A few banks were rumored to be holding out on approving a two-year extension sought by Calpine Corp. for $1 billion of revolving credit capacity that was initially set to expire last Friday. The holdouts could not be determined. Traders said Calpine received a three-week to one-month extension for the revolvers until a more permanent solution can be worked out. The delay in getting the full two-year extension could be a reason why market rumors suggested banks were holding out as the company needs to receive 100% approval for the extension. "In a situation like this [lenders] feel empowered to ask for everything," noted one dealer. Rick Barraza, senior v.p. of investor relations for Calpine, said the company is still working with its lenders but he could not comment on the specifics of the bank deal.
Some traders said the stalling on the extension and the dip in the price of the company's bank debt could have more to do with Calpine's monetization and securitization deals, which are also pending. The market for the company's "B" loan sunk into the 95 range early last Wednesday but firmed to the 96-97 context later in the day. The bonds were softer as well. The market expected Calpine to come out with the Morgan Stanley securitization deal sooner, explained one trader. Lenders were also said initially to be concerned by the $1.2 billion in convertible notes due in 2006 that can be put back to the company in December 2004. With the extension, the revolver will mature the May following this date, putting the lump sum of potential obligations in front of the bank debt maturity. It could not be determined whether or not this issue has been resolved.