Ping...
Calpine by going into bankruptcy court can choose not to assume certain contracts such as those that require the sale of electricity bellow generating costs. That means it can sell the power at market if profitable or not produce the power. The bondholders have claims on the physical assets of the company. The generating plants will be sold and the analyst must figure they can pay off the entire bond debt. This means there might be nothing for the shareholders and the junior debt holders. This could be a decent arbitrage play if the debt drops enough because of the bankruptcy filing and the assets are as good as the analyst says.
This is a Chapter 11 (re-org) and not a Chapter 7 (liquidate),
for those interested in that important distinction (I have
a family member employed there, well, was yesterday, don't
know about today).
Lots of stories:
http://news.google.com/news?hl=en&ned=us&q=calpine&ie=UTF-8&scoring=d
During the power crisis that was ultimately responsible for Davis being recalled, Calpine was the "golden boy" of Davis and his cronies. Calpine didn't gouge like all the other evil energy producers - nosiree - claimed CA liberals.
Many Freepers in the know correctly predicted that Calpine would eventually go under and, lo and behold, those Freepers were correct (wouldn't be the first time).
For those who might be interested, there is an extensive archive going back about 5 years keyed calpowercrises which was meticulously kept by ernest_at_the_beach.