) announced that it has priced senior secured notes, worth $750
million in aggregate principal amount. The notes, carrying an
interest rate of 6.00%, are expected to mature in 2022. The
company will offer the notes through a private placement. The
offering will close on Oct 31, 2013.
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Initially, Calpine Corp. had plans to offer senior secured notes
of $570 million. The company later increased the offering to meet
the higher public demand.
The company intends to utilize the funds to repay a part or in
full of its existing 7.25% senior secured notes due 2017 and use
the rest to pay premiums, fees and expenses for the tender offer
and consent solicitation and redemption of the aforesaid notes.
Calpine Corp. issues senior notes from time to time to accumulate
funds for repaying its existing debts and for several corporate
purposes. In addition, these offerings also enable the company to
reduce its interest burden and extend repayment tenure. In Sep
2012, the company issued senior secured notes worth $615 million
in aggregate principal amount, due in 2022, in a private
placement. Calpine Corp. had utilized the net proceeds to redeem
a portion of the original aggregate principal amount of each
series of its existing notes and pay the fees and expenses
related to the offering and redemption.
As of Jun 30, 2013, Calpine Corp. had a cash balance of $715
million compared with $1,284 million as of Dec 31, 2012. The
company's net debt was $11,020 million as of Jun 30, 2013, up
from $10,750 million as of Dec 31, 2012. As of Oct 17, 2013, the
company's long-term debt-to-capitalization ratio was 73.2%, much
higher than the industry average of 48.7%. The ratio is expected
to climb further following the current offering.
Calpine Corp.'s weak debt position is reflected in its credit
ratings. Credit rating agency, Moody's Investors Services has
assigned a B1 rating on the notes, which symbolizes an instrument
with high credit risk.
Currently, the company is in the midst of several vital projects,
including a combined-cycle project in Delaware, a fossil fuel
steam-based power plant called Deepwater Energy Center, and
expansion of the Mankato Power Plant and Los Esteros critical
energy facility. However, it seems that current liquidity
position is not sufficient to meet its existing debt burden as
well as complete the ongoing projects.
Calpine Corp. currently has a Zacks Rank #4 (Sell). However, all
energy stocks are not performing as badly as Calpine Corp. Stocks
that are worth considering include Zacks Ranked #2 (Buy)
Brookfield Infrastructure Partners L.P.
Alliant Energy Corporation