, but these creditors can elect to have their claims reduced to $50,000 to be classified as convenience claims;

• Holders of unsecured convenience class claims will be paid in full in cash;

• Holders of intercompany claims will either have their claims reinstated or receive no distribution under the plan; and

• Holders of intercompany interests will have their claims reinstated in exchange for the reorganized company's agreement to make distributions to holders of unsecured claims and interests under the plan, to provide management services for some of the reorganized debtors and to satisfy obligations between those debtors.

Existing Calpine common stock will be cancelled on the plan effective date.

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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