Hole Appears at Calpine

The ruling against Calpine(CPN Quote) in a dispute with creditors Tuesday could leave the debt-strapped power producer with a hole in its finances.

In a closely watched case, Chancery Judge Leo Strine ruled that Calpine violated the terms of a bond indenture when it spent $313 million last summer to buy natural gas to run its power plants. Bondholders argued that the money, raised from an asset sale, was collateral on their loans and couldn't be spent in this fashion to fund day-to-day operations.

News of the decision had investors running for the exits, with shares of Calpine falling 31 cents, or 17%, to $1.44 in frenzied trading. The stock was halted after the ruling came out. ...