CPN: Calpine Corporation Message Board

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Gold/Mining/Energy : CPN: Calpine Corporation

FRO 23.66

-0.3%

Nov 7 9:30 AM EST

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To: Howard R. Hansen who wrote (238)	1/6/2002 11:24:51 AM
From: Hawkmoon	Read Replies (1) of 555

Up to now I had been under the impression there was a straight swap of a convertible note for X number of shares of Calpine stock when the price of Calpine exceeded $18.07 per share. It all depends on the interest of the bondholder. Do they wish to hold a note that pays them 4% and equates to a dividend paying investment in the stock with a basis of $18.07, but not have the risk of physically holding the shares? Or would they find some reason to pay out the difference between where the stock currently trades (assuming some price determination based upon the average trading price over a certain period of time), which is below the $18.07 price at which the conversion is set. Basically this is a private placement where CPN effectively indirectly sold stock for a premium over current market value. They set a "floor" under that conversion at a price higher than where the stock has recently been trading... something that very much was a positive surprise to me when we first heard the news. (I was expecting a discount to market price which at the time was around $13-14/share.) So effectively the convertible note holders have found a place to park their money and make 4%, with the potential to enter into an equity position at any point over the coming years at a very favorable price, assuming that CPN contines to be successful at implementing its business plan. And if the company falters, the bondholders will be ahead of the common shareholders in any claims against the company. Overall, given the attitude the market has displayed toward the debt of energy providers in the wake of Enron, I think this deal was quite accretive and helped to restructure the company's liquidity in a way that promoted confidence on the street. Very strange to see the market reacting positively to a company that is hinting it will slow down it's developement plans. But maybe they see that with slower development, there will be higher price support in the power generation markets and better opportunity to maintain profit margins. Hawk

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