CPN: 1 billion at 4% for a "junkie".
12/19 19:27
Calpine Boosts Security Sale to $1 Bln to Repay Notes (Update1)
By Mark Lake
San Jose, California, Dec. 19 (Bloomberg) -- Calpine Corp. increased a convertible note sale by 60 percent to $1 billion, helping the energy trader bolster its credit rating and pay back debt.
The San Jose, California-based company will pay a coupon of 4 percent on the five-year notes, which can be converted to common stock when shares are at a price 23 percent above current levels, according to people familiar with the matter. Deutsche Banc Alex. Brown arranged the sale and has the right to buy an additional $100 million of the notes.
Calpine said it would use proceeds from the sale to repurchase part of its $878 million of zero-coupon convertible notes due 2021, which could be put back to the company in April. The new notes have a three-year put option.
``They've raised relatively low-cost capital,'' said Terran Miller, a fixed-income analyst for UBS Warburg. ``They've done a good job of proving the rating agency wrong.''
The note sale comes after Moody's Investors Service cut the company's credit rating to junk late Friday, citing Calpine's need to manage ``significant debt burden.''
Shares in the company rose 69 cents, or 4.9 percent, to $14.69. They had dropped 35 percent since Enron Corp., the largest energy trader, filed for Chapter 11 bankruptcy on Dec. 2.
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Wednesday December 19, 8:07 pm Eastern Time
Calpine sells $1 bln in convertible bonds
(UPDATE: Adds details, background throughout; previous SAN JOSE)
LOS ANGELES, Dec 19 (Reuters) - Calpine Corp. (NYSE:CPN - news) said on Wednesday it had placed $1 billion in convertible notes with investors, more than double the amount initially planned as the capital-hungry power producer sought to put to rest fears that it could face a funding crunch.
Shares of Calpine closed up 69 cents, or 4.9 percent, to $14.69 on the New York Stock Exchange on Wednesday, extending a three day winning streak that has seen the stock take back about a third of the losses it sustained last week.
The San Jose, California-based company said it sold the 5-year debentures in a private placement under Rule 144A. The securities will be convertible into shares of Calpine common stock at $18.07 per share, a 23 percent premium to Wednesday's close, the company said.
Calpine said the proceeds from the issue, which was increased in size to respond to investor demand, will be used to buy back company's 20-year zero-coupon convertible debentures.
Those securities have a ``put'' option allowing bondholders to sell them back to the company in April 2002, raising a concern for some investors that the company could face a liquidity crunch at that time.
On Dec. 12, with its stock and bonds under pressure, Calpine moved to reassure investors by buying back $122 million of the 20-year bonds, leaving $878 million outstanding, less than the amount raised by Wednesday's expanded private placement.
Calpine had originally planned to sell up to $500 million in convertible debentures on Wednesday, but that amount was doubled in the course of the day because of the strength of demand, the company said.
``We believe this should put to rest concerns related to the company's ability to finance the zero-coupon debentures,'' wrote analyst Michael Worms of Gerard Klauer Mattison in a report.
Calpine has plans to build 70,000 megawatts of mostly gas-fired electricity generating capacity by 2005, enough to supply about 70 million homes, which would make it the largest independent power supplier in the United States. So far, Calpine has about 30,000 MW either built or under construction.
On Wednesday, the ratings agency Fitch lowered its rating on Calpine's senior debt by a notch to its highest ``junk'' rating, saying that the company's aggressive expansion plans were at odds with the ``more cautious outlook'' for the power generation business and the tighter capital markets.
The action by Fitch followed a similar downgrade by Moody's Investors Service on Friday and brought the ratings from those two agencies in line with Standard and Poor's, which repeated its equivalent ``BB plus'' rating on Calpine last week.
Fears of a glut in U.S. power capacity as demand gets hit by the recession and the fallout from the collapse of energy trader Enron Corp. (NYSE:ENE - news) have made creditors more cautious about bankrolling new power projects.
Calpine continues to reevaluate its construction program, with an eye toward the possible delay of certain projects, Worms said.
``In our opinion, this should not have any significant impact on long-term earnings or strategy,'' Worms wrote. ``However, given current investor concerns, some modest adjustment could occur, which should, again, allay investor concerns that Calpine will build at any cost.'' |
