Hole Appears at Calpine

Of course, Calpine's lawyerly response all turns on what the meaning of the word "assets" is.

Either way, this is bad news for Calpine, which is no position to go out and raise additional financing to make its bondholders whole. It's not known what kind of remedy the creditors will seek to impose on the company.

Calpine had hoped the court would side with it, after the Bank of New York(BK Quote) informed the California-based energy company that it froze the remaining $400 million in its account. The bank took that step after some bondholders had protested about the way Calpine was spending the money.

Real Money contributor William Gabrielski argued in a column here that a ruling like Strine's Tuesday decision would raise uncertainty about Calpine's ability to fund its operations.