Calpine Tells Court That It Can Repay Money Before Deadline

Beleaguered power producer Calpine Corp. told the Delaware Supreme Court on Thursday that it could repay $313 million that it misspent on fuel earlier than the Jan. 22 deadline imposed by a lower court.

San Jose-based Calpine had previously said it wasn’t sure it could repay the money by the deadline and was at risk of filing for bankruptcy protection. But company lawyers said Thursday that Calpine could make the payment and was seeking to raise new funds for its operations.

Calpine “is in the process of attempting to enter into financing transactions,” said Robert Haney, an attorney for Calpine, at an appeals hearing before the Wilmington, Del., court. “Obviously it’s easier to do that in the longer term.”

The court heard arguments from Calpine, one of the biggest U.S. power generators, and Wilmington Trust, as trustees for Calpine’s first and second lien note holders. Calpine is appealing a Delaware Court of Chancery ruling that it violated terms of its debt by using $313 million in asset sale proceeds to buy natural gas for fuel, saying it should be reversed because the court misinterpreted the terms.

The Chancery Court ordered Calpine to repay the money to the bank account from which it came.

Wilmington Trust is asking the Supreme Court to uphold the Chancery Court’s ruling and to move Calpine’s repayment date to Jan. 3. Wilmington Trust agreed last week to hold off forcing Calpine to repay $3 billion in second-lien notes until the appeal is decided and a repayment deadline is confirmed.

The Supreme Court, after an hourlong hearing, adjourned and said it expected to rule on the appeals promptly.

Shares in Calpine rose nearly 8 cents, or 26%, to 38.6 cents.