Calpine equity holders object to stipulation agreement with second-lien debtholders, call plan unfair

By Reshmi Basu

New York, Aug. 2 - Calpine Corp.'s official committee of equity security holders asked the court to deny the company's proposed stipulation agreement with its unofficial committee of second-lien debtholders and Wilmington Trust Co., calling the deal unfair, according to a Thursday filing with the U.S. Bankruptcy Court for the Southern District of New York.

Under the stipulation, $282 million in make-whole premium or damage claims against Calpine will be replaced by $100 million in claims.

According to the motion, the equity committee contends that the settlement provides a substantial windfall to the second-lien debtholders, which affects its recovery rates.

In addition, the committee contends that the second-lien claimants "are not entitled to any damages or make-whole amounts under the plain language of its indentures."

Furthermore, the equity security holders argue that the $100 million settlement achieves nothing because the second-lien noteholders could file a claim for the remainder of the make-whole claims.

As previously reported, specifically under the agreement, the second-lien debtholders' claims will be replaced by a $60 million secured claim and a $40 million unsecured claim.

Holders of Calpine's $1.15 billion in 8½% second-priority senior secured notes due 2010 will receive $45.31 million of the $100 million in claims; holders of the company's $900 million of 8¾% second-priority senior secured notes due 2013 will receive $43.69 million of the claims; and holders of Calpine's $400 million in second-priority senior secured notes due 2011 will receive $11 million of the claims.

A hearing is scheduled for Aug. 8.

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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