Calpine/Loan -2: Calpine May Need To Post Collateral
22 Feb 17:37
In recent days, there has been speculation that Calpine will need to post
collateral in order to secure the financing. There also is talk in the market
that some of the lenders have left the syndicate.
Calpine's Barraza declined to discuss the nature of the talks with its
lenders.
Previously, Calpine said the funding would be provided by a syndicate of
banks, including the Bank of Nova Scotia (T.BNS), Bank of America Corp. (BAC),
Bayerische Landesbank Girozentrale, Citigroup Inc.'s (C) Citibank, Credit
Suisse First Boston (Z.CSF), Deutsche Bank AG (DB) and the Toronto-Dominion
Bank (TD).
A person familiar with the negotiations said the terms of the financing were
being discussed. According to the source, the lenders were talking about both
interest rates used in the loan and the securitization of the funding.
The source said it was likely some type of collateral would need to be
posted.
In a research note Friday morning, bond research firm Creditsights said a
securitized bank line on top of the two project financings Calpine already has
would leave current fixed-income investors subordinated to about $2 billion in
debt, which the firm thinks could be enough to prompt credit rating agencies
such as Moody's Investors Service to consider a "one to two notch downgrade."
"With or without security, we would expect the banks to exact some fairly
onerous convenants before they sign on the dotted line," Creditsights said.
Moody's ratings do traditionally differentiate between secured and unsecured
ratings by one to two notches.
It should come as no surprise that lenders are being cautious about lending
additional money to Calpine. The company has stated its 2002 capital
expenditures will be about $3.25 billion, including $2.5 billion in
construction costs, $500 million in turbine payments and $250 million for
existing gas and power operations.
In April, Calpine also will need to pay back about $800 million in
outstanding zero-coupon convertible securities and it has a $330 million lease
obligation due this year.
To meet these expenses, Calpine said last month that it had $1.8 billion in
cash resources and $875 million in borrowing capacity under its credit lines.
(The borrowing capacity assumes the completion of the pending credit facility.)
Calpine also expects to generate $1.2 billion in operating cash flow this
year.
While Calpine is trying to build up its cash cushion, there are other
expenses it may need to grapple with that aren't included in the spending plans
it has already shared with investors.
As part of its efforts to scale back its ambitious construction plans,
Calpine has delayed delivery of gas turbines it had on order from General
Electric Co. (GE) and other vendors. Calpine is in negotiations with its
equipment providers, but may have to pay penalties for not accepting delivery
as it agreed to do.
Without a doubt, timing and investor confidence will likely continue to be an
issue as Calpine navigates its way through this critical time, which has been
further complicated by low energy prices.
-Christina Cheddar, Dow Jones Newswires; 201-938-5166;
christina.cheddar@dowjones.com
(END) DOW JONES NEWS 02-22-02
05:37 PM |
