Independent oil and gas operator Rosetta Resources Inc. earlier in September filed an objection to Chapter 11-bound Calpine Corp.’s reorganization plan for emerging from bankruptcy. Rosetta, which purchased Calpine’s oil and natural gas reserves in 2005, has unresolved disputes with the independent power plant operator.
Separately, last Wednesday, Calpine filed a second amended reorganization plan, including an amended disclosure statement, whose earlier versions had been challenged in the U.S. Bankruptcy Court for the Southern District of New York by several parties, including Rosetta. The San Jose, CA-based power plant operator said it still expects to exit bankruptcy in January.
A hearing to consider the adequacy of the Calpine disclosure statement is scheduled for Tuesday in the bankruptcy court in New York City.
Calpine said the latest amended plan “maintains all key terms” provided under the first revised plan filed with the court last month. “Calpine remains on track to have the amended plan confirmed during the fourth quarter this year,” the company said.
Meanwhile in its objection, Rosetta argued that the court should reject Calpine’s disclosure statement because it allegedly contains “misleading and factually inaccurate descriptions” of the July 2005 transaction in which Calpine split off its remaining oil and gas business to Rosetta, a Calpine-created entity, including the claims that Calpine subsequently has filed against Rosetta.
Rosetta said statements made in the court filing by Calpine amount to “little more than self-serving allegations that are improperly portrayed as facts rather than unsupported contentions that are disputed by Rosetta.”
The bankruptcy court Sept. 11 approved a partial settlement between Rosetta and Calpine Corp. On the same day, Rosetta asked the court to dismiss Calpine’s unsettled allegations of fraudulent actions by the producer.
“We object to approval [by the bankruptcy court] of Calpine’s proposed disclosure statement because it contains false and misleading descriptions of the Rosetta transaction and the purported claims Calpine holds against Rosetta,” said Rosetta CEO Charles Chambers.
Rosetta contends that in its court filing Calpine does not disclose “the nature and extent” of any investigation it may have conducted before proposing to release claims that the Calpine bankruptcy estate may hold against Calpine’s board of directors, officers and professional advisers arising from their respective involvement in the “conception, structuring and implementation” of the Rosetta deal.
“At a minimum Calpine should provide additional disclosure of the nature and extent of the investigation it conducted,” Rosetta contends in its filing of objection.
While reiterating that Calpine’s outstanding claims against it are “entirely devoid of merit,” Rosetta said Calpine apparently is trying to use Chapter 11 bankruptcy protection to “effectively attempt to renegotiate the terms of the Rosetta’s acquisition of Calpine’s oil and gas business,” and in the process reap what Rosetta called a “monetary windfall for its shareholders.”
Among six other allegations by Rosetta, the Houston-based independent argued that the disclosure statement fails to inform creditors that full claims payment under Calpine’s plan does not depend on the power plant operator recovering claims against Rosetta, and does not address Rosetta’s contention that its purchase agreement with Calpine is comprised of “a number of interrelated agreements.”
Assuming the amended plan is confirmed by the court by Dec. 31, Calpine said its reorganized organization will have a midpoint value of $21.7 billion. In this context, “reorganization value” is equal to total enterprise value, plus estimated distributable cash, Calpine said.
When it emerges from bankruptcy early in 2008, Calpine said its total enterprise value will be between $19.2-21.3 billion, with a midpoint of $20.3 billion. Distributable cash at that time should be about $1.4 billion, the company said.
CEO Robert May reiterated that Calpine should continue to move forward through the restructuring process, and it expects to emerge as “a financially stable, stand-alone company” that he thinks will have an improved competitive position in the energy industry. “We remain grateful to our employees, customers, vendors and partners for their support throughout this process.”
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