Calpine completes exchange offer, lifts earnings in the third quarter

By Lisa Kerner

Charlotte, N.C., Oct. 30 - Calpine Corp. president and chief executive officer Jack Fusco called his company's third-quarter performance "outstanding" during an earnings call on Friday.

Highlighted during the call was Calpine's exchange of $1.2 billion of term loans for eight-year bonds.

The bonds have a 7.25% yield.

Chief financial officer Zamir Rauf said investor demand for the exchange, which was launched at $750 million, was strong.

"This was one of those rare instances where a creative structure benefited both the lender and the company," Rauf said on the call.

"Since the term loans had been trading at a discount to par, we were able to issue bonds at a yield that allowed them to trade higher than the term loans, thereby allowing the lender that converted to realize a gain."

In addition to extending the debt maturity by three-and-a-half years, Calpine obtained an investment-grade covenant package for added flexibility, according to Rauf.

Calpine boasted strong liquidity during the third quarter of 2009 at over $2.2 billion.

The San Jose, Calif., power company generated $520 million of adjusted free cash flow for the first nine months of 2009 due to changes in working capital.

Net income for the quarter was up at $238 million, or $0.49 per share, compared to $136 million, or $0.28 per share, in the third quarter of 2008, according to a Calpine news release.

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