Calpine gets court OK of settlement with lease financing parties at Pasadena facility

By Reshmi Basu

New York, Dec. 19 - Calpine Corp. obtained court approval Wednesday of a settlement agreement that would remedy the company's dispute with the lease financing parties at its Pasadena, Texas, facility.

As previously reported, the company's non-debtor subsidiary, Pasadena Cogeneration LP, entered into certain agreements with lease financing parties under which Pasadena Cogeneration agreed to the sale-leaseback financing of a 750-megawatt natural gas-fired cogeneration facility.

As a result of Calpine's Chapter 11 filing, the lease financing parties alleged that certain defaults existed under the related operative documents.

Under the settlement agreement, the lease financing parties have agreed to waive all alleged existing defaults and consent to certain amendments to the related operative documents.

In exchange for the amendments, the Calpine parties have agreed to grant the lease financing parties a first-priority perfected security interest in certain bank accounts, which will be assigned to the lease indenture trustee.

Additionally, the applicable Calpine parties will execute and deliver a stock pledge agreement, an amended and restated guaranty and a central guaranty. The Calpine parties also agreed to cure certain alleged lease defaults under the settlement.

Calpine, a San Jose, Calif., power company, filed for bankruptcy on Dec. 20, 2005 in the U.S. Bankruptcy Court for the Southern District of New York. Its Chapter 11 case number is 05-60200.

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