By Peg Brickley
A group of big contractors that has been battling Longview Power
LLC said they won't oppose a $150 million financial lifeline from
the company's lenders intended to keep the West Virginia power
plant online.
Subsidiaries of Norwegian construction company Kvaerner ASA
(KVAER.OS), of Siemens AG (SI, SIE.XE), and of German engineering
firm Foster Wheeler AG (FWLT) have agreed not to oppose the loan,
which promises cash to fix the power plant and get Longview out of
bankruptcy.
The financing pact is up for review Wednesday in the U.S
Bankruptcy Court in Wilmington, Del., where Longview sought
protection from creditors in August. With cash running short, the
company lined up new financing that it says is enough to see it out
of Chapter 11.
Agreement by the contractors not to get in the way of the new
financing was crucial for Longview, because the trio claims rights
on the assets that are superior to any new loans. So-called priming
financing arrangements in bankruptcy, meaning loans that take
priority over existing secured debt, need either consent of the
top-ranking debtholders or a court order.
Typically, it can be tough for a company in bankruptcy to get a
court order silencing secured creditors when it comes to new debt
that ranks above theirs.
But Longview's contractors won't force a court fight, according
to recent court papers. They agreed with Longview that new loans
from existing lenders are "the correct path to fund" the turnaround
effort, as Kvaerner's attorneys put it in papers filed Sunday with
the U.S. Bankruptcy Court in Wilmington.
Longview sought court protection in the middle of an arbitration
proceeding that saw the company and the contractors blaming each
other for the technical troubles that have delayed the launch of
the coal-fired plant and have kept it operating at less than full
capacity.
Part of that fight, a dispute over whether Longview is entitled
to draw on $58 million worth of letter of credit borrowing power,
has continued during the bankruptcy. The new loan means Longview's
fate doesn't depend on a fast win on the question of who owns the
letters of credit.
Collectively, the Kvaerner, Siemens and Foster Wheeler units
that helped build the plant have asserted $360 million worth of
liens against Longview. Though disputed by the company, the
mechanic's liens could have been wielded to block the bankruptcy
financing.
Instead, the contractors are insisting on safeguards such as a
finding there's enough value in the plant to cover their liens as
well as the new financing.
The new loan is step one in Longview's plan to exit bankruptcy
after having dropped about $1 billion in debt from its balance
sheet. It cost more than $2 billion to build the plant, including
$1 billion from First Reserve Corp., a $23 billion energy-focused
private-equity firm in Greenwich, Conn. Longview is moving toward a
February hearing on its Chapter 11 exit plan.
(Dow Jones Daily Bankruptcy Review covers news about distressed
companies and those under bankruptcy protection. Go to
http://dbr.dowjones.com)
Write to Peg Brickley at peg.brickley@wsj.com
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