Calpine Corp.'s $742 million second-lien term loan has softened to the 85-86 range from 87 1/2-88 1/2. Meanwhile, Calpine Generating Co.'s (CalGen) first lien dropped a quarter point to the 100 1/2-100 3/4 context. Traders were split on the reason for the drop.
One trader attributed it to Calpine's announcement at the Deutsche Bank high yield conference two weeks ago that the company could buy back bonds at a discount. "The market took this as a negative," he noted. However, another trader said it is uncertain whether the possibility of a bond buyback could have affected the bank debt and in his view the market could be anticipating future earnings falling below expectations. Rick Barraza, v.p. of investor relations at Calpine, did not return calls. The second trader noted that even though Calgen is subject to Calpine's risk, it is an independent project and therefore the impact from Calpine is less. Calpine's second lien is led by Goldman Sachs.