Brazos files Chapter 11 reorganization plan and disclosure statement

By Sarah Lizee

Olympia, Wash., Sept. 2 – Brazos Electric Power Cooperative, Inc. filed a Chapter 11 plan and related disclosure statement with the U.S. Bankruptcy Court for the Southern District of Texas.

The plan incorporates a settlement with the Electric Reliability Council of Texas (Ercot). Brazos said the settlement is the culmination of an “all-encompassing and lengthy” multi-party arm’s length mediation.

Under the settlement, Brazos will make two effective date payments to Ercot. First, a $599.7 million payment to replenish Ercot’s congestion revenue right (CRR) reserve account, and second, a $553.8 million payment to fund an initial distribution to electing market participants.

The debtor will also make certain installment payments of up to $13.8 million per year over 12 years and contribute a portion of the generation sale proceeds (about $116.6 million) to fund payments, through Ercot, to the applicable eligible market participants.

The settlement also includes certain release and injunction provisions, precluding Ercot from collecting default uplifts for prepetition amounts owed by the debtor.

Additionally, the plan includes provisions regarding, among other things,

• The participating member securitization, which allows members to elect to participate in the debtor-led securitization, or to arrange for alternative financing/securitization to satisfy their respective balances due to the debtor in connection with winter storm Uri and the Ercot claim;

• The conversion of the company’s $350 million debtor-in-possession revolving facility with JPMorgan Chase Bank, NA into an exit working capital facility;

• The post-effective date sale of the reorganized debtor’s generation assets and application of the generation sale proceeds;

• The reorganized debtor’s entry into amended all requirements contracts (ARCs) with the members, to become effective as of March 1, 2023, and the terms of the consenting member settlement;

• The establishment and funding of the ratepayer hardship fund to make hardship distributions to qualified hardship recipients; and

• The terms of other settlements, including the Brazos Sandy Creek claims settlement, the Sandy Creek Energy Associates, LP claim settlement, and the committee settlement.

Under the plan, holders of administrative claims, other priority claims and other secured claims will receive payment in full.

Rural Utilities Service secured notes claims will be reinstated.

General unsecured creditors have a minimum estimated recovery of 89.5% and are set to receive a pro rata share of a GUC cash recovery with an initial GUC cash payment to be made on the effective date, a second GUC cash recovery to be made on or before the generation sale closing date, and a residual GUC cash payment, if any.

Holders of general unsecured convenience claims will receive the GUC convenience recovery, which is a total amount of cash enough to yield a recovery of 95 cents on account of their claims.

Holders of tort claimants have an estimated 100% recovery.

Holders of tort convenience claims will receive the tort convenience amount, which is the lower of the asserted total liquidated amount of the applicable allowed claim and $5,000 per holder.

Holders of member patronage capital claims will have their claims reinstated, retained and retired in line with certain bylaws.

The company is hoping for a November confirmation hearing.

Brazos Electric is a 3,994-megawatt generation and transmission cooperative based in Waco, Tex. The company filed bankruptcy on March 1, 2021 under Chapter 11 case number 21-30725.

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