Calpine Corp.'s term loan "B" ticked up a point to a point-and-a-half to the 93 level last Thursday. Paper was said to have traded at those levels after slowly climbing up during the course of the week. The bank debt grows stronger as investors feel more comfortable with the name. Although there have been recent reports that indicate valuations for power generating assets are lower, Calpine has a stock of quality assets in good locations, noted one market player. He added that assets sales were likely to get done easily.
Calpine has approximately $600 million in asset sales planned for early 2003. The divestitures are some of the company's older power plants, called QF qualifying facility power plants, explained Robert Kelly, Calpine's executive v.p. and cfo, during the company's last earnings call. These assets are more attractive because they have power sales agreements in place, a Calpine spokeswoman explained. On average these facilities have eight to 10 years left on contracts. The company is not required to use the proceeds to pay down bank debt, rather the proceeds are part of the company's capital funding program, said the spokeswoman. Calpine is working with Salomon Smith Barney to complete the sales.
Calpine has a $1 billion, 364-day revolver maturing in May. The company is currently negotiating with its banks to extend this revolver for two years. In addition, Calpine has the $1 billion term loan "B" due in 2004. Salomon leads the bank deal.