Edison Mission Energy and Midwest Generation (MWG) on Aug. 6 filed with their bankruptcy court a settlement that will allow the companies out of a coal barging agreement with American River Transportation Co. (ARTCO).
The settlement agreement resolves certain issues related to 18 barges currently or formerly owned or leased by MWG. MWG and parent Edison Mission Energy in December 2012 filed for Chapter 11 at the U.S. Bankruptcy Court for the Northern District of Illinois.
ARTCO had been moving coal and petroleum coke to the now-closed Crawford and Fisk stations. That fuel was typically shipped by rail to MWG’s Will County facility, where it was transferred from railcars, blended as necessary to meet station specifications, and loaded onto debtor-owned or leased open hopper river barges.
Under a 2008 transportation agreement, ARTCO transported these barges to the Crawford and Fisk facilities and maintained and kept the barges in good repair. The debtors’ operations have not utilized the barge fleet since the Crawford and Fisk facilities were shut down and decommissioned in September 2012.
On and after the bankruptcy petition date, ARTCO maintained possession and control of 29 barges currently or formerly owned by MWG or leased from third parties. ARTCO continues to hold 18 of the 29 original barges. Of these, 15 are owned by MWG and three were sold to third parties before the petition date.
On March 5, the MWG asked for rejection of this agreement, with ARTCO then objecting. “MWG and ARTCO engaged in good-faith, arm’s length negotiations in efforts to resolve ARTCO’s objections and reach a comprehensive resolution of the issues in dispute, including ARTCO’s proof of claim for $695,875.93 for prepetition services under the Transportation Agreement, Claim No. 1660 (the ‘Claim’),” the company said. “ARTCO asserted liens in the barges, which remained in ARTCO’s possession as of the Petition Date.”
Under the settlement, the agreement is to be rejected as of March 6. With respect to any and all barges currently owned by MWG and in ARTCO’s possession, the parties agree to enter into a new care and custody agreement. ARTCO will release and return all barges currently in its possession to MWG or the MWG’s designees or purchasers as soon as practicable and (except for the four barges to be abandoned to ARTCO pursuant to the agreement).
In full and final settlement of any and all prepetition claims of ARTCO against MWG, including this claim, ARTCO will have an allowed general unsecured claim against MWG in an amount of $693,698. In full and final satisfaction of any and all postpetition administrative claims of ARTCO against MWG and the other debtors, MWG will immediately (or as soon as practicable) abandon four of the barges to ARTCO.
“The Settlement is a true win-win for MWG and ARTCO and demonstrates how collaborative negotiations and creative thinking can result in a final solution that provides value to both sides,” said the filing. “The Settlement is not only within the reasonable range of litigation possibilities, but allows MWG to retain (and monetize) the majority of value of the barges. Any potential drain on MWG’s assets as a result of effectuating the terms of the Settlement will likely be inconsequential compared to the significant cash benefit to MWG’s estate. Specifically, a sale of MWG’s unsold barges (pursuant to the Debtors’ de minimis asset sale procedures) could generate approximately $495,000 in proceeds for MWG’s estate. As further explained below, the Settlement also (a) enables MWG to sell the barges during the 2013 summer season, when there is a higher demand for barges than in other market seasons, (b) resolves a potentially expensive and time-consuming dispute over the rejection of the Transportation Agreement and issues related to the barges, (c) eliminates any dispute regarding the characterization and priority of ARTCO’s claims, and (d) provides finality and conclusion to these issues, thereby allowing MWG and the other Debtors to devote valuable time and resources to other important restructuring matters.”