Interesting piece in the Wall Street Journal about how distressed power producer Calpine's pending bankruptcy is highlighting the growing clout of hedge hunds to force changes in corporate strategy.

The WSJ piece is for subscribers so here's a summary: the hedge funds are among the biggest holders of Calpine's $17 billion debt and some have taken positions set to push the company into Chapter 11.

Corporations traditionally borrow from banks and mutual funds who lend on the condition that they'll get the moolah back. Calpine's lenders however were playing to another set of rules. In some cases, they structured the investments with an eye towards bankruptcy filing and some would be the big winners if it were to file, especially the ones who had shorted the stock after taking a bet that its value would fall. Many of them have taken Calpine to court in moves to put more heat on the directors and increase the likelihood of a bankruptcy filing.

Now, I can't get too upset about an outfit coming to grief over a strategy that required it cosy up to vultures and seek a different type of lender that didn't have its interests at heart. I mean, what did they expect? Still, the case does show how much the business of financing troubled companies has changed, and that could be a warning of what's ahead.

It makes Bill Cara's blog entry on Rogue Traders worth reading: "You will be shocked to see the methods used by these people to seek their goals. Think about these: 1. Buying political influence for obvious reasons 2. Hanky-panky with judges 3. Hiring former military leaders to lobby current military leaders 4. Acquiring Big Media to coerce journalists to become cheerleaders 5. Forcing the take-over of major corporations, or pressuring them for desired spin-offs"