Longview Power LLC, the operator of a coal-fired power plant in northern West Virginia, has worked out a new financing deal that it said could get it out of Chapter 11 bankruptcy protection early next year.
Longview Power and a related coal production company sought Chapter 11 protection on Aug. 30 at the U.S. Bankruptcy Court for the District of Delaware. It said that its new 700-MW coal plant has not operated properly since being built and that it is in arbitration with plant contractors over plant construction issues. It said it needs new money to fix the plant so the facility can work properly and start returning it consistent revenues.
On Nov. 1, Longview Power filed with the court a debtor-in-possession financing plan that calls for quick resolution of this Chapter 11 case, including the filing by Nov. 12 of a bankruptcy reorganization plan.
“As noted by this Court recently, these cases are not solely about resolving issues related to the Debtors’ pending arbitration with the Contractors (as defined herein), but rather, they involve significant operational and financial issues that will need to be addressed, especially in light of the Debtors’ liquidity issues,” Longview wrote. “This restructuring process involves more than $1.0 billion in prepetition debt and a 700 megawatt power plant that has been plagued by material operational deficiencies since the Debtors first took possession of that facility in December 2011.”
The company added: “As the Court is aware, the Debtors initially sought to fund this process by utilizing cash collateral, including $59 million of proceeds from the Foster Wheeler [letters of credit] LCs. As the Court is also aware, the Contractors have sought to block these efforts by attempting to strip the Foster Wheeler LCs from the Debtors’ estates and by seeking to bar the Debtors’ access to cash collateral. The relief sought in the Motion provides a comprehensive capital solution for the Debtors’ reorganization and the framework for a plan of reorganization that the Debtors expect to file by November 12, 2013.”
The financing was worked out with financial entities known in the filing as the “Backstoppers.”
The company said the debtors and the Backstoppers have negotiated: an up to $150m senior, secured, priming multi-draw term loan facility, including an up to $30m replacement letter of credit subfacility, which subfacility may be used to renew or replace existing letters of credit or to issue new letters of credit in the ordinary course of business; a conversion feature, allowing the debtor-in-possession (DIP) Facility to convert into the Exit Facility (in the same amount) upon consummation of a chapter 11 plan; and the material terms providing for the debtors’ emergence from chapter 11.
This DIP Facility has been sized to meet both the debtors’ working capital needs, the costs of these chapter 11 cases, and the cost of repairs necessary to fix the power plant. The DIP Facility is fully backstopped by the Backstoppers, although each lender under the Longview Credit Agreement will also be offered the opportunity to participate in the DIP Facility.
The case schedule under this facility includes filing of the reorganization plan on Nov. 12, entry by the court of a plan confirmation order on Feb. 19, 2014, and a plan effective date of March 7, 2014.
“In sum, the relief requested by this Motion is a significant step towards the ultimate resolution of these chapter 11 cases,” Longview wrote. “The DIP Facility provides the Debtors with the liquidity necessary to fund repairs necessary for the Power Plant and to consensually restructure approximately $1.0 billion of prepetition debt. The DIP Facility provides the Debtors with a clear path to exit chapter 11 in the first quarter of 2014. At the same time, the relief requested by this Motion is also narrowly tailored to address the Debtors’ business needs and adequately protect the interests of affected parties, such as they are. On this record, and as the Debtors are prepared to demonstrate at the Court’s hearing on this Motion, the relief requested herein presents a sound exercise of business judgment and should be approved.”