Source: Dow Jones Corporate Filings Alert
 
Calpine Corp. (CPNLQ) wants to replace its current bankruptcy financing deal with a new $5 billion package that would yield about $100 million in annual savings and fund operations once the company exits Chapter 11 protection.
 
On Friday, Calpine asked U.S. Bankruptcy Judge Burton R. Lifland in Manhattan to allow the energy company to replace its current $2 billion debtor-in-possession loan with a $5 billion package arranged by Credit Suisse, Goldman Sachs, JPMorgan and Deutsche Bank.
 
According to an affidavit by Samuel M. Greene, managing director of Miller Buckfire & Co., Calpine has used about $996.5 million of its current financing package, which is scheduled to expire on Dec. 20.
 
Miller Buckfire is serving as the company's financial advisor and investment banker. In effort to increase Calpine's cash flow, the firm asked lenders to submit proposals for a replacement DIP loan to meet the company's current and future needs.
 
Greene said the financing package had to mature beyond Dec. 31, contain the flexibility to provide exit financing and the option to expand borrowing capacity to refinance existing debt.
 
The new $5 billion package comprises a $1 billion revolving loan and a $4 billion term loan, which includes a $550 million letter of credit. Greene said the package is set to expire in two years, but can be expanded to a seven-year window if Calpine converts the deal into an exit-financing package.
 
Proceeds of the loan will be used to fund operations, refinance the existing DIP loan, and pay off $2.5 billion in secured debt from Calpine's CalGen unit. The company is one of Calpine's largest operating units, which indirectly owns 14 natural gas-fired power plants that have an estimated peak capacity of 9,815 megawatts.
 
Greene said Calpine expects to save about $100 million annually from the new package, which lowers the company's interest rate to 7.61% from 8.66%. The company will also benefit from repaying the CalGen debt that carries an 11.25% interest rate.
 
Additionally, Greene said paying off the CalGen debt furthers the company's restructuring efforts by resolving seven streams of debt that represent at least three different creditor groups.
 
Greene said the time is ripe for Calpine to seek replacement financing, as interest-rate spreads for issuers rated B and BB reached their lowest levels since 1998 during 2006, and remain near those levels currently.
 
Lifland will consider the loan request during a Feb. 27 hearing at the Manhattan bankruptcy court.
 
Calpine supplies about 3.5% of the electricity used in the U.S., powering 27 million households. Since it began its bankruptcy reorganization over a year ago, the company has moved to sell or close a fifth of its 92 plants and reduce its work force by a third.
 
Calpine is the largest U.S. operator of natural-gas-fired power plants. It filed for Chapter 11 protection from creditors on Dec. 20, 2005, in the U.S. Bankruptcy Court in Manhattan.