More than 200 accounts are in the book for Calpine Generating Co.'s $2.4 billion refinancing. A wide audience signed on to the deal including insurance companies, pension funds, mutual funds, high-yield buyers and bank loan buyers, a source familiar with the deal said. Morgan Stanley, which fully underwrote the deal, filled the book only one day after announcing it to investors last Thursday (LMW, 3/11).
Deutsche Bank's $2.3 billion loan and bond deal to refinance the credit was pulled last month after Deutsche Bank failed to sell a bond portion of the financing. There were reportedly issues relating to covenants on the note issue, disputes over the collateral and the bond pricing. The average weighted price of the debt is now 7.5%, compared to a reported 7.9% on the Deutsche Bank-led refinancing (3/1).
Investor demand led to some adjustments of the tranche sizes by Morgan Stanley on the new deal from that first pitched to investors. "With a deal that size you are going to find a greater pocket of demand in some pockets and less in others," the source said.
The five-year, $835 million combination of non-recourse super priority floating rate secured institutional term loans and notes were increased from $800 million.
These priced at LIBOR plus 3 3/4%, with a 1 1/4% LIBOR floor. The six-year, $740 million in combination of non-recourse floating grate senior secured institutional term loans and notes was decreased from $855 million and priced at LIBOR plus 5 3/4% with a LIBOR floor of 1 1/4%.
The seven-year, $680 million non-recourse floating rate secured notes were increased from $550 million and priced at LIBOR plus 9% with a 1 1/4% LIBOR floor. And the seven-year, $150 million of non-recourse first rate secured notes were decreased from $200 million and priced at 11 1/2%. "People either buy the riskiest or the safest," the source said. "It's like middle-child syndrome. The secured and third lien generally get the most demand," he added.
Covenant changes on the new deal are no asset substitution and asset sale proceeds must first offer to repay debt. The offering is expected to close March 23. A Morgan Stanley spokesman declined comment and Rick Barraza, Calpine's senior v.p. of investor relations, did not return calls.