
	Debt

At June 30, 2013 and December 31, 2012, our debt was as follows (in millions):



	June 30, 2013		December 31, 2012
First Lien Notes	$	5,304	$	5,303
First Lien Term Loans	2,450		2,463
Project financing, notes payable and other	1,858		1,789
CCFC Term Loans	1,197		—
CCFC Notes	—		978
Capital lease obligations	211		217
Total debt	11,020		10,750
Less: Current maturities	169		115
Debt, net of current portion	$	10,851	$	10,635

Our effective interest rate on our consolidated debt, excluding the impacts of capitalized interest and unrealized gains (losses) on interest rate swaps, decreased to 6.9% for the six months ended June 30, 2013, from 7.4% for the six months ended June 30, 2012. The issuance of our 2019 First Lien Term Loan in October 2012 allowed us to reduce our overall cost of debt by replacing a portion of our First Lien Notes and variable rate project debt with a corporate level term loan carrying a lower variable interest rate. Also, in February 2013, we repriced our First Lien Term Loans by lowering the LIBOR floor by 0.25% to 1.0% and lowering the margin over LIBOR by 0.25% to 3.0%. The issuance of the CCFC Term Loans in June 2013 also allowed us to reduce our interest expense by replacing the CCFC Notes carrying a higher fixed interest rate with the CCFC Term Loans carrying a lower variable interest rate.

First Lien Notes

Our First Lien Notes are summarized in the table below (in millions):



	June 30, 2013		December 31, 2012
2017 First Lien Notes	$	1,080	$	1,080
2019 First Lien Notes	360		360
2020 First Lien Notes	984		983
2021 First Lien Notes	1,800		1,800
2023 First Lien Notes	1,080		1,080
Total First Lien Notes	$	5,304	$	5,303

First Lien Term Loans

Our First Lien Term Loans are summarized in the table below (in millions):



	June 30, 2013		December 31, 2012
2018 First Lien Term Loans	$	1,621	$	1,630
2019 First Lien Term Loan	829		833
Total First Lien Term Loans	$	2,450	$	2,463

CCFC Term Loans

On May 3, 2013, CCFC entered into a credit agreement providing for a first lien senior secured term loan facility comprised of (i) a $900 million 7-year term loan and (ii) a $300 million 8.5-year term loan.

CCFC utilized the proceeds received from CCFC Term Loans to redeem the entire $1.0 billion in principal amount of CCFC Notes at a redemption price equal to 104% (plus accrued and unpaid interest), to pay related transaction expenses and for corporate purposes, as described in the credit agreement. The CCFC Notes were redeemed on June 3, 2013, at which date the CCFC Term Loans were fully drawn.

The CCFC Term Loans bear interest, at CCFC’s option, at either (i) the Base Rate, equal to the higher of the Federal Funds Effective Rate plus 0.50% per annum or the Prime Rate (as such terms are defined in the Credit Agreement), plus an applicable margin of (a) 1.25% per annum with respect to the 7-year term loan and (b) 1.50% per annum with respect to the 8.5-year term loan, or (ii) LIBOR plus (a) 2.25% per annum with respect to the 7-year term loan and (b) 2.50% per annum with respect to the 8.5-year term loan (in each case subject to a LIBOR floor of 0.75%). The term loans were offered to investors at an issue price equal to 99.75% of face value.

An amount equal to 0.25% of the aggregate principal amount of the CCFC Term Loans are payable at the end of each quarter commencing in September 2013, with the remaining balance payable on the relevant maturity date (May 3, 2020 with respect to the 7-year term loan and January 31, 2022 with respect to the 8.5-year term loan). CCFC may elect from time to time to convert all or a portion of the CCFC Term Loans from LIBOR loans to Base Rate loans or vice versa. In addition, CCFC may at any time, and from time to time, prepay the Term Loans, in whole or in part, without premium or penalty, upon irrevocable notice to the administrative agent.

The CCFC Term Loans are secured by certain real and personal property of CCFC consisting primarily of six natural gas-fired power plants. The CCFC Term Loans are not guaranteed by Calpine Corporation and are without recourse to Calpine Corporation or any of our non-CCFC subsidiaries or assets; however, CCFC generates the majority of its cash flows from an intercompany tolling agreement with Calpine Energy Services, L.P. and has various service agreements in place with other subsidiaries of Calpine Corporation.

In connection with the redemption of the CCFC Notes, we recorded $68 million in debt extinguishment costs for the three and six months ended June 30, 2013 which is comprised of $40 million of prepayment penalties and $28 million associated with the write-off of unamortized debt discount and deferred financing costs. We also recorded $15 million in new deferred financing costs on our Consolidated Condensed Balance Sheet during the second quarter of 2013 associated with the issuance of the CCFC Term Loans.

Corporate Revolving Facility and Other Letters of Credit Facilities

On June 27, 2013, we executed Amendment No.1 to the Corporate Revolving Facility. Certain key terms of the amendment are listed below:


•	the applicable margin has been reduced from 3.25% to 2.25% for LIBOR rate borrowings and from 2.25% to 1.25% for base rate borrowings;


•	the fee on the undrawn commitment has been reduced from 0.75% to 0.50%; and


•	the maturity date of the Corporate Revolving Facility has been extended to June 27, 2018.

The table below represents amounts issued under our letter of credit facilities at June 30, 2013 and December 31, 2012 (in millions):



	June 30, 2013		December 31, 2012
Corporate Revolving Facility⁽¹⁾	$	240	$	243
CDHI	243		253
Various project financing facilities	131		130
Total	$	614	$	626

____________


(1)	The Corporate Revolving Facility represents our primary revolving facility.

CDHI

We have a $300 million letter of credit facility related to CDHI. As a result of the completion of the sale of Riverside Energy Center, LLC, a wholly-owned subsidiary of CDHI, on December 31, 2012, we are required to cash collateralize letters of credit issued in excess of $225 million until replacement collateral is contributed to the CDHI collateral package, which we are in the process of arranging. At June 30, 2013, we had $18 million in outstanding letters of credit issued in excess of $225 million under our CDHI letter of credit facility that were collateralized by cash.

Fair Value of Debt

We record our debt instruments based on contractual terms, net of any applicable premium or discount. We did not elect to apply the alternative U.S. GAAP provisions of the fair value option for recording financial assets and financial liabilities. The following table details the fair values and carrying values of our debt instruments at June 30, 2013 and December 31, 2012 (in millions):



	June 30, 2013				December 31, 2012
	Fair Value		Carrying Value		Fair Value		Carrying Value
First Lien Notes	$	5,621	$	5,304	$	5,863	$	5,303
First Lien Term Loans	2,452		2,450		2,489		2,463
Project financing, notes payable and other⁽¹⁾	1,670		1,723		1,599		1,629
CCFC Term Loans	1,180		1,197		—		—
CCFC Notes	—		—		1,075		978
Total	$	10,923	$	10,674	$	11,026	$	10,373

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(1)	Excludes a lease that is accounted for as a failed sale-leaseback transaction under U.S. GAAP.

We measure the fair value of our First Lien Notes, First Lien Term Loans, CCFC Term Loans and CCFC Notes using market information, including quoted market prices or dealer quotes for the identical liability when traded as an asset (categorized as level 2). We measure the fair value of our project financing, notes payable and other debt instruments using discounted cash flow analyses based on our current borrowing rates for similar types of borrowing arrangements (categorized as level 3). We do not have any debt instruments with fair value measurements categorized as level 1 within the fair value hierarchy.