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Case Study: Calpines Restructuring Company Overview Founded in 1984, Calpine Corporation is an independent power producer engaged in owning,

operating and developing power generation facilities and selling electricity and electricity-related products and services. Calpine sells electricity generated from natural gas-fired combustion and renewable geothermal facilities to wholesale and industrial customers in 16 states in the U.S. and Canada. As of September 2008, the Company owned or leased 61 active, clean-burning, natural gas-fired power plants and 17 active geothermal power plants with an aggregate capacity of 24,000 megawatts. Bankruptcy Filing In 2005, a combination of weak power markets and increases in natural gas prices due to Hurricane Katrina and Rita pushed Calpines cost significantly above the locked in price stipulated in its long-term sales agreements. This decline in profitability combined with the substantial debt Calpine incurred to add power generation capacity put a significant strain on Calpines liquidity. In order to avoid financial distress, Calpine divested $2 billion in assets, which included the sale of its 550-megawatt Ontelaunee Energy Center to LS Power Equity Partners for $225 million. However, with $22.5 billion in debt, Calpine was unable to meet its interest obligations and filed a voluntary petition to restructure under Chapter 11 of the U.S. Bankruptcy code on December 20, 2005. In connection with the bankruptcy filing, Calpine obtained $2 billion in debtor-in possession financing from Deutsche Bank and Credit Suisse First Boston. Calpine was the first major debtor to file for reorganization under the new bankruptcy laws implemented in 2005. The Company retained Miller Buckfire & Co. LLC as its financial advisor and Kirkland & Ellis LLP as its legal advisor. In December 2005, Robert May replaced Pete Cartwright, one Calpines founders, as CEO. Restructuring Plan With the help of its advisors, Calpine set up a restructuring plan which included streamlining its power generation business, divesting non-core assets and restructuring its balance sheet. The Company successfully retired $7.2 billion in debt and secured $7.3 billion in exit financing two years later. Calpines recognized $8.7 billion equity value was distributed to creditors generating an estimated 100% recovery for Senior Note holders, 85% recovery for general unsecured creditors and 42% recovery for holders of its Subordinated Notes at the time of the first stock distribution. Pre-bankruptcy stock was canceled and exchanged for warrants. Post-Bankruptcy On January 31, 2008, Calpine emerged from bankruptcy protection and resumed trading on the NYSE under the ticker CPN. Currently, many of the parties involved in the restructuring hold large stakes in Calpine, including LS Power Equity Partners. Recently Calpine reported strong financial results, with third quarter operating revenue up 37% year-over-year and adjusted EBITDA up 17% year-over-year, though its stock price has fallen 70% since its post-bankruptcy high in June.

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