Fresh from a shakeup at the top of its debt-plagued organization, San Jose, CA-based Calpine Corp. Thursday said it has asked the Delaware Chancery Court for 90 days to restore only part of the $313 million in natural gas asset sales proceeds that the court last month ruled had been misappropriated by the troubled power plant developer/operator. The court’s Vice Chancellor Leo Strine had ordered that the funds be restored to a special account earmarked for senior bondholders. Calpine said it is continuing to evaluate its options, including the possibility of filing for bankruptcy.

Calpine told the court that an immediate return of the monies would threaten its already teetering financial situation, causing “severe financial disruption.” Calpine and other parties on Wednesday filed separate memoranda with the court responding to Strine’s Nov. 22 ruling (see Power Market Today, Nov. 28).

Calpine asked that it be allowed to restore $199 million, instead of the $313 million, and that the company have a three-month window in which to do that. The bondholders, including a number of hedge funds, have asked the court to require the full $313 million be restored by Dec. 9.

“Calpine believes an appropriate remedy would be the restoration of $199 million, plus accrued interest at a rate of 3.5% per annum to the collateral account or the use of that amount for reinvestment in qualifying designated assets or repurchase of secured debt,” said a Calpine spokesperson. Wilmington Trust Company, as trustee for the second lien bondholders, sought the full restoration by the end of next week.

Strine now will decide — presumably on the expedited basis both sides requested — whether to allow Calpine’s partial restoration on a delayed basis or whether to require all the monies returned. Calpine said that regardless of how Strine rules the company faces “substantial risk” that it won’t have enough cash to satisfy either option and also pay its ongoing debt service obligations and operating expenses.

“As a consequence, Calpine continues to evaluate its options, including the possibility of filing for bankruptcy,” the company said in a prepared statement.

Calpine also reported on a status conference held Nov. 22 in a second pending legal action in a New York state court brought by the hedge fund Harbert Convertible Arbitrage Master Fund, Ltd., and related parties, holders of Calpine’s 6% Contingent Convertible Notes due 2014. Calpine continued to maintain that it was in full compliance with the indenture restrictions related to the Convertible notes.

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