Calpine value may be falling, creditors say

Calpine Corp. said its creditors were warning that the bankrupt California power producer’s value might have declined since June by as much as $1.3 billion, or 6.4%, endangering their ability to recover losses.

Creditors contend that the company’s $20.3-billion estimated value as of June 20 might be lower because of deteriorating market and operating conditions, according to an amended disclosure statement filed Wednesday in U.S. Bankruptcy Court in Manhattan.

Such a lower company value would have a “negative impact” on projected recoveries, Calpine said in court papers. Differing estimates by the company and creditors probably will result in a valuation fight at Calpine’s confirmation hearing. The company said it planned to emerge from bankruptcy by year-end.

“There will absolutely be a dispute over valuation,” said Matthew Dundon, managing director at Miller Tabak Roberts Securities, a research firm specializing in high-yield securities.

The power producer’s reorganization plan, based on the June value estimate, would repay creditors in full, with the possibility of some recovery for shareholders.

A hearing to consider San Jose-based Calpine’s disclosure statement is set for Tuesday in Manhattan bankruptcy court, according to a company statement. Calpine said it stood by the $20.3-billion estimate, the midpoint of a range given by analyst Miller Buckfire.

“Our plan estimates shareholders will receive $2.05” a share, Calpine spokeswoman Norma Dunn said.

The creditors’ calculation, included in Calpine’s disclosure statement, a document that outlines how the company plans to repay them, is based on creditors’ “interpretation of the methodology employed in the valuation analysis,” Calpine said.

Creditors believe the market values for companies Miller Buckfire used as comparisons in its June analysis have also “declined significantly,” according to the court filings.

The analyst also will prepare a new estimate about Calpine’s value as a routine preparation for creditor votes on the company’s final Chapter 11 exit plan, Dunn said.

Calpine has said that if it emerged from bankruptcy protection with an enterprise value of $20.3 billion, distributed cash would be $1.4 billion.

General unsecured creditors are estimated to recover 95% to 100% on their allowed claims, or $2.05 per existing share of Calpine stock.

Calpine’s shares rose 11 cents to $1.40.