FirstEnergy Strikes Creditor Deal in Subsidiary Bankruptcies -- Update
April 23 2018 - 4:52PM
Dow Jones News
By Andrew Scurria
FirstEnergy Corp. has reached a settlement with creditors of its
bankrupt power-generation businesses that would simplify their
restructuring while extricating the parent company from the chapter
11 case.
The proposed deal with the nonbankrupt parent company requires
approval from subsidiary FirstEnergy Solutions, or FES, and its
affiliates and from the Ohio chapter 11 judge overseeing their
restructuring.
If approved, the agreement covers potential claims surrounding
FirstEnergy's obligations toward unprofitable coal and nuclear
power plants in Ohio and Pennsylvania that are under bankruptcy
protection. Research firm CreditSights said the settlement provides
15 cents on the dollar for holders of unsecured FES debt, some of
which rallied nearly 20% Monday, according to FactSet.
The two largest bondholder groups in the bankruptcy support the
agreement, according to a securities filing. FirstEnergy said it
would try to bring the court-appointed committee of unsecured FES
creditors on board with the terms.
Recoveries for creditors also depend on whether the Trump
administration intercedes to keep the FES plants open. FES has
sought an emergency lifeline from the U.S. Department of Energy to
prop up those facilities, which have been unable to compete in
unregulated markets with plentiful natural gas and state-subsidized
renewables.
The settlement provides a combination of cash payments and tax
notes from the parent designed to deliver $628 million in value to
creditors, according to a securities filing. FirstEnergy agreed to
take on pension payments, deferred compensation and retiree life
insurance and medical claims arising from FES.
In return FirstEnergy would share in any bondholder recoveries
above 60 cents on the dollar. FES and its affiliates are
negotiating a restructuring of three nuclear plants while putting
four fossil fuel operations and a retail power business on the
block.
CreditSights analysts said the potential upside for FirstEnergy
would incentivize the parent to continue pressing federal and state
regulators for a bailout of FES facilities. The potential closure
of FES facilities is testing the Trump administration's commitment
to coal and nuclear as it weighs compelling the nation's largest
grid operator to favor those fuel sources over alternatives.
FES has few allies in its campaign, which experts say would
effectively end America's largest competitive electricity market.
The bailout request is opposed by several power companies supplying
the market and by industrial customers facing higher electricity
costs.
The deal would also swing ownership of the coal-fired Pleasants
Point power station in West Virginia to the chapter 11 estate from
FirstEnergy's non-bankrupt affiliate Allegheny Energy Supply Co.
AES said in February it would close Pleasants Point next year
unless a buyer is found.
Creditors of the Bruce Mansfield coal-plant in Pennsylvania
would receive a $787 million allowed unsecured claim in the
bankruptcy that would be partially satisfied upon court approval of
a restructuring plan.
Write to Andrew Scurria at Andrew.Scurria@wsj.com
(END) Dow Jones Newswires
April 23, 2018 16:37 ET (20:37 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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