Calpine creditors committee objects to Calpine Generating debtholders' request for Chapter 11 trustee

By Jennifer Lanning Drey

Portland, Ore., Sept. 24 - Calpine Corp.'s official committee of unsecured creditors objected to Calpine Generating Co. LLC's first- and second-lien debtholders' request for appointment of a Chapter 11 trustee to represent CalGen's interests in Calpine's Chapter 11 case, according to a Friday filing with the U.S. Bankruptcy Court for the Southern District of New York.

In the motion, the committee argued it would be most beneficial to keep CalGen's current management and further claimed that a trustee cannot be appointed absent proof of misconduct including fraud, dishonesty, incompetence or gross mismanagement by management.

The committee also called the substance of the debtholders' motions "nothing more than a collateral attack on the second-amended plan."

Additionally, the creditors committee said objections to factual grounds for the consolidation of a debtor's estate are more appropriately addressed in the context of considering a plan of reorganization.

As previously reported, HSBC Bank USA, NA, the indenture trustee for CalGen's $640 million second-priority secured floating-rate notes due 2010, and the Bank of New York, administrative agent for CalGen Finance's $100 million principal amount of second-priority secured institutional term loans due 2010, requested appointment of a CalGen trustee on Sept. 13.

In a separate motion, first-lien agent Wilmington Trust Co. and indenture trustee Wilmington Trust FSB mirrored the second-lien debtholders' argument that Calpine's proposed substantive consolidation of its subsidiary debtors, including CalGen, is "directly adverse" to the best interests of CalGen and its creditors.

The first-lien debtholders also said there is no independent fiduciary representing CalGen's interests in Calpine's Chapter 11 case.

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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