Entergy New Orleans bond insurer asks court to terminate exclusivity, calls plan 'unconfirmable'

By Caroline Salls

Pittsburgh, Oct. 24 - Entergy New Orleans Inc. secured bond insurer Financial Guaranty Insurance Co. asked the U.S. Bankruptcy Court for the Eastern District of Louisiana to terminate Entergy New Orleans' exclusive periods to file a plan of reorganization and solicit votes on the plan, according to a Monday court filing.

According to the motion, after two exclusivity extensions and more than a year in bankruptcy, the plan of reorganization Entergy New Orleans filed on Tuesday will be patently unconfirmable.

Financial Guaranty said the creditors in this case should not be required to wait for the proposed plan to fail and to be burdened with the costs of a time-consuming and expensive failed solicitation process before having the option to consider alternative plans.

Financial Guaranty said, given the opportunity, it will propose a plan that will expedite distributions to creditors, will preserve the company's liquidity and will treat creditors fairly.

The insurer said its proposed plan would not only protect the bondholders' long-term investment in Entergy New Orleans, but also would protect the city and the residents of New Orleans.

In addition, Federal Guaranty said it envisions a plan process in which creditors will have an opportunity to vote on the two competing plans and it is willing to work with the company to create an agreed upon efficient and economical competing plan process, including the use of one disclosure statement for both plans.

The insurer said Entergy New Orleans and Entergy Corp. designed their original plan terms with the primary goal of paying off Entergy's affiliate claims and maintaining Entergy's position as the holder of 100% of Entergy New Orleans' equity, with little regard to Entergy New Orleans' future liquidity.

Federal Guaranty said it and The Bank of New York advised the Entergy parties of their strong objections to the originally proposed plan terms and Entergy New Orleans agreed to make minimal modifications to those original plan terms.

However, Federal Guaranty said the modifications, which were included in the plan filed on Tuesday, do not even begin to address its concerns about the feasibility, timing and the confirmability of a plan that fails to protect Entergy New Orleans' liquidity, fails to ensure that Entergy New Orleans will be financially able to provide future service to the citizens of New Orleans and that the insurer feels will delay the company's exit from bankruptcy until at least the end of 2007.

Entergy New Orleans provides electric and natural gas service to customers in New Orleans and is the smallest of Entergy Corp.'s five utility companies. Entergy New Orleans filed for Chapter 11 on Sept. 23, 2005. Its case number is 05-17697.

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