Calpine Corp.’s 8 1/2%s of ’08 traded up to four points higher last week following the power company’s announcement it intends to come with a new offering. The deal would consist of two parts: a $785 million senior secured first-lien piece, led by Merrill Lynch, and a $600 million class via Deutsche Bank.
Proceeds from the deal are intended to be used by Calpine to retire its preferred stock, which would increase the company’s liquidity. “Investors are thinking if these deal pulls through, maybe Calpine will have enough cash to get through 2007,” noted one portfolio manager, who pointed out Calpine’s ’08s also traded higher on word of the new deal.
Another investor is not as positive on the company’s prospects. “I’m skeptical of the whole credit and unsure how they’ll put it off,” he said.
