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by John M. Powers
Online editor
Tulsa, OK, Dec. 21, 2005 -- Mired in court battles and hindered with a debt of $17 billion, Calpine Corp. filed for chapter 11 bankruptcy. The move is intended to offer the company a chance to restructure and, according a statement released by the company, to continue operations and protect its assets.
The San Jose, California based power provider is a major producer of electricity and has plants spread over 21 US states as well as three Canadian provinces. Calpine claims the filing will not disrupt normal operations.
"Our plan calls for power plants to remain available for operation to provide reliable supplies of electricity," said Robert P. May, Calpine's recently installed CEO in a statement on the company's website.
Calpine has also asked the court to allow it to continue to pay its employees, though the company says during the restructuring they will "…continue to evaluate all opportunities to strengthen [Calpine's] balance sheet and enhance operating cash flow, including asset sales and reductions in operating and overhead costs."
Some of Calpine's Canadian affiliates and subsidiaries will also file for creditor protection.
The company has secured commitments from Deutsche Bank and Credit Suisse First Boston for up to $2 billion in secured debtor-in-possession financing. Calpine will use the financing to "be used to fund post-petition operating expenses, including employee and supplier obligations."
In conjunction with the filing, Fitch Ratings has downgraded Calpine's issuer default rating from "CC" to "D" yet removed its Negative Rating Outlook. Fitch also said, in a press release, it "…expects little disruption to the power markets" due to Calpine's filing for chapter 11.
After creditors raised concerns about the appropriateness of certain expenditures, Calpine found itself staring down bankruptcy when the concerns culminated in a Delaware court ordering the company to repay the massive debt it incurred buying fuel for its power plants.
For more stories about Calpine, please see these articles:
Calpine given time to repay debts, but not much
Calpine's common stock to cease trading on NYSE
Fitch says Calpine exposure does not adversely affect public power sector
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