Calpine launches seven-year covenant-light term loan to investors

By Sara Rosenberg

New York, Oct. 17 - Calpine Corp. held a call at 11:30 a.m. ET on Thursday to launch a $570 million seven-year senior secured covenant-light term loan that was then downsized to $390 million in the afternoon, according to a market source.

Citigroup Global Markets Inc., Barclays, Morgan Stanley Senior Funding Inc., RBC Capital Markets, UBS Securities LLC, Mitsubishi and RBS Securities Inc. are the joint lead arrangers on the deal. Credit Agricole Securities (USA) Inc. and ING Financial Markets LLC are the co-managers.

Price talk on the $390 million term loan is Libor plus 300 basis points with a 1% Libor floor and an original issue discount of 99.

The term loan has 101 soft call protection for six months and amortizes at a rate of 1% per annum.

Expected loan ratings are B1 from Moody's Investors Service and BB from Standard & Poor's.

Commitments are due at 5 p.m. ET on Tuesday, and closing is targeted for Oct. 31, the source added.

An initial draw under the term loan at close will help fund a tender early settlement date for the company's 7¼% senior secured notes due 2017, and the remaining amount drawn within 35 days of close will be used to refinance any remaining 2017 notes. A final draw will be conditioned only upon no bankruptcy event or default.

Other funds for the refinancing will come from $750 million of senior secured notes, upsized from $570 million when the term loan was downsized.

Calpine is a Houston-based power producer.

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