Entegra Power Group's term loan jumped six points to 117 on Apollo Management's interest in the energy company and its debt. One trader said the private equity firm was rumored to be interested in acquiring the company. Mirant Corp.'s hostile bid for rival NRG Energy is being seen as a sign of increasing consolidation in the energy sector and is leading to speculation of other hook ups, according to market observers. Officials at Apollo did not return calls seeking comment.
Joff Mitchell, interim ceo at Entegra, formerly known as TECO Energy, said no sale of the company was being discussed. But he added he had heard that Apollo was buying portions of Entegra's bank debt. An estimated $100 million of Entegra debt traded last week. Citigroup leads Entegra's $1.325 billion term loan.
"Mirant's hostile bid gave people reason to look at the project assets of other companies," one trader said. "Maybe more will be sold. Some of the project assets are pretty solid. TECO particularly stands out."
Entegra, which was formed in June 2005 and is owned by a consortium of banks and private equity funds, owns two of the largest power plants in the U.S. Gila River Power Station in Arizona and the Union Power Station in Arkansas. It was formed after TECO Energy transferred ownership and the debt of its indirect subsidiaries, Union Power Partners, Panda Gila River, Trans Union Interstate Pipeline and UPP Finance, to an entity owned by the projects' lenders. UPP owns the Union and Gila River power stations. The transfer of ownership was part of its plan of reorganization.
Calpine Corp. was another energy company that saw its bank debt rise after Mirant's hostile bid. Its second-lien debt traded up three points to 98 in the days following the bid. Last week it fell back down to 95, but dealers said trading was very active in the name. Traders said Calpine's bank debt has also traded up on a rumor that Calpine's unsecured debt holders may do a $3.5 billion rights offering to take out its second-lien debt and floating rate notes. A Calpine spokeswoman did not return calls seeking comment.
