Debt

At June 30, 2014 and December 31, 2013, our debt was as follows (in millions):



	June 30, 2014		December 31, 2013
First Lien Notes	$	4,990	$	4,989
First Lien Term Loans	2,814		2,828
Project financing, notes payable and other	1,849		1,901
CCFC Term Loans	1,603		1,191
Capital lease obligations	193		203
Subtotal	11,449		11,112
Less: Current maturities	189		204
Total long-term debt	$	11,260	$	10,908

Our effective interest rate on our consolidated debt, excluding the impacts of capitalized interest and mark-to-market gains (losses) on interest rate swaps, decreased to 6.1% for the six months ended June 30, 2014, from 6.9% for the six months ended June 30, 2013. The issuance of our CCFC Term Loans, 2022 First Lien Notes, 2024 First Lien Notes and 2020 First Lien Term Loan in 2013 allowed us to reduce our overall cost of debt by replacing our CCFC Notes and a portion of our First Lien Notes with debt carrying lower interest rates.

First Lien Notes

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



	June 30, 2014		December 31, 2013
2019 First Lien Notes⁽¹⁾	$	320	$	320
2020 First Lien Notes⁽²⁾	875		875
2021 First Lien Notes⁽²⁾	1,600		1,600
2022 First Lien Notes	745		744
2023 First Lien Notes	960		960
2024 First Lien Notes	490		490
Total First Lien Notes	$	4,990	$	4,989

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(1)	The 2019 First Lien Notes were repaid on July 22, 2014 with a portion of the proceeds from the issuance of our Senior Unsecured Notes which are described in further detail below.

(2)

On July 8, 2014, we launched tender offers and consent solicitations to repurchase our 2020 First Lien Notes and 2021 First Lien Notes with the proceeds from our Senior Unsecured Notes which are described in further detail below. On July 22, 2014, we repurchased approximately $861 million in aggregate principal amount of our 2020 First Lien Notes and approximately $1,582 million in aggregate principal amount of our 2021 First Lien Notes. We used the remaining net proceeds, together with cash on hand, to satisfy and discharge the remaining 2020 First Lien Notes and 2021 First Lien Notes.

Senior Unsecured Notes

On July 22, 2014, we issued $1.25 billion in aggregate principal amount of 5.375% senior unsecured notes due 2023 and $1.55 billion in aggregate principal amount of 5.75% senior unsecured notes due 2025 in a public offering. The 2023 Senior Unsecured Notes bear interest at 5.375% per annum and the 2025 Senior Unsecured Notes bear interest at 5.75% per annum, in each case payable semi-annually on April 15 and October 15 of each year, beginning on April 15, 2015. The 2023 Senior Unsecured Notes mature on January 15, 2023 and the 2025 Senior Unsecured Notes mature on January 15, 2025. Our Senior Unsecured Notes were issued at par.

Our Senior Unsecured Notes are:


•	general unsecured obligations of Calpine;


•	rank equally in right of payment with all of Calpine’s existing and future senior indebtedness;


•	effectively subordinated to Calpine’s secured indebtedness to the extent of the value of the collateral securing such indebtedness;


•	structurally subordinated to any existing and future indebtedness and other liabilities of Calpine’s subsidiaries; and


•	senior in right of payment to any of Calpine’s subordinated indebtedness.

We used the net proceeds received from the issuance of our 2023 Senior Unsecured Notes and 2025 Senior Unsecured Notes, together with cash on hand, to repurchase our outstanding 2019 First Lien Notes and to repurchase approximately $861 million in aggregate principal amount of our 2020 First Lien Notes and approximately $1,582 million in aggregate principal amount of our 2021 First Lien Notes on July 22, 2014. We used the remaining net proceeds, together with cash on hand, to satisfy and discharge the remaining 2020 First Lien Notes and 2021 First Lien Notes. We expect to record approximately $40 million in deferred financing costs and approximately $340 million in debt extinguishment costs during the third quarter of 2014 related to the repayment of our 2019 First Lien Notes, 2020 First Lien Notes and 2021 First Lien Notes.

First Lien Term Loans

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



	June 30, 2014		December 31, 2013
2018 First Lien Term Loans	$	1,606	$	1,614
2019 First Lien Term Loan	820		824
2020 First Lien Term Loan	388		390
Total First Lien Term Loans	$	2,814	$	2,828

CCFC Term Loans

In February 2014, we executed an amendment to the credit agreement associated with the CCFC Term Loans, which allowed us to issue $425 million in incremental CCFC Term Loans to fund a portion of the purchase price paid in connection with the closing of our acquisition of Guadalupe Energy Center on February 26, 2014. Guadalupe Energy Center was purchased by Calpine Guadalupe GP, LLC, a wholly-owned subsidiary of CCFC. The incremental term loans carry substantially the same terms and conditions as the $300 million in aggregate principal amount of CCFC Term Loans issued in June 2013. The incremental term loans were offered to investors at an issue price equal to 98.75% of face value.

Corporate Revolving Facility and Other Letters of Credit Facilities

The table below represents amounts issued under our letter of credit facilities at June 30, 2014 and December 31, 2013 (in millions):



	June 30, 2014		December 31, 2013
Corporate Revolving Facility⁽¹⁾	$	235	$	242
CDHI⁽²⁾	269		218
Various project financing facilities	171		170
Total	$	675	$	630

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(1)	The Corporate Revolving Facility represents our primary revolving facility. On July 30, 2014, we amended our Corporate Revolving Facility to increase the capacity by an additional $500 million to $1.5 billion.


(2)	During the first quarter of 2014, we amended our CDHI letter of credit facility to lower our fees and extend the maturity to January 2, 2018.

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, 2014 and December 31, 2013 (in millions):



	June 30, 2014				December 31, 2013
	Fair Value		Carrying Value		Fair Value		Carrying Value
First Lien Notes	$	5,441	$	4,990	$	5,317	$	4,989
First Lien Term Loans	2,822		2,814		2,845		2,828
Project financing, notes payable and other⁽¹⁾	1,736		1,728		1,772		1,766
CCFC Term Loans	1,586		1,603		1,179		1,191
Total	$	11,585	$	11,135	$	11,113	$	10,774

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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 and CCFC Term Loans 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.