Calpine details tender offer for 7 7/8% and 7˝% secured notes

By Jennifer Chiou

New York, July 9 – Calpine Corp. is tendering for any and all of its $880 million of outstanding 7 7/8% senior secured notes due 2020 and $1.6 billion of 7˝% senior secured notes due 2021.

According to a filing with the Securities and Exchange Commission, the company is soliciting consents to certain proposed amendments to the indentures governing the notes.

The offer and solicitations will end at midnight ET on Aug. 4.

Calpine also previously said it is in discussions with holders of its $320 million of 8% senior secured notes due 2019 to repurchase of some or all of those notes.

In the tender offer, the company is offering a total consideration of $1,105.71 per $1,000 principal amount of 7 7/8% notes and $1,114.29 per $1,000 principal amount of 7˝% notes, both including a consent payment of $30.00.

Calpine will also pay accrued interest up to, but not including, the settlement date.

The total consideration for the 7 7/8% notes was calculated using a weighted average that assumes that

• $770 million of the notes would be repurchased at a price equal to the sum of the present values on the applicable early settlement date of (a) $1,039.37 on July 31, 2015, the notes’ first redemption date and (b) the interest that would accrue for the notes to the redemption date, minus the accrued interest from the most recent interest payment date to, but not including, the applicable early settlement date; and

• $110 million of the 7 7/8% notes would be repurchased at a price equal to the sum of the present values on the applicable early settlement date of (a) $1,030 on Dec. 3, 2014 and (b) the interest that would accrue from the most recent interest payment date to, but not including, the special redemption date, minus the accrued interest from the most recent interest payment date to, but not including, the applicable early settlement date.

The total consideration for the 7˝% notes was calculated using a weighted average that assumes that

• $1.4 billion of the notes would be repurchased at a price equal to the sum of the present values on the applicable early settlement date of (a) $1,037.50 on Nov. 1, 2015, the notes’ first redemption date and (b) the interest that would accrue for the notes to the redemption date, minus the accrued interest from the most recent interest payment date to, but not including, the applicable early settlement date; and

• $200 million of the 7˝% notes would be repurchased at a price equal to the sum of the present values on the applicable early settlement date of (a) $1,030 on Dec. 3, 2014 and (b) the interest that would accrue from the most recent interest payment date to, but not including, the special redemption date, minus the accrued interest from the most recent interest payment date to, but not including, the applicable early settlement date.

The present values for both series were determined based on a yield to the reference U.S. Treasury rate to the redemption date plus 50 basis points.

The company is soliciting consents to eliminate substantially all of the restrictive covenants, certain events of default and related provisions in the note indentures and release the liens on the collateral securing the notes.

The consent deadline is 5 p.m. ET on July 21.

The Houston-based power company said it intends to redeem any notes that remain outstanding following the tender offer.

In other news, the company plans to amend its existing credit agreement with Goldman Sachs Bank USA as administrative agent to provide for an aggregate amount of incremental revolving facilities amounting to up to $500 million.

Proceeds from the company’s planned $2.8 billion offering of notes due 2023 and 2025 will be used to fund the tender offer and the potential repurchase of the 8% notes.

The company has the option to redeem some or all of the 8% notes at a make-whole price.

Morgan Stanley & Co. LLC is the dealer manager and solicitation agent (212 761-1057 or 800 624-1808). D.F. King & Co., Inc. is the tender agent and the information agent (800 628-8536 or call collect 212 269-5550).

Affiliates of Goldman, Sachs & Co. hold all of the outstanding 8% notes.

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