Sunday, August 26, 2007

Predatory Borrowers

Mathew Dalton writing for DJ Newswires has the story of a market-savvy borrower.

Calpine told the U.S. Bankruptcy Court in Manhattan June 20 that the credit markets were offering an amazing deal that might not last.

"It is impossible to know, and risky to assume, that the low interest rates and favorable terms currently offered by the capital markets will continue," Calpine said in documents filed with the court

Calpine Debt Another Weight On Wall Street Balance Sheets

Add one more to the list of companies that locked in cheap debt from Wall Street banks shortly before credit markets tanked at the end of July.

Calpine Corp. (CPNLQ), the San Jose, Calif.-based power company that's plotting a course out of bankruptcy, secured $8 billion in loans June 20 from four Wall Street banks, led by Goldman Sachs Group Inc. (GS).

While much of the cheap corporate debt banks have issued in the past year has been used to help finance headline-grabbing leveraged buyouts, Calpine's deal shows how Wall Street's eagerness to lend extended beyond the buyout boom.

Goldman Sachs tried to syndicate part of Calpine's loans starting on July 10, according to data collected by S&P Leveraged Commentary and Data, which tracks the loan market. Goldman pulled the syndication on July 25 after investors were unwilling to take the debt off the banks' hands, S&P said.

If credit markets don't recover soon, Goldman Sachs and the other lenders likely will have to leave Calpine's debt on their balance sheets, perhaps at a significant loss....MORE via CNN Money