Homer City Generation makes pre-packaged Chapter 11 bankruptcy filing

By Caroline Salls

Pittsburgh, Jan. 11 – Homer City Generation LP made a pre-packaged Chapter 11 bankruptcy filing on Jan. 11 in the U.S. Bankruptcy Court for the District of Delaware to implement a comprehensive financial restructuring plan.

The company said the restructuring is expected to significantly deleverage its balance sheet and provide for an orderly transition of ownership to Homer City’s existing secured noteholders.

Homer City said it expects to continue its operations and meet its obligations in the ordinary course during the Chapter 11 case.

Under the proposed pre-packaged plan of reorganization, which is supported by roughly 86% of the company’s existing secured noteholders who are party to the previously announced restructuring support agreement, all trade creditors and other general unsecured creditors will be paid in full.

Noteholders other than GE Financial Services Energy will receive a share of 100% of limited liability company interests in a new holding company, as well as a percentage of new company interests that GE has agreed to contribute.

On account of its notes claims, GE will receive its share of the new company interests other than those it has agreed to contribute.

All existing partnership interests in Homer City will be cancelled on the plan effective date.

GE’s obligations under any guaranty, indemnification or credit support currently provided to or for the benefit of Homer City will be released and replaced through exit financing.

The company said it expects to have commitments for $150 million of financing under the exit facility.

The company said it is in the process of soliciting creditor approval for the plan and expects to emerge from Chapter 11 on an expedited basis.

“Today, with the strong support of the noteholders, we are taking the next step to implement Homer City’s financial restructuring plan,” John Boken, a senior managing director at Zolfo Cooper and Homer City chief restructuring officer, said in the release.

“Through this process, we expect to enhance the company’s financial flexibility, eliminate over $600 million in existing secured debt from the company’s balance sheet and enable Homer City to continue to invest in its operations and environmental compliance.”

Consol Energy agreement

In addition, Homer City and Consol Energy Inc. entered into a new two-year supply contract that will help Homer City meet its anticipated fuel needs through the end of 2018.

NRG Energy Services will remain in place as the plant operator under the terms of an amended operating and maintenance agreement that currently runs through Dec. 31, 2017. As such, NRG personnel at Homer City will continue to operate and maintain the plant in the ordinary course.

GE Energy Financial Services will also continue as asset manager through the in-court restructuring process and will provide transitional assistance after the plan effective date to facilitate the ownership change.

Homer City also filed a number of customary motions seeking court approval to support its business operations during the pre-packaged reorganization process, including approval to access its cash collateral to fund its operations.

The company said it believes it has sufficient liquidity to continue its operations and meet its obligations in the ordinary course throughout the restructuring process. As a result, Homer City said it does not expect to need to seek debtor-in-possession financing in connection with the Chapter 11 filing.

Debt details

According to court documents, Homer City has $1 billion to $10 billion in assets and $500 million to $1 billion in debt.

The company’s largest unsecured creditor is the Commonwealth of PA Clean Air Fund, which has a $1.1 million environmental claim.

No other unsecured creditors were listed with claims of $1 million or more.

The company is represented by Richards, Layton & Finger, PA.

Indiana, Pa.-based Homer City operates three coal-fired electric generating units. The Chapter 11 case number is 17-10086.

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