Calpine's bank debt traded in the high 70s last week, with market players attributing the paper's dip to sector problems and bank holder disappointment concerning the use of proceeds from a recent asset sale. The bank debt dipped down from the high 80s, where it was said to have traded a couple of weeks ago. "We can't find a bottom on this," one dealer said, noting that bids keep sinking and offers slide right after.
The company recently completed the sale of its oil and gas properties in British Columbia to Pengrowth Corp. for $243.7 million. The transaction was structured in such a way that Pengrowth paid for part of the acquisition by tendering Calpine senior notes with a market value of almost $83 million. And market players noted that only roughly $100 million of the proceeds were earmarked to pay back bank debt. The credit agreement isn't as tight as some investors hoped, one dealer said, adding that there were many baskets through which the company could divert proceeds away from the bank debt. Calls to Bob Kelly, cfo, were not returned by press time.