Calpine may repay first-lien debt with asset sale proceeds

By Sara Rosenberg

New York, June 10 - Calpine Corp. will use potential asset sale proceeds to repay its existing $500 million first-lien debt, according to a company news release.

The assets under review for sale are its natural gas reserves located in Alberta, Canada, and certain unidentified U.S. natural gas reserves.

Following the repayment of its existing first-lien debt, the San Jose, Calif., power company would have the ability to issue up to about $700 million of new first-lien debt under its existing bond indentures.

Calpine has retained Waterous & Co. to act as its adviser for the sale of the Canadian gas reserves.

"Our equity gas reserves have provided us with an attractive hedge to our fixed-price contract portfolio," chief financial officer Bob Kelly said in a release. "With a restructuring of certain of our fixed price power contracts and the potential sale of these natural gas reserves, we not only enhance our liquidity position, but we also expect to preserve the margin of our power contracts."

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