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Calpine Halted After Plunge

A report says it has lost a battle with bondholders about how to use proceeds from asset sales.
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Shares of debt-strapped power producer



plunged 16.5% Tuesday before trading was halted for pending news on the

New York Stock Exchange.

The stock last traded at $1.46, down 29 cents. More than 20 million shares have changed hands during the session.

Wire reports said Calpine has lost a battle with creditors in Delaware Chancery Court over the use of proceeds from an asset sale. A judge reportedly ruled Calpine violated terms of a bond indenture when it spent about $313 million on natural gas to fire its plants. Bondholders argued the money is collateral on their loans.

The judge, Leo Strine, reportedly barred the company from using any more of the roughly $850 million raised in the asset sale to buy gas. The money was raised from the sale of oil and gas assets in July.

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.