The term loan "B" for embattled power generator Calpine seems to have found its clearing price, with bankers saying over $400 million of the $600 million has now been raised, but at a steep cost. A discount of 1% has been thrown in to sweeten the deal, in addition to a 1% price hike from the originally floated LIBOR plus 2 3/4 % spread, bankers said. In addition to the price hike, a dispute with the Californian utility board has been resolved, some added collateral has been thrown in and an equity offering has been announced that will provide some added liquidity, said a banker. The retail launch of the "B" is now planned for early May, he added.
The equity offering had a mixed response though, with some buysiders suggesting the proceeds could wipe out the debt. Bill Highlander, a Calpine spokesman, said the term loan "B" will definitely be funded at the end of May. The share offering of 69-70 million shares, totaling $920 million will be used to redeem $685 million in zero coupons next week, he said. The "B" loan, part of a $2 billion debt package, is being used to address liquidity concerns, Highlander remarked.
A lack of familiarity with the name and a downgrade from Moody's Investors Service are two issues making life difficult for the name, bankers and investors said. Also, investors are not very familiar with the company and are looking to the bonds, which have been trading in the low 80s, one banker added.