Calpine's $600 million term B loan not expected to close until end of May

By Sara Rosenberg

New York, April 25 - Calpine Corp. has yet to close on its new $600 million two-year term loan B (Ba3/BB+) even though on March 12 it said in press release that it "has closed a new, $1.6-billion secured credit facility."

While Calpine has closed on a new $1 billion revolver and an amendment of an existing $400 million, it is having difficulty completing the term loan. Not only did it have to raise interest rates from earlier expectations to make the loan more attractive to investors, but it also had to add some extra collateral as security.

"This was all market-driven," a syndicate source said. Now that the loan is more securely backed and has better terms, investors are showing more interest, he added.

Salomon Smith Barney, Deutsche Bank and Credit Suisse First Boston are lead banks on the term B loan.

Other new factors that are attracting potential investors in Calpine's loan include its public offering of 66 million shares of common stock late Wednesday, priced at $11.50 per share, and the restructuring of its long-term power contracts with the California Department of Water Resources.

Initial price talk had the term B at an interest rate of Libor plus 275 basis points. On Wednesday, the interest rate revised upwards to Libor plus 375 basis points, according to the syndicate source. The loan was originally secured by interests in the company's natural gas properties, the Saltend power plant in the U.K. and equity investments in nine U.S. power plants. As an additional sweetener, the San Jose, Calif. power company added mortgages on gas properties as collateral.

The credit facility is scheduled to launch to "smaller retail investors" in early-May at a discount of 100 basis points, according to a syndicate source.

The loan is not expected to close until the end of May, a company spokesman said.

On March 12, Calpine said in a press release stated that it "has closed a new, $1.6-billion secured credit facility." The release continued to say that the credit facility consists of "a new $1.0-billion and an amended $400-million revolving credit facility, expiring on May 24, 2003, that together provide $1.4 billion in borrowing and letters of credit capacity; A new two-year, $600-million term loan that will be available upon satisfaction of certain conditions, which the company expects to satisfy within the next 30 days." The $1.4 billion revolver has closed, the company spokesman confirmed.

Proceeds from the loan will be used to finance capital expenditures and for other general corporate purposes, according to the press release.

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