Calpine Sells $2.8 Billion of Bonds to Finance Tender

Calpine Corp. sold $2.8 billion of unsecured bonds in a deal that would cut interest costs and loosen restrictive covenants on its debt while unshackling the company from liens on assets.

The power producer sold notes in two parts in its first offering since October. Proceeds will be used to repurchase bonds and amend indentures that will eliminate covenants and release liens on the collateral securing outstanding debt, according to a company statement today.

Calpine, which has $11.3 billion in debt, is rated four levels below investment grade by Moody’s Investors Service and Standard & Poor’s, according to data compiled by Bloomberg. The company issued $1.25 billion of 5.375 bonds due in 2023 and $1.55 billion of 5.75 percent securities maturing in 2025, according to data compiled by Bloomberg. Calpine bonds have gained 5.5 percent this year, Bloomberg bond index data show.

The offering transitions “the company from a historically secured-basis bond issuer to an unsecured one,” Andy DeVries, an analyst at debt-research firm CreditSights Inc., wrote today in a report.

Calpine is buying back its 8 percent bonds maturing in 2019 and putting out a tender and consent solicitation offer on its 7.875 percent notes due in 2020 and 7.5 percent debentures maturing in 2021.

The company is offering to buy back the $880 million of 7.875 percent debentures due July 2020 for as much as 110.5 cents on the dollar, the Houston-based company said in its statement. The $1.6 billion of 2021 notes are being repurchased at 111.4 cents.

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