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Calpine Gets $1-Billion Credit

January 11, 2002|From Bloomberg News

Calpine Corp., a U.S. power-plant developer, won $1 billion in unsecured credit from lenders, boosting its finances for the third time since its credit rating was cut to junk a month ago.

The one-year credit line will allow Calpine to borrow $350 million and provide $1 billion in guaranteed backing from banks, the company said. Calpine, which has a $400-million credit facility, now has access to $750 million for borrowing and $1.4 billion in letters of credit.

Moody's Investors Service had cut Calpine's credit grade, citing a "significant debt burden." Calpine, which owns or is building power plants in 29 U.S. states, Canada and Britain, then sold $1 billion in convertible notes to pay debt. This month, it sold an additional $200million in notes.

"They now have more liquidity, and that's a good thing," said Susan Abbott, a managing director at Moody's.

"They still have a lot of debt on their balance sheet, and as long as that remains as heavy a burden as it is, they will remain on review for a downgrade."

San Jose-based Calpine has about $13 billion in debt on its balance sheet, Abbott said. Moody's may reconsider its review after the company releases fourth-quarter results, she said. The earnings announcement is scheduled for early next month.

Shares of Calpine rose 31 cents to close at $16.05 on the New York Stock Exchange. They have fallen 48% in the last year.

Calpine's 8.5% notes maturing in 2011 fell about half a cent on the dollar to 89.5 cents from 90 cents on Thursday, traders said. The debt is yielding 10.3%.

U.S. power producers and traders have moved to improve their balance sheets after Enron Corp., once the biggest energy trader, filed for bankruptcy protection Dec. 2, prompting closer industry scrutiny by credit-rating agencies.

"Concerns about [Calpine] getting financing and accessing capital markets should subside," said Catherine Zaharis, portfolio manager of the Principal Utilities Fund, which owns Calpine shares. "It was clearly on everyone's mind last month."

Calpine's shares fell 22% in December, partly because of investor concern about debt and financing new power plants.

The company's credit also is rated junk by Standard & Poor's Corp.

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