Calpine (CPN) Up on Bond Sale to Lower Interest Costs, Reduce Restrictions
Shares of Houston, Texas, based Calpine Corp. (CPN) rose on Tuesday as stocks suffered a broad loss overall. Calpine Corp.'s stock was up 4.25%, rising $.97, to close at $23.81, on volume of 7,332,358 shares. The company announced the pending sale of $2.8 billion of unsecured bonds that will lower its interest costs, while removing liens and restrictions on its assets.
Founded in 1984, Calpine Corp. is a power producer company, which develops, constructs, owns and operates a modern and flexible fleet of low-carbon, natural gas-fired and renewable geothermal power plants.
It operates primarily in California, Texas and the Middle Atlantic States. In 2013 the company had earnings of $14 million on total revenue of $6.5 billion, and employs 2,157 workers. For 2013, revenues experienced a 24.2% increase over the prior year. The company announced today that it plans to offer $2.8 billion in senior unsecured notes due in 2023 and 2025, pursuant to its shelf registration statement filed with the Securities and Exchange Commission. The company plans to use the proceeds to repurchase or redeem some or all of its 8% senior notes due 2019, 7.875 senior secured notes due 2020, and 7.50% senior secured notes due 2021. Any proceeds not used for the retirement of these notes will be used for general corporate purposes. Analysts see the deal as cutting the company's interest costs, as well as relieving restrictive covenants on assets securing the original notes. The bonds will be sold in two parts, including $1.25 billion in 5.375% bonds due in 2023, and $1.55 billion in 5.75% bonds due in 2025. The company has $11.3 billion in debt, and is rated four levels below investment grade by both Moody's (MCO
) and Standard & Poor's. According to CreditSights Inc analyst, Andy DeVries, Tuesday's bond issuance will move "the company from a historically secured-basis bond issuer to an unsecured one." As a result of today's move by Calpine Corp., Moody's Investors Service affirmed the company's corporate family rating of "B1", and upgraded its outlook from "stable" to "positive". Meanwhile, on the strength of today's bond announcement, Moody's has also upgraded Calpine's senior secured rating to "Ba3". The new issuance of $2.8 billion in unsecured notes announced on Tuesday is being assigned a rating of "B3". According to Moody's Senior Analyst Toby Shea, "Calpine's positive outlook reflects improving market fundamentals and an expected increase in cash flow to debt ratios over the next few years. If these trends continue, we could upgrade Calpine's ratings at some point over the next 12 to 18 months." Last week Calpine Corp. completed the sale of six power plants, in five Southeastern states, to LS Power for $1.57 billion. The move is expected by the company to further align its portfolio with its strategic focus. The company expects to record a net book gain of $750 million in the third quarter as a result of the sale. Other News About Calpine Corp.
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Published on Jul 9, 2014
By Kevin Mercadante