New Chapter 33 Bankruptcy Filing - NorthEast Gas Generation LLC

NorthEast Gas Generation LLC

June 18, 2020

Texas-based NorthEast Gas Generation LLC (along with three affiliates, the “debtors”), an indirect subsidiary of non-debtors Talen Energy Corporation and NorthEast Gas Generation Holdings LLC (f/k/a MACH Gen LLC), filed for bankruptcy in the District of Delaware. This is the third chapter 11 in six years. You could be excused for thinking that, after two prior rodeos, the balance sheet would be pretty light. Alas, that is not the case. The debtors have $585.2mm of funded indebtedness split between a $554.7mm first lien credit facility and a much smaller $30.5mm second lien credit facility (PETITION Note: there are also LOCs of $23.2mm). Behind all of that is approximately $10.5mm of trade debt.

Low natural gas prices have persisted, unfortunately, and that has placed downward pressure on electric energy prices. Moreover, supply continues to outpace demand thanks to energy saving tech, alternatives, and more. Apparently global warming ain’t helping either: a warmer-than-normal winter reduced home heating levels. All of these factors affected the debtors’ ability to generate revenue and service their debt. The bankruptcy filed was tripped by the urgent need for liquidity and the ability to enter into a DIP financing agreement. This critical funding will bridge the debtors to some sort of transaction that will “allow them to effectuate an orderly restructuring process in chapter 11, pursuant to which the Debtors anticipate consummating a transaction that will transfer, sell, or otherwise convey substantially all of the Debtors’ assets to the First Lien Secured Parties or their designee.”

• Jurisdiction: D. of Delaware (Judge Walrath)

• Capital Structure: $585.2mm

• Professionals:

  • Legal: Richards Layton & Finger PA (Mark Collins, Dan DeFranceschi, Jason Madron, Brendan Schlauch)

  • Financial Advisor: Alvarez & Marsal LLC

  • Investment Banker: Houlihan Lokey Capital Inc.

  • Claims Agent: Prime Clerk LLC (*click on the link above for free docket access)

• Other Parties in Interest:

  • DIP Admin Agent & DIP Lenders: CLMG Corp. & Beal Bank USA & Beal Bank SSB

    • Legal: White & Case LLP (Scott Greissman, Philip Abelson, Elizabeth Feld, Rashida Adams) & Fox Rothschild LLP (Jeffrey Schlerf)

  • Talen Energy Supply LLC

    • Weil Gotshal & Manges LLP (Matt Barr, Bryan Podzius, Alexander Welch, Ronit Berkovich & Morris Nichols Arsht & Tunnell LLP (Robert Dehney, Taylor Haga)

New Chapter 22 Filing - New MACH Gen LLC

New MACH Gen LLC

6/11/18

In ⓶⓶Is A Fresh Batch of Chapter 22s Coming?⓶⓶, we asked "Did Talen Energy's Acquisition of MACH Gen Miss the Mark? (Short Synergy)". Apparently the answer is yes to both questions: MACH Gen is now in bankruptcy court for the second time in four years. 

New MACH Gen LLC and four affiliated debtors have filed a prepackaged chapter 11 bankruptcy that seeks to partially equitize its first lien debt, transfer interests in the Harquahala facility in Arizona to the First Lien Lenders, eliminate approximately $95 million of debt off of the company's balance sheet, shed approximately $20 million of annual interest expense, and reorganize around two of the debtor entities. If the plan is effectuated, the company will emerge from bankruptcy with a (slightly) trimmed down balance sheet including (i) $512 million of first lien debt split among a revolving credit facility and two term loans and provided by the prepetition First Lien Lenders and (ii) approximately $25 million in a new second lien term loan provided by Talen Energy Supply LLC. The First Lien Lenders have also agreed to provide a $20 million DIP credit facility. The proposed plan of reorganization appears to be fully consensual among the various debt and equity interest holders. Accordingly, the company hopes to confirm the plan within 45 days of filing and obtain regulatory approvals another within an additional 45 days. 

The company is the owner and manager of a portfolio of three natural gas-fired electric generating facilities: (1) a 1,080 MW facility located in Athens, New York that achieved commercial operation on May 5, 2004 (the “Athens Facility”); (2) a 1,092 MW facility located in Maricopa County, Arizona, that achieved commercial operation on September 11, 2004 (the “Harquahala Facility”); and (3) a 360 MW facility, located in Charlton, Massachusetts, that achieved commercial operation on April 12, 2001 (the “Millennium Facility,” and collectively with the Athens Facility and the Harquahala Facility, the “Facilities”). The company generates revenue by selling energy, capacity and ancillary services from the Facilities into relevant power markets. In the last fiscal year, the company generated approximately $269 million of operating revenue at a net loss of approximately $10 million. 

These numbers shouldn't really be surprising. In May we highlighted the following:

"Here is where natural gas prices were (i) in April 2014 around the time of the bankruptcy filing (5.97), (ii) in November 2015 (2.08) at the time of the Talen acquisition, (iii) in June 2016 (2.57) at the time of the announced Riverstone transaction, (iv) in December 2016 at the time the transaction closed (3.58) and (v) where they stand now (~2.69):"

This change in the natural gas market (and regulatory hurdles) flipped "compelling future projections" to "a challenging operating environment" and, in 2016, the company "significantly underperformed" its way to a net loss of $589.8 million. Given the current environment for natural gas, we'll see whether this transaction does the trick. After all, as the company notes, "[a]though the Plan will result in the elimination of debt, Reorganized MACH Gen will continue to have a significant amount of indebtedness after the Effective Date." See you in four years? 

• Jurisdiction: D. of Delaware
• Capital Structure: $132.9mm first lien RCF (CLMG Corp., Beal Bank SSB), $465.1mm first lien TL,      
• Company Professionals:
  • Legal: Young Conaway Stargatt & Taylor LLP (Robert Brady, Edmon Morton, Kenneth Enos, Elizabeth Justison)
  • Financial Advisor: Alvarez & Marsal LLC (Ryan Omohundro)
  • Investment Banker: Evercore LLC (Bo Yi)
  • Claims Agent: Prime Clerk LLC (*click on company name above for free docket access)
• Other Parties in Interest:
• First Lien & DIP Agent: CLMG Corp.
• First Lien Lenders: Beal Bank USA/SSB
  • Legal: White & Case LLP (Thomas Lauria, Scott Greissman, Elizabeth Feld)
• Talen Energy Supply LLC 
  • Legal: Skadden Arps Slate Meagher & Flom LLP (Lisa Laukitis) 

New Filing - La Paloma Generating Company LLC

La Paloma Generating Company LLC

• 12/06/16 Recap: California-based (NW of LA) nat-gas fired merchant power provider that services SoCal files for bankruptcy citing a litany of reasons: (i) adverse market for nat-gas fired electricity given the rise of wind and solar power in CA; (ii) the regulatory environment; (iii) cap and trade; (iv) its unsustainable debt load; and (v) the army of O'Melveny lawyers servicing the deal. Okay, not the last part but see below: that sure is a surge of (man)power. 
• Jurisdiction: D. of Delaware
• Capital Structure: $524mm of total funded debt. $35mm '20 1st lien (BofA), $292mm '20 1st lien TL (BofA), $110mm '20 second lien TL (Sun Trust), $87mm '19 LPAC TL, $34mm LOCs (SunTrust)     
• Company Professionals:
  • Legal: O'Melveny & Meyers LLP (John Rapisardi, George Davis, Peter Friedman, Diana Perez, Andrew Sorkin, Matthew Kremer, Valerie Cohen) & (local) Richards Layton & Finger PA (Mark Collins, Jason Madron, Andrew Dean) & (conflicts counsel) Curtis Mallet-Prevost Colt & Mosle LLP (Steven Reisman, Turner Smith, Peter Behmke, Cindi Giglio)
  • Financial Advisor: Alvarez & Marsal LLC (Emmett Bergman)
  • Investment Banker: Jefferies LLC (Jeffrey Finger)
  • Claims Agent: Epiq Bankruptcy Solutions LLC (*click on company name for docket)
• Other Parties in Interest:
  • Sponsor: EIG Global Partners LLC (Niranjan Ravindran)
  • First Lien Lender: Bank of America
    • Legal: Moore & Van Allen (David Eades, Glenn Huether) & (local) Buchanan Ingersoll & Rooney PC (Mary Caloway, Kathleen Murphy)
  • Ad Hoc Group of Second Lien Noteholders
    • Legal: Morgan Lewis & Bockius LLP (Glenn Siegel, Joshua Dorchak, Elaine Fenna, Jody Barillare)
  • Second Lien Lender: Sun Trust Bank
    • Legal: King & Spalding LLP (Sara Borders, Thaddeus Wilson) & (local) Morris James LLP (Stephen Miller)
  • 1st Lien Debtholder: Beal Bank USA (LNB)
    • Legal: White & Case LLP (Thomas Lauria, Christopher Shore) & (local) Fox Rothschild LLP (Jeffrey Schlerf)
  • Collateral Agent: Bank of New York Mellon
    • Legal: Bryan Cave LLP (Stephanie Wickouski, Michelle McMahon)

Updated 12/29/16