Midwest Generation (MWG) and related companies on Aug. 6 asked their bankruptcy court to approve the rejection of certain expensive riders related to a railcar lease arrangement with General Electric Railcar Services Corp. (GE Rail).
MWG, which sought chapter 11 bankruptcy protection last December, leases a fleet of railcars from multiple lessors, including GE Rail, to transport coal to its four operating coal-fired power plants in Illinois. Under a 1999 Assignment Agreement by and among MWG, GE Rail, and Commonwealth Edison (ComEd), the former owner of the plants, MWG accepted the assignment of ComEd’s right, title, and interest in that certain Lease Agreement No. 1519-01 by and between ComEd and GE Rail, dated May 1998.
The assignment included, among others things, MWG’s assumption of four related “riders” specifying the equipment, term, and pricing for groups of railcars subject to the overall terms of the lease. The Prepetition Riders provide for the price and term for 1,007 railcars (which are sorted by rider in groups of approximately 100–450 railcars each).
Following the commencement of these chapter 11 cases, and as part of its ongoing effort to eliminate costs, MWG has determined that the terms of the Prepetition Riders are too “onerous.” MWG engaged GE Rail in discussions regarding new arrangements with respect to the 1,007 railcars subject to the Prepetition Riders. Those discussions were successful and MWG and GE Rail recently agreed upon new modified terms for the 1,007 railcars that are the subject of the Prepetition Riders.
MWG concluded that it could reject the Prepetition Riders and enter into new terms (including pricing and duration) more favorable than the terms of the Prepetition Riders. The bankrupt companies are required to file a motion with the court to reject or assume any railcar lease with GE Rail. GE Rail has consented to the rejection of the riders.