Calpine Mulling Stock-Rights Offering

In court documents filed Thursday in Manhattan, the San Jose, Calif.-based power company asked a judge to postpone a Sept. 11 hearing on its Chapter 11 plan so it can consider the "viability" of a rights offering. U.S. Bankruptcy Judge Burton Lifland rescheduled the hearing for Sept. 25.

The company said the offering was proposed by the committee representing its shareholders, but provided few other details. It said only that the proposal calls for tweaking the Chapter 11 plan so that "current Calpine shareholders would have rights to purchase new Calpine stock."

The move marks the second time the company has put its Chapter 11 plan on hold to consider revisions for the benefit of shareholders. That plan already has been unusually generous by the standards of bankruptcy cases, which typically entail a wipeout for stockholders.

Calpine's plan calls for the company to cancel its existing stock. The company intends to pay creditors by granting them new stock in the company, a move it said would ensure that unsecured creditors get at least 95 cents for every dollar they're owed.

In its initial Chapter 11 plan, Calpine said its current shareholders were likely to be paid the equivalent of $1.80 a share. Last week, it revised the plan to offer shareholders the equivalent of $2.05 a share. Calpine's stock was trading at $1.98 a share late Thursday afternoon in the over-the-counter market, down 4 cents from Wednesday. Calpine, which supplies energy to 27 million U.S. households, has seen its prospects improve steadily since it filed for Chapter 11 protection in December 2005 to restructure more than $22 billion in debt.

Rising electricity demand across the U.S. has boosted the value of Calpine's power plants. The company also is poised to profit from concerns over global warming that have caused coal-fired power plants to fall out of favor domestically. Calpine has the largest number of natural-gas-fired plants in North America and is considered among the cleanest power generators in the U.S.

In April, the company said it had drawn "robust" interest from prospective investors thinking about financing Calpine's exit from bankruptcy reorganization through an offering of stock or bonds.

But it dropped the idea of a rights offering by the time it filed its Chapter 11 plan in June, saying such an arrangement wasn't necessary to fund its way out of bankruptcy. The company has an $8 billion loan from Goldman Sachs Credit Partners and other lenders for that purpose.