The bank debt for Calpine Construction Finance Company II (CCFC II), now known as Calpine Generating Co., slumped to the 951/2-963/4 range following Calpine Corp.'s decision to pull a $2.3 billion deal to refinance the credit. But the paper recovered, trading in the 961/4-971/4 range toward week's end. The existing CCFC II bank debt had been climbing up toward par with the expectation that the paper would be taken out. The name previously had traded into the 981/2 range.
A $12 million piece of Calpine's CCFC I facility was said to have traded off in sympathy. Traders said the paper was seen changing hands in the mid 106 context, off slightly from highs in the 107-108 range.
There is a camp among loan players that believes Calpine will be able to return to the market to get a new deal completed in the near future. The company was trying to get too much done too fast, noted one loan trader. "It was starting to cost [Calpine] too much money," he added. The new deal was set to include $1.3 billion of non-recourse first-lien term loans and $1 billion of second-lien notes. Deutsche Bank was the lead arranger for the bank debt and bonds. Market watchers said the failure was due in part to loose covenants and the absence of a spark-spread hedge.
The company said in a written statement that it is considering alternative financing and "remains confident" that it will be able to refinance the credit, which had about $2.17 billion outstanding at the end of September, prior to its maturity date in November. Calls to Rick Barraza, Calpine's senior v.p. of investor relations, were not returned.