Considerably lighter in debt and megawatts, San Jose, CA-based Calpine Corp. Thursday emerged from Chapter 11 bankruptcy, closing its $7.3 billion exit financing facility, including a $300 million bridge loan the reorganized independent power plant developer/operator expects to pay off by the end of the first quarter.

Calpine’s exit comes a month past the two-year anniversary of its original filing Dec. 21, 2005 (see Daily GPI, Dec. 22, 2005).

CEO Robert May, 58, who took over the beleaguered, debt-heavy company a week prior to the Chapter 11 filing, called Thursday’s emergence “a wonderful day,” stressing the pride he felt in overcoming numerous obstacles the past two-plus years. He claims the company was able to slash its overall debt during its stay in Chapter 11 by about $7.2 billion.

Senior officers now feel the company has streamlined its operations and it has a “strong core power generation business” to run once again.

Separately on Friday, Calpine announced it had reached a $51.8 million settlement with a group of creditors, classified as the Unofficial Committee of Second Lien Debtholders, on $65 million of allowed unsecured claims. The deal covers five different debt instruments from fixed- and floating-rates notes to term debt.

Calpine’s court-approved reorganization plan assigned a total enterprise value on the newly stand-alone company of $18.95 billion. The company estimates that it will make some initial distributions of newly issued common stock to holders of allowed claims and interest on or before Feb. 10.

After entering Chapter 11 protection in the U.S. Bankruptcy Court, Southern District of New York with $2 billion of debtor-in-possession loans and more than $18 billion of accumulated debt, Calpine resumes operations with an entirely different senior management team and board of directors, intending to issue 485 million new shares of common stock that will trade on the New York Stock Exchange under “CPN.”

In addition to the 485 million new shares, Calpine plans to reserve 15 million common shares for its senior executives and directors as part of an incentive program that will be implemented along the lines of the court-approved reorganization plan.

Calpine said it will set aside another 62 million common shares to account for disputed unsecured claims. Under current estimates, Calpine said, general unsecured creditors ultimately will recover about 99.9% of their allowed claims; senior note holders will recover approximately 100%, and subordinated note holders will recover approximately 75%. (The allowed claims involve both principal and pre-petition interest.)

The Chapter 11 exit was foreshadowed last Monday when Calpine announced that a unit of Ohio-based FirstEnergy won the bidding for its partially built 707 MW natural gas-fired electric generation plant in Fremont, OH, for $253.6 million — double the price established between Calpine and a public-sector power utility group in the state last November. The sale requires approval of the bankruptcy court.

Calpine has one other generation asset still for sale, according to its Houston-based spokesperson. It is the 774 MW Huckabee Energy Center in Alabama, on which Calpine has already spent $365 million and estimates another $100 million is needed. A unit of Baltimore-based Constellation Energy began the bidding earlier this month at $122 million. The auction ends Tuesday and the sale is to be completed the following day.

“Calpine’s restructuring was truly remarkable,” said Gregory Doody, Calpine general counsel and the chief restructuring officer during Chapter 11. “In just a little more than two years, Calpine dramatically improved its capital structure, reducing approximately $7.2 billion in debt while generating a significant recovery for our creditors.”

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