A two point dip in the price of Calpine's bank debt was attracting a lot of attention from bank debt players last week as a $20-30 million piece traded hands and those watching the credit speculated that the term sheet on the proposed extension of the company's $1 billion revolver due in May could be sparking activity. "There has to be something going on," said one buysider, noting that Calpine's bonds dipped as well. The buyer and seller of the piece could not be determined. Traders said the name had been quoted as high as 95 1/2 96 1/2 before this latest slip.
Much of the speculation centers on what is or is not on the term sheet for the two-year extension of the $1 billion revolver. Market players said a rumor suggests the term sheet does not include anything that deals with the potentially thorny issue of existing puttable convertible notes. The company has $1.2 billion in convertible notes due in 2006 that can be put back to the company in December 2004, ahead of the bank debt maturity if the extension is completed. Calls to the company's financial officials were not returned by press time. It could be that lenders are looking to cut back due to the uncertainty surrounding the new deal, suggested one trader, of the trades this past week.
Some market players suggested that the dip in the name was purely technical. Calpine had not moved up on news, but rather due to the momentum of other energy companies coming to market and getting deals done, said one trader. After the market reached the 96 range, the bids backed up, he added. Another trader said those who had bought the name at lower prices were taking the opportunity to cash out with a profit.
Another issue that market players are watching is how Calpine plans to deal with its other short-term maturities, one in particular being the May 2004 maturity of its $1 billion term loan. Andre Meade, an analyst at Lazard Freres & Co. who follows Calpine, commented that the maturities in 2003 are not as much a concern as the mountain of maturities in 2004. "We've seen a lot of companies try to reach global solutions on all their maturities," said Meade. "I think [Calpine is] trying to rollover the working capital revolver on a stand-alone basis." Some, however, think that this might not be the best route to take. If Calpine refinances every maturity in piece meal it will be a big headache for their creditors, one dealer said, noting that the market does have an appetite right now for energy paper.