The proposed $2 billion debtor-in-possession loan for Calpine Corp. is set to hit the market this week as investors await the final hearing for the company's post-petition financing this Wednesday. Deutsche Bank and Credit Suisse are preparing to launch syndication of a two-year, $350 million "B" term loan; a two-year, $650 million second-lien term loan and a two-year, $1 billion revolver. Pricing on the first-lien loan and revolver is LIBOR plus 2 1/4%, while the second lien is priced at LIBOR plus 4 1/2%. Commitments are due the week of Feb. 6.
"The pricing [on the deal] looks pretty good so that's a plus," one potential investor said. "It's definitely something that we would look at, but personally, I'm going to hold off on a decision until after the final approval hearing for the DIP." The Wednesday hearing is set for 10 a.m. in the U.S. Bankruptcy Court in New York.
Investors looking at the credit said the DIP represents a start but not a solution for the beleaguered power company. "If they continue to follow the same path that got them where they are now, they could very well find themselves [in bankruptcy] again in a few years," one buysider said. "If they stop compounding the problem, then they have a chance. Obviously [the DIP] helps, but it is far from a cure all."
Calpine's $2 billion DIP is among the largest ever; Kmart, in 2002, and Delphi Corp., in 2005, also had $2 billion DIP financings, according to Dealogic. The $350 million term loan is solely for the purpose of Calpine unwinding its lease for Geysers Power Co. and taking control of the facilities outright. But if the lease is not unwound by Feb. 9, Calpine will no longer have access to the $350 million and the overall DIP will be reduced to $1.65 billion. The lease unwind deadline can be extended to April 8, pending agent approval.
The company filed for bankruptcy on Dec. 20 and is seeking the facility in order to continue normal business while it deals with about $22 billion in debt. The facility will allow Calpine to continue to operate its power plants in the U.S., Canada and Mexico. Moody's Investors Service placed a senior debt rating of Ca on Calpine while Standard & Poor's assigned a rating of D. Calls to a Calpine spokesman were not returned.
