GenOn agrees Chapter 11 restructuring plan, recent deal to be repaid

New York, May 23 – GenOn Energy, Inc. said it has reached agreement with some of its noteholders and NRG Energy, Inc. on a proposed restructuring via a Chapter 11 filing.

Under the plan, holders of GenOn Energy’s senior notes will receive 100% of the equity in the reorganized company while holders of GenOn Americas Generation, LLC’s senior notes will receive 92% of par in cash, according to an 8-K filing with the Securities and Exchange Commission.

Members of an ad hoc committee that includes 39 institutions holding 60.6% of GenOn Energy’s notes and more than two-thirds of GenOn Americas’ notes have signed a consent agreement under which they will support the plan.

Funds from GenOn Energy’s recent offering of notes, the $550 million of 10½% senior secured first-lien notes due 2022 issued via Remote Escrow Finance Vehicle LLC and priced on May 4, would be returned to investors along with accrued interest and a 4% breakage fee.

However the proposal faces opposition.

A dissenting ad hoc committee made up of six holders with 27% of GenOn Energy’s notes has told the company that it opposes the terms and has put forward a counterproposal.

Under the proposed restructuring agreed with the consenting ad hoc committee, GenOn would reduce its debt by $1.83 billion plus a further $695 million reduction at GenOn Americas.

The plan includes the issuance of $700 million of new notes that would be backstopped by the steering committee members of the ad hoc committee in exchange for a 5% fee.

In return for full releases, NRG Energy will make a $243 million cash settlement payment, continue to provide shared services worth $84 million annually during the bankruptcy and for two months subsequently, retain some historic pension liabilities under the existing NRG pension plans, including $13.1 million of 2017 pension contributions for GenOn employees, which will be applied to the $120 million underfunding amount, and other consideration.

NRG will also consent to the cancellation of its equity interests in GenOn, giving it a worthless stock deduction against federal income tax.

Amounts drawn under the NRG credit facility will remain outstanding and be replaced by an exit facility when GenOn exits bankruptcy.

NRG’s participation is conditional on holders of at least 50% of each group of notes supporting the plan.

If the support reaches two-thirds of each group of notes then NRG will contribute an additional $18.3 million in cash.

In addition to receiving all the equity of the reorganized company, holders of GenOn Energy’s notes who signed up for the term sheet by 11:59 p.m. ET on May 22 will receive a $75 million early consent and participation fee, to be paid when the plan of reorganization becomes effective.

For the GenOn Americas notes, the payment to holders will be $920 per $1,000 principal amount in cash plus accrued interest through the date the company files for bankruptcy.

After six months the size of the claim will increase at an annual rate of 6%.

The early consent and participation fee for consenting GenOn Americas noteholders is $14.1 million.

For both groups of noteholders, the early consent and participation fee deadline was extended from 2:30 p.m. ET on May 22.

In addition, GenOn gave the dissenting noteholders an extension to the early consent and participation fee deadline to 11:59 p.m. ET on May 24.

The dissenting noteholder plan differs from the agreed plan in that holders of GenOn Americas’ notes would be paid at the rate of $840 per $1,000 principal amount in cash if two-thirds or more support the restructuring or be reinstated if less than two-thirds agree. There is no ticking fee under this proposal.

In addition, the exit financing would be smaller at $650 million of notes.

GenOn is a Princeton, N.J.-based power producer.

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