Calpine enters stipulation to resolve second-lien debtholders' replacement DIP objection

By Caroline Salls

Pittsburgh, March 1 - Calpine Corp. entered a stipulation that resolves the unofficial committee of second-lien debtholders' objection to the company's motion for approval of a $5 billion replacement debtor-in-possession facility, according to a Thursday filing with the U.S. Bankruptcy Court for the Southern District of New York.

The parties to the stipulation are the company, its official committee of unsecured creditors, the official committee of equity security holders, the unofficial committee of second-lien debtholders and the replacement DIP facility lenders.

Under the stipulation:

• The replacement DIP's incremental term facility will only be used to refinance debt and/or preferred stock at the Rocky Mountain, Riverside, Metcalf, Freeport, Mankato, Blue Spruce and Deer Park projects and cannot be used without the consent of the committees or a further court order;

• The $484 million to be available under the replacement DIP facility after repayment of the existing DIP facility and repayment of the CalGen lenders will only be used to repay debt and/or preferred stock at the Rocky Mountain, Riverside, Metcalf, Freeport, Mankato, Blue Spruce and Deer Park projects and/or make payments to the Calpine second-lien debtholders and/or the CalGen lenders and cannot be used without the consent of the committees or upon further court order;

• The amount secured by the Calpine second-replacement liens will no longer be limited to securing diminution in value only, but will now instead secure the full amount of the second-lien debt;

• Calpine and its debtors may only incur or grant liens in to secure debt in connection with any commodity hedge agreements of the loan parties to the extent that the commodity hedge agreements can be entered into for hedging activities undertaken in compliance with Calpine's trading protocol for ordinary course, non-speculative hedging transactions for "right way risk" activities; and

• As additional adequate protection, the amount of the Calpine second-lien holders' claim will be increased by a paid-in-kind fee equal to 1.5% of the non-cash portion of their distribution under a plan of reorganization, exclusive of any amounts for penalties or premiums.

The stipulation is subject to bankruptcy court approval of the replacement DIP motion and closing of the replacement DIP facility.

Calpine, a San Jose, Calif., power company, filed for bankruptcy on Dec. 20, 2005. Its Chapter 11 case number is 05-60200.

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