By Peg Brickley
Homer City Generation LP, which has an electric-power generating facility in Western Pennsylvania, filed for chapter 11 bankruptcy protection Wednesday to implement a restructuring that will erase $600 million in secured debt from its balance sheet.
Judge Mary Walrath will take a first look at Homer City's turnaround effort at a hearing set for Thursday in the U.S. Bankruptcy Court in Wilmington, Del.
The filing marks the second pass through chapter 11 for the Homer City facility, which runs on coal and was built in the 1960s. Along with much of the industry, Homer City has been under pressure in the low-price environment, competing with cheap natural gas and alternative energy sources. Debt being swapped forequity in the planned restructuring grew out of Homer City's 2012 bankruptcy.
The 2012 case set the company on course for a while. In 2014, it reported net income, after debt service payments, of $102 million. The next year was a different story, with revenue diving 28% and a net loss of nearly $49 million.
In a release, Homer City said it has support for its chapter 11 exit plan from about 86% of the holders of its $607 million in secured bond debt. Homer City must gain approval of the chapter 11 plan it brought with it to bankruptcy court.
Bondholders stepped up for the restructuring talks in mid-2016, after efforts to find a buyer that began in late 2015 failed to produce an acceptable offer, court papers say. Potential buyers made offers that valued Homer City at $230 million to $505 million but carried conditions that made it likely the deals wouldn't close without significant changes, the company said.
Homer City'splant, which has three coal-fired power-generating units, operates near Pittsburgh. NRG Energy Services staffs the plant and will continue to serve as the plant operator.
Pre-negotiated chapter 11 cases are popular, cutting down on the time and money companies spend in bankruptcy court. Essential terms are agreed to in advance and sometimes the ballots have already been counted by the time a company files for bankruptcy protection.
Trade and general unsecured creditors are being promised payment in full, which means there is no need to solicit their votes on Homer City's plan. Pennsylvania's Clean Air Fund is the largest unsecured creditor, owed $1.1 million, court papers say.
Homer City signed up secured bondholders to a restructuring agreement and was in the process of rounding up votes on the plan when it filed for chapter 11 protection in the U.S. Bankruptcy Court in Wilmington, Del.
As a limited partnership, Homer City is run by general partner EFS HC GP, LLC, an entity indirectly owned by General Electric Co. Other indirectly-owed GE affiliates own most of Homer City, while Metropolitan Life Insurance Co. owns nearly 5% of the limited partnership interests, court papers say.
The case number is 17-10086. Homer City is being advised by the law firm of Richards Layton & Finger, financial adviser PJT Partners and restructuring adviser Zolfo Cooper Management. The bondholder group is being advised by the law firms of O'Melveny and Myers and Young Conaway Stargatt & Taylor. Houlihan Lokey is providing financial advice to the bondholders.
Write to Peg Brickley at firstname.lastname@example.org
(END) Dow Jones Newswires
January 11, 2017 15:03 ET (20:03 GMT)
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