Elwood extends consent solicitation for 8.159% bonds, amends payment

By Wendy Van Sickle

Columbus, Ohio, Sept. 19 – Elwood Energy LLC extended its solicitation of consents to amend its 8.159% senior secured bonds due 2026 to 5 p.m. ET on Sept. 29 and increased the consent payment to $40 per $1,000 in amortized principal amount of bonds held by each consenting holder from an aggregate payment of $1.5 million previously, according to a press release.

The deadline had been 5 p.m. ET on Sept. 20, after having been previously pushed back from 5 p.m. ET on Sept. 6 and, before that, from 5 p.m. ET on Aug. 31.

The company had previously, on Aug. 31, amended the consent payment to a total of $1.5 million, from $5.00 per $1,000 amortized principal amount originally.

Currently $145,612,440 amortized principal amount of bonds is outstanding, down from the original $402 million due to amortization.

Elwood noted that the revised consent payment will likely result in a “significant modification” of a consenting holder’s bonds for the purposes of federal income tax.

If the solicitation does count as a “significant modification,” then the result will be a deemed exchange of the bonds, which would be a taxable event, the company said.

Elwood announced the solicitation on Aug. 25, saying that it was seeking to amend the definition of “permitted PPA” in the indenture and to waive certain defaults or events of default.

Elwood Energy said that when it issued the bonds in 2001 almost all of the energy from the 1,350 MW gas-fired electric generating facility in Elwood, Ill., that it owns was contracted under power sales agreements with purchasers which were load-serving entities or affiliates of load-serving entities who were buying to serve retail customers.

Now, in areas within markets served by PJM Interconnection, LLC, load-serving entities more typically purchase electrical capacity and energy through the wholesale market operated by PJM or its affiliates.

As a result, rather than seeking bilateral power sales agreements with purchasers, Elwood Energy is bidding into the three-year capacity auction operated by PJM or its affiliates and bidding into the daily energy auctions operated by PJM or its affiliates.

The issuer expects this to continue and wishes that capacity agreements entered into with PJM or its affiliates will satisfy the definition of “permitted PPA” even though PJM and its affiliates are rated only by Moody’s and not also by S&P.

The amendment would make a contract under an electrical capacity auction by PJM, which is rated Aa2 by Moody’s, count as a permitted PPA.

Defaults as a result of current contracts would be waived.

MUFG Securities Americas Inc. (212 405-7481 or 877 744-4532) is solicitation agent. Global Bondholder Services Corp. (866 924-2200, 212 430-3774 or contact@gbsc-usa.com) is information agent and tabulation agent.

Schaumburg, Ill.-based Elwood Energy owns the Elwood, Ill., generating facility and is a subsidiary of J-Power USA Generation, LP.

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