PRESS RELEASE: S&P: Calpine Corp Ratings On Watch Neg
25 Feb 15:38
Following is a press release from Standard & Poor's:
NEW YORK (Standard & Poor's) Feb. 25, 2002--Standard & Poor's today placed
its double-'B'-plus corporate credit rating on Calpine Corp., its
double-'B'-plus rating on Calpine's existing senior unsecured debt, and its
single-'B'-plus rating on the company's convertible preferred stock on
CreditWatch with negative implications.
The action follows Calpine's decision to secure approximately $2 billion
ahead of Calpine's unsecured bondholders.
The San Jose, Calif.-based independent power company plans to pledge all of
its 1.7 trillion cubic feet of U.S. and Canadian gas assets as well as its U.K.
Saltend power plant to three classes of debt holders. Calpine expects to secure
a $1 billion 18-month revolver, a $600 million two-year term loan, and the
existing $400 million corporate revolver that expires in May 2003. This
security adds to the security under the $3.5 billion construction revolver,
which includes power plants under construction.
Standard & Poor's will soon evaluate whether the additional debt and its
security arrangements sufficiently impair Calpine's double-'B'-plus corporate
credit rating to warrant a downgrade. The magnitude of the offering and its
attendant security relative to Calpine's total capitalization, however,
indicate that a downgrade is possible. While the $2 billion debt issuance may
improve Calpine's short-term liquidity position, the additional debt will
likely increase interest expense, refinancing risk, and interest rate risk.
The magnitude of the secured debt offering combined with Calpine's
subinvestment-grade corporate credit rating would cause the subordinated debt
to be rated two notches belowthe secured debt and the preferred stock to be
rated three notches below the secured debt. For example, if Calpine were to
maintain its double-'B'-plus corporate credit rating, the secured debt might be
rated double-'B'-plus, the unsecured debt would be rated double-'B'-minus, and
the preferred stock would remain at single-'B'-plus. However, if Calpine's
corporate rating falls to double-'B', the secured rating might also be
double-'B', the unsecured rating would be single-'B'-plus, and the preferred
stock would be rated single-'B'.
Additionally, the magnitude of the secured debt financing will make it
difficult for Calpine to obtain unsecured debt financing in the future.
Therefore, Standard & Poor's expects that future debt issuances would also be
secured, which would further disadvantage the unsecured, senior bonds.
(END) DOW JONES NEWS 02-25-02
03:38 PM |
