Elwood Energy gets consents needed to amend 8.159% bonds due 2026

By Wendy Van Sickle

Columbus, Ohio, Oct. 2 – Elwood Energy LLC received the requisite majority of consents to amend its 8.159% senior secured bonds due 2026, the company said in a press release.

The consent solicitation expired at 5 p.m. ET on Sept. 28 after having been extended from 5 p.m. ET on Sept. 20 and previously from 5 p.m. ET on Sept. 6 and 5 p.m. ET on Aug. 31.

The consent solicitation was launched on Aug. 25.

Holders who delivered their consents will receive a consent payment to $40 per $1,000 in amortized principal amount of bonds held by each consenting holder. The consent payment was increased on Sept. 19 from an aggregate payment of $1.5 million.

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 said it intends to take the position that the consent payment received by a consenting holder will result in a “significant modification” of a consenting holder’s bonds for the purposes of federal income tax.

The result will be a deemed exchange of the bonds, which would be a taxable event, the company said.

In announcing the consent solicitation, Elwood said 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, which has now taken effect, makes 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 will 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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