Longview Power LLC, which spent $2 billion to build a coal-fired plant in West Virginia, is seeking court approval of financing from a majority of its lenders to help fund operations and lay the groundwork for a reorganization plan to exit bankruptcy.
Lenders that hold about 60 percent of Longview’s $1.2 billion secured credit facility have agreed to provide a multidraw term loan of as much as $150 million, which includes a letter of credit sub-facility for as much as $30 million, according to documents filed Nov. 1 in U.S. Bankruptcy Court in Wilmington, Delaware.
The financing “provides a comprehensive capital solution” to support Longview’s restructuring while forming the “framework for a plan of reorganization,” the company said in the filing. The loan, negotiated as part of broader talks with the lenders, would be convertible into financing to help support an exit from bankruptcy.
The Maidsville, West Virginia-based power producer, an indirect unit of investment firm First Reserve Corp., was forced to seek bankruptcy protection after construction flaws at the plant reduced its power output, hindering its ability to make debt payments, according to court documents.
Longview said it expects to file a reorganization plan with the court by Nov. 12. Under the proposed terms of the plan, the lenders would share as much as 90 percent of the reorganized company’s equity, court papers show. Lenders providing the bankruptcy loan would get the rest of the equity.
Longview intended to fund its bankruptcy with cash representing collateral for the lenders, including $59 million in disputed letters of credit from a unit of Geneva-based Foster Wheeler AG, a contractor that helped build Longview’s 700-megawatt plant.
Longview listed more than $1 billion in both assets and debt in Chapter 11 papers filed in August. Affiliate Mepco Holdings LLC, which can produce about 4 million tons of coal a year and provides half of its output to Longview, also sought protection.
The contractors hired to build the plant, which also include a Siemens AG unit and Kvaerner North American Construction Inc., dispute that they are at fault for the plant’s flaws and are in arbitration with Longview over ownership of the $59 million in letters of credit, according to court documents.
Longview received a $1 billion equity investment from an affiliate of Greenwich, Connecticut-based First Reserve and borrowed about $1.2 billion on a secured credit facility to fund construction of the West Virginia project, according to court papers. The company has about $1 billion outstanding on the credit agreement, with about $557 million due in February.
The case is In re Longview Power LLC, 13-bk-12211, U.S. Bankruptcy Court, District of Delaware (Wilmington).