Calpine, subsidiary enter third DIP amendment

By Caroline Salls

Pittsburgh, Dec. 22 - Calpine Corp. and guarantor subsidiary Calpine Generating Co., LLC entered into the third amendment to its debtor-in-possession facility, according to an 8-K filing with the Securities and Exchange Commission.

The amendment allows liens to be granted to CalGen; allows adequate protection payments to holders of Calpine's second-priority secured floating-rate notes due 2007, 8½% second-priority senior secured notes 2010, 8¾% second-priority senior secured notes due 2013, 9 7/8% second-priority senior secured notes due 2011 and senior secured term loans due 2007; and resets the Geysers leverage ratio and Geysers interest coverage ratio for the months ended Dec. 31, 2006 through Nov. 30, 2007.

The amendment also eliminates the provision that would have required reduction of the DIP revolver commitment to $750 million from $1 billion based on asset sale mechanics; allows for future project financing at Otay Mesa Energy Center, LLC; permits the transfer by Calpine to the Greenfield Project Partnership of a purchase contract with Siemens Power Generation, Inc. relating to warranties on turbines transferred; and permits the sale of some of the company's subsidiaries, which are inactive or have de minimis assets.

According to the filing, CalGen has $258 million in excess cash flow available to transfer to CalGen, but the collateral agent for CalGen's secured notes and term loans disagreed with CalGen's interpretation of the cash collateral order, which authorizes transfers of unrestricted cash, and indicated that it would not grant a transfer request.

However, under the amendment, the collateral agent is required to transfer the $258 million to Calpine in the form of a loan and is required to honor all future requests for loan transfers within three days of receipt of the request.

As adequate protection to the holders of CalGen secured debt, CalGen will have a first-priority lien on the excess cash flow transferred so the funds remain in a separate account maintained by Calpine.

In addition, CalGen will have a claim in the amount of the excess cash flow transferred against each of the U.S. debtors and a junior lien on all assets of each of the U.S. debtors, with the exception of Bethpage Energy Center.

Calpine, a San Jose, Calif.-based power company, filed for bankruptcy on Dec. 20, 2005 in the U.S. Bankruptcy Court for the Southern District of New York. Its Chapter 11 case number is 05-60200.

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