With its board having recently dismissed its CEO/founder and Wall Street expecting a bankruptcy filing soon, San Jose, CA-based Calpine Corp. received a reprieve of sorts in a Delaware court on Friday, giving the company until Jan. 22 to return $313 million to bondholders from the sale last summer of substantially all of it oil and natural gas assets. Whether the added seven weeks will allow the national power plant developer/operator to avoid a cash implosion was unclear Friday, but the company’s financial situation appeared to be worsening almost daily.

Calpine said it will immediately file an appeal with the Delaware Supreme Court, requesting expedited treatment, as soon as it receives the chancery court’s final order. Calpine had sought 90 days and a lesser amount ($199 million) needed to be returned from the Delaware Chancery Court in Wilmington, and bondholders were asking for all the money by Dec. 9, following a ruling just before Thanksgiving finding Calpine misappropriated part of the more than $800 million in proceeds from the oil/gas assets sale to Rosetta Resources last July.

In a separate announcement Friday, a financing affiliate of Calpine — Canadian-based Calpine Power Income Fund — said it is reviewing its options regarding its future commercial relations with the power generation company. It mentioned concerns about the developing situation and how a bankruptcy filing would impact the operation of the Fund’s Canadian and U. S. power plants.

Calpine told the Delaware court Thursday 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 Vice Chancellor Leo Strine’s Nov. 22 ruling (see Power Market Today, Nov. 28).

By week’s end Calpine found its stock cut to less than 30 cents/share, downgrades in its credit ratings further into the junk category by the three major rating agencies, and uncertainty over whether in the days and weeks ahead it will have enough cash to pay its debt costs, take care of operating the nation’s largest fleet of merchant electric generating plants and satisfy the Delaware court’s latest ruling.

Moody’s Investors Service Friday lowered Calpine another notch — ten levels below investment grade — to “Ca.” It called this a “very speculative” rating with a negative outlook, all of which reflects Moody’s opinion that a default by Calpine on its $17.7 billion mountain of debt is likely.

“The downgrade also reflects expectations that poor results will continue in the near term due to difficult market conditions for the company’s natural gas-fired generating fleet,” Moody’s said.

Under a headline that cited Calpine’s references Thursday to a “financial emergency,” the Wall Street Journal reported Friday on the company’s dire-sounding filing to the Delaware court, and Fitch Ratings’ response leaving the first- and second-lien bonds involved in the court case at their current ratings (B and B-, respectively), but lowering the rating on Calpine’s $5.6 billion of senior unsecured notes and convertible debt to CC from CCC-.

Most of the buzz that picked up momentum in the energy industry and among the financial community by week’s end had bankruptcy being the ultimate outcome for Calpine following a week that began with its board getting rid of Peter Cartwright, 75, the former General Electric nuclear engineer, who founded Calpine in 1984 and was its CEO until last Monday, along with long-time Executive Vice President/CFO Robert Kelly, 48.

Calpine’s lead director Kenneth Derr has been named chairman and acting CEO. Derr retired from Chevron in 1999 after serving 11 years as its chairman and CEO. Eric N. Pryor, executive vice president and deputy CFO, will serve as interim CFO.

©Copyright 2005Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.