Calpine valuation filing raises doubts for creditors, investors

Calpine Corp. said it was worth $900 million less than previously estimated due to a decline in the market value of other companies that generate power and an increase in market volatility.

The new estimate, filed Monday in U.S. Bankruptcy Court in New York, raises the odds that Calpine’s unsecured creditors won’t be paid back in full. It also means Calpine thinks its current shares are largely worthless.

Calpine said the midpoint of its total enterprise value is now $19.35 billion, down from $20.25 billion.

Though the change in the estimate is small compared with the total size of the company, shareholders must absorb the entire loss until their shares are worthless before bondholders start to suffer.

Judge Burton Lifland will decide the final post-bankruptcy value of the company, though the firm’s own estimate usually carries considerable weight.

The San Jose-based company, which is now aiming to emerge from Chapter 11 by the end of the year, believes its current shares are worth anywhere from nothing up to 41 cents, down from its most recent estimate of zero to $3.28 a share. Where the company’s final value falls in that range depends on the outcome of ongoing litigation from lenders.

Shares of Calpine fell 45 cents, or 45.9%, on Tuesday to 50 cents in over-the-counter trading.