) taking advantage of the prevailing market conditions has decided
to issue senior unsecured notes to swap its existing debts. The
company priced $1.25 billion of 5.3755% senior unsecured notes due
2019 and $1.55 billion of 5.75% senior unsecured notes due 2025.
The offering pursuant to Calpine Corp's shelf prospectus filed with
the Securities and Exchange Commission is expected to close on Jul
Purpose of New Issue
The company will utilize the net proceeds from the issue to
redeem 8% Senior Secured Notes due 2019, redeem the
outstanding principal amount of the company's 7.875% Senior Secured
Notes due 2020 and 7.50% Senior Secured Notes due 2021. In
addition, the proceeds will go to pay premiums, fees and expenses
relating to the purchase and redemption of existing secured notes
described above. Any remaining proceeds not utilized for the causes
mentioned above will be used for general corporate purposes.
Benefits of the Swap
The issue of new notes at a lower interest rate will enable the
company to keep the borrowed funds invested in its business for a
longer period of time, at a cheaper cost. This is a common strategy
used by companies to lower their overall capital costs. Calpine
Corp. is also expected to reap the benefits of swapping.
Calpine Corporation outpaced the Zacks Consensus Estimate in the
last two quarters with an average beat of 200%. The company will
likely keep the positive surprise alive in the second quarter too.
Calpine plans to concentrate on the wholesale and competitive power
space and the steady economic recovery in its major power markets
will bode well for future growth. The Zacks Consensus Estimate for
2014 is 74 cents, which reflects a year-over-year increase of
Calpine Corporation currently carries a Zacks Rank #3 (Hold). Some
better-ranked stocks in the utility sector include
Consolidated Edison, Inc.
Wisconsin Energy Corp.
). All these stocks carry a Zacks Rank #1 (Strong Buy).
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CALPINE CORP (CPN): Free Stock Analysis Report
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