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Calpine files reorganization plan

As not many anticipated, Calpine has filed its reorganization plan to emerge from bankruptcy. Most speculation revolved around private equity taking the company public as a means to emerge. The plan indicates the new company emerges with 72 plants, 22,500 MW of gas and geothermal generation, and 2,200 employees. The company believes it is worth $21.7B, but still has unsecured debt of up to $8.9B to settle before it emerges from bankruptcy.

Creditors will likely raise objections to this plan as it settles the debt with stock and potentially pays back up to 91% of what they are owed. Current shareholders could be left with nothing after the debt is cleared or have an upside that is capped at $3.53 a share depending upon the range of debt to be cleared as determined by the courts. Expect the stock to trade down sharply today as the market prices in this now quantified risk from the reorganization plan. Yesterday’s closing share price was $2.93.

Details of the reorganization plan are available in this article posted on Yahoo Finance. We will post a pointer to the SEC filing when it is available.

Update: Despite our take on the situation, the market thinks the reorganization announcement is good news. Calpine shares are up 7.5% at $3.21 per share. Regardless, we believe the downside risk will drag the share price down in due course.

2 Comments so far

  1. […] reorganization plan was announced, the stock traded at $2.93 per share. On that day, we predicted that the shares would slide (in the face of a post-announcement pop to $3.21/share) to a level that would more accurately […]

  2. » Calpine Tanks > Renewable Energy Journal November 21st, 2007 6:51 am

    […] when Calpine unveiled their plan to emerge from bankruptcy, we weren’t too positive. In fact, we were downright puzzled by the market reaction sending the stock over $3/share and market capitalization greater than $1.5B. The issue has been on […]