Struggling power company Calpine Corp., which has binged on debt for the past few years, announced late Tuesday night that it had filed for bankruptcy protection.
The company — which has accumulated $22.5 billion in debt after fuel costs soared to record highs — stated that it has received commitments for up to $2 billion of secured debtor-in-possession financing from Deutsche Bank and Credit Suisse First Boston. The financing includes a $1 billion revolving credit facility and a $1 billion term loan. Upon court approval, the financing combined with cash from operations will be used to fund post-petition operating expenses, including employee and supplier obligations.
“After careful consideration of all available alternatives, Calpine’s board of directors determined that a Chapter 11 filing was a necessary and prudent step and the best way to obtain the financing necessary to maintain regular operations, and allow for a successful restructuring,” said chief executive officer Robert P. May, in a statement. “With our new financing we will have additional financial flexibility and sufficient liquidity to meet our obligations going forward.”
May, a turnaround expert, was brought in less than a week ago after successfully keeping HealthSouth out of bankruptcy.
Calpine joins Mirant Corp., NRG Energy Inc., and National Energy & Gas Transmission Inc. in the circle of companies that have sought bankruptcy protection after overbuilding of electricity plants knocked down prices, Bloomberg pointed out. The wire service, which noted that Calpine was the largest issuer of junk bonds last year, also reported that Calpine’s filing will not affect its tender offer to purchase up to $400 million of outstanding notes due in 2014, which began on December 1.
Last week, Delaware’s Supreme Court upheld a lower-court ruling that Calpine misspent $312 million in asset-sale proceeds to buy fuel for its power plants, according to Reuters.