Morgan Stanley has snared the lead role in underwriting $2.4 billion refinancing for Calpine Generating Co., formerly Calpine Construction Finance Co. II (CCFC II). The new deal, which sources said is fully underwritten by Morgan Stanley, comes after Deutsche Bank was dropped from the lead position.
The deal comprises a five-year, $800 million super-secured floating-rate loan priced at LIBOR plus 3 1/2-3/4%. The loan, which is non-call until year three, is can be bought by high-yield investors, said a source. The rest of the debt consists of a six-year, $855 million senior secured note/loan, that is non-call until year four and is priced at LIBOR plus 5 1/2-3/4%; a seven-year $550 million secured floating rate note, that is non-call life and priced at LIBOR plus 8 3/4-9%; and a seven-year non-call for life, $200 million secured fixed rate note priced at 11 1/4-1/2%.
There is also a new $200 million revolver being led by Scotia Capital. Scotia and Credit Suisse First Boston are the leads on CCFC II's existing bank debt. Rick Barraza, Calpine's senior v.p. of investor relations, did not return calls.
Deutsche Bank was in the market last month with a $2.3 billion loan and bond deal to refinance the credit. The facility included $1.3 billion of non-recourse first-lien term loans and $1 billion of second-lien notes. Price talk on the loan was LIBOR plus 4 1/4% (LMW, 3/1). The offering was cancelled due to market conditions, the company said in a press release. There were reportedly issues relating to the covenants on the note issue, disputes over the collateral and the pricing of the bond. A Deutsche Bank spokesman could not be reached by press time.
Covenant changes on the new deal are: no asset substitution and asset sale proceeds must first offer to repay debt. Investors will have the direct lien on two-thirds of the California plants and lien of the stock on the Goldendale facility. The deal also includes a three-year $100 million spark-spread hedge between the issuer and the Morgan Stanley. This is a feature that ensures debt repayments even if generation margins deteriorate.