Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Gold/Mining/Energy : CPN: Calpine Corporation -- Ignore unavailable to you. Want to Upgrade?

To: TimF who wrote (221)	12/19/2001 11:54:51 PM
From: Clement	Read Replies (1) \| Respond to of 555

A couple quick key summary points on bond priced today. If the option is exercised (incidentally, as Babb later noted, his initial read on the bonds was incorrect): - $1.0 billion plus $0.2 billion (over allotment option) less $0.024 (2.0% in fees) - Given close of $14.69 at conversion premium of 23% (or $18.07), that would imply the number of additional shares as potentially being 66.4 million which is 20% of the current estimated 320.2 million shares o/s (includes an estimated 14.8 million shares in options) - If the option is not exercised, there would be an estimated additional 55.3 million shares or 17.3% dilution. Thoughts: - That's a lot of converts out there at a pretty depressed price but given the limited options, it's probably not too bad (although I would have preferred that they do another now and another one later). As a side note, the convertible market is highly cyclical -- so Calpine is getting in at a time when demand is high for this type of product which is good. - There is the possibility that it will not get completed to the full $1.2 billion. I've heard that the size is a little iffy as to whether or not it will get done and in terms of interest -- seems like Calpine is hitting the market for everything it can get while it can get it. - For the bond holders, if Calpine hits $18.07 that's a minimum return of 23% with downside protection which is pretty good especially in this market - The $200 million is an overallotment option -- only available at the beginning if the underwriters can sell it. An overallotment option can only be exercised initially. - There is a put option but it is in 3 years -- and cannot be used until then. And it can be put in shares. Given that I'm an optimist, and that odds in that way are in favor of me, the stock price will rise and and we will not see such a massive beating on the stock in 3 years time. Also it is important to note, that Calpine must eventually issue additional equity anyway to maintain their 35:65 equity:debt target ratio. This would be an easy way for them to do this. - Ideally, they will issue equity at much higher prices than the $18.07, but given our luck as shareholders, they will probably just allow the debt to convert at $18.07