Calpine second lien heads lower on company's inability to access capital markets

By Sara Rosenberg

New York, Feb. 24 - Calpine Generating Co. LLC (previously Calpine Construction Finance Co. II LLC) pulled its $1.3 billion non-recourse first priority secured institutional term loan (B+) from the bank loan market and its $1.05 billion secured notes offering from the high-yield market, proving Monday's market rumors true and sending Calpine Corp.'s bank debt to lower levels in the secondary.

The deals were cancelled "due to current market conditions," according to a company news release.

Calpine's second lien bank debt was quoted at 95 bid, 95 7/8 offered, slightly lower from previous levels, according to one trader. A second trader placed the debt at 95¼ bid, 95¾ offered with trades taking place at 95 during market hours, compared to Monday's levels of 95¾ bid, 96¾ offered.

"The whole market's been off," the second trader said in explanation of why the second lien debt was lower. "[Plus, pulling the deal] demonstrates that they just don't have access to the market right now. It traded off in sympathy."

Proceeds from the term loans, combined with proceeds from the notes, were to have been used to refinance amounts outstanding under the $2.5 billion CCFC II credit facility that matures in November. Currently there is about $2.3 billion in outstanding debt under the CCFC II facility including letters of credit.

"The company is evaluating different financing alternatives and remains confident that it will be able to refinance this indebtedness prior to its maturity," the news release added.

Questions on the refinancing's ability to get done arose from the very start as was seen from the CCFC II revolver's trading levels. When the refinancing proposal was first announced, the revolver moved to 98½ bid, 99 offered. The paper was unable to reach the usual par levels that a refinancing announcement tends to incite as investors remained cautious on the company's ability to complete its proposed transaction.

Then on Monday, doubts grew even more as rumors were flying that the bond and the bank deal were struggling, with some even saying that the bond deal was restructured or pulled. The CCFC II revolver dropped to 95 bid, 97 offered from previous levels of 98¾ bid, 99¼ offered, according to one trader, while a second trader placed it at 96 bid, 97 offered. The paper was said to be heading back to the 95 context since that was where it was quoted before the refinancing proposal ever hit the market.

However, the CCFC II paper kind of steadied on Tuesday since the market now knew for certain that the refinancing was not going to occur at this time. The paper was quoted in the 95, 96 area by a number of sources with a slight differential in exact levels depending on the trader.

One source quoted it in the 95½ bid, 96 offered context, which is "where it kind of bottomed out," he said. A second source placed the revolver at 95¾ bid, 96½ offered. And a third source quoted it at 95½ bid, 96½ offered.

The now pulled $1.3 billion term loan was priced at Libor plus 475 basis points, increased from Libor plus 425 basis points at the end of last week, with a 1.5% Libor floor, 50 basis points original issue discount, non-call of two years and two years of call premiums. The $525 million floating-rate notes were talked at Libor plus 725 basis points, with a 1.5% Libor floor, 50 basis points original issue discount and seven-year non-call. Lastly, the $525 million fixed-rate notes were talked to yield 11¼%. Pricing on the notes was expected to take place Tuesday.

Deutsche Bank was the lead bank on both the bank and bond transactions.

Calpine Generating is a wholly owned subsidiary of Calpine Corp., a San Jose, Calif.-based power company.

Vulcan call Wednesday

Timing on Vulcan Energy Corp.'s term loan B launch emerged with the company now scheduled to hold a conference call on Wednesday, according to a market source. Previously it was known that the deal would launch this week but a specific day had not yet been nailed down.

The $175 million term loan B is talked at Libor plus 350 basis points.

Fleet is the sole lead arranger on the deal.

Proceeds will be used to help fund the acquisition of Plains Resources Inc. with Vulcan Capital as equity sponsor. Under the transaction agreement, shareholders of Plains Resources, other than chairman James C. Flores and chief executive officer and president John T. Raymond (who together with the affiliate of Vulcan Capital form the Vulcan Group) will receive $16.75 per share in cash, according to a company news release.

Closing of the acquisition, which is expected to occur during the second quarter of 2004, is subject to approval by the shareholders of Plains Resources and other customary closing conditions.

Plains Resources is a Houston independent energy company.

Freedom launches

Freedom Communications Inc. held a bank meeting on Tuesday for its proposed $1.1 billion senior credit facility (Ba3), according to a market source. JPMorgan, Morgan Stanley, Wachovia, Deutsche Bank and UBS are the lead banks on this deal.

The facility consists of a $750 million term loan B, a $250 million term loan A, and a $100 million revolver, with all three tranches priced at Libor plus 225 basis points, according to the source.

Proceeds will be used to help support the company's previously announced recapitalization. In October, the company announced that it signed a definitive agreement with Blackstone Communications Partners and Providence Equity Partners to form a new partnership. Under the terms of the agreement, Blackstone and Providence will make a significant investment in the firm and enable continued control by descendents of founder R. C. Hoiles.

Freedom Communications is an Irvine, Calif., diversified media company.

Also scheduled to launch on Wednesday was True Temper Corp.'s $130 million credit facility (B+). Credit Suisse First Boston is the sole lead arranger on the deal.

The facility consists of a $20 million five-year revolver and a $110 million seven-year term loan B. Pricing is still to be determined.

Proceeds will be used to help support the company's leveraged buyout by management and Gilbert Global Equity Partners from Cornerstone Equity Investors.

True Temper is a Memphis, Tenn., manufacturer of golf shafts and performance sports products for the bicycle, hockey and sporting goods industry.

FTD closes

FTD Inc. completed its merger with Nectar Merger Corp., a subsidiary of Mercury Man Holdings Corp., in a transaction led by Green Equity Investors IV LP, an affiliate of Leonard Green & Partners LP, according to a company news release.

In connection with this merger, FTD obtained a new $135 million credit facility (B1/B+) consisting of a $50 million five-year revolver with an interest rate of Libor plus 275 basis points and a 50 basis points commitment fee, and an $85 million seven-year term loan with an interest rate of Libor plus 275 basis points.

Credit Suisse First Boston and UBS acted as joint lead arrangers on the Downers Grove, Ill., floral company's bank financing.

Cebridge closes

Cebridge Connections closed on a new $350 million senior credit facility. Goldman Sachs Credit Partners LP and RBC Capital Markets were the lead banks on the deal.

Proceeds from the credit facility, combined with proceeds from up to $125 million in new equity, will be used to refinance all of the company's existing debt; upgrade its technology; enhance broadband services and fund additional acquisitions.

"The debt refinancing gives Cebridge's management team greater financial and operational flexibility than was available to them under prior loans. While specific terms were not disclosed, company officials said the credit facilities were significantly over-subscribed, prompting them to increase the $325 million they originally sought," a company news release said.

Cebridge is a St. Louis provider of cable television, internet access and home security services.

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