OTCBB/Pink Trading Strategies

[glassy]

I think better said is that is looks like they will dodge the BK bulllet- my bad. not definite yet

Thursday , December 08, 2005 21:16 ET

By RANDALL CHASE
AP Business Writer
DOVER, Del., Dec 08, 2005 (AP Online via COMTEX) -- Calpine Corp. on Thursday withdrew its request for a temporary restraining order after reaching an agreement with bondholders who had threatened to declare the struggling power merchant in default if it did not immediately restore $312 million into an escrow account.

Wilmington Trust Co., acting as trustee for bondholders holding $3 billion in second-lien secured debt, notified Calpine on Monday that it would declare the company in default if the money was not restored to the escrow account by Wednesday.

Calpine immediately filed a motion for a temporary restraining order, arguing that a default declaration could set off chain of defaults on other Calpine debt and cause the company, which is on the brink of bankruptcy, "irreparable harm."

Following negotiations, Calpine, Wilmington Trust and an unofficial steering committee of bondholders informed Chancery Court judge Leo Strine Jr. on Thursday that they would abide by the terms of Strine's ruling giving Calpine until Jan. 22 to restore the money to the escrow account.

In his decision, Strine rejected Calpine's offer to repay $199 million into the account within 90 days, but he also gave the company more time than Wilmington Trust would have preferred to come up with the entire amount.

Strine's decision came in a lawsuit filed by Calpine seeking to force the Bank of New York to release up to $400 million in the escrow account. The account was frozen after bondholders complained that Calpine's use of proceeds from the $1 billion sale of its remaining natural gas supplies this summer to buy natural gas in storage for operating purposes was not allowed under its indenture agreements.

In the agreement reached Thursday, Wilmington Trust and representatives of the steering committee said they would not accelerate payment of the second-lien debt prior to Jan. 22, and would not encourage or support other bondholders attempting to do so.

Calpine agreed that if it fails to restore the $312 million plus interest into the account, the bondholders can declare the outstanding notes to be due and payable immediately.

The parties also agreed to abide by any changes made to Strine's ruling by the Delaware Supreme Court, which has scheduled oral arguments in the case for Dec. 15.

The lawsuit involves Calpine's sale of natural gas assets in an attempt to lighten its heavy debt load. The indenture agreements allowed the company to use sale proceeds either to lower its debt or to purchase other "designated assets," which specifically excluded contracts for the purchase or sale of natural gas, and natural gas supplied under such contracts.

Calpine used $139 million in sale proceeds to buy back some of its top-priority debt at face value, but other bondholders refused to sell at that price. The company then withdrew more than $300 million to buy natural gas in storage, a move that angered some bondholders and prompted the Bank of New York to freeze the escrow account.

Calpine claimed that it had structured the purchases to take title to the gas, but Strine agreed with second-lien bondholders that the company purchased the equivalent of an impermissible futures contract.

The judge said Calpine can use the funds it must replace only to purchase "designated assets" as defined in the second-lien indentures, or to buy back first-priority debt until Jan. 22. Any money remaining in the account after that date must be used to make a tender offer to buy back second-lien debt, which currently is trading at a deep discount, at par.

Following Strine's ruling, Calpine's shares plummeted on the New York Stock Exchange, prompting the exchange to suspend trading before Tuesday's session and to initiate proceedings to delist the company. Calpine shares closed up slightly at about 20 cents in over-the-counter trading Thursday.

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On the Net:

Calpine: http://www.calpine.com

Copyright 2005 Associated Press, All rights reserved

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As of Sunday, 12-04-2005 23:59, the latest Comtex SmarTrend(SM) Alert,
an automated pattern recognition system, indicated an UPTREND on
10-26-2005 for BK @ $30.58.

As of Sunday, 12-04-2005 23:59, the latest Comtex SmarTrend(SM) Alert,
an automated pattern recognition system, indicated an UPTREND on
10-24-2005 for WL @ $36.82.