The line of creditors who want to halt Boston Generating LLC's sale of its assets at a bankruptcy court auction next Wednesday keeps getting longer.

In a court filing earlier this week, second-lien holder MatlinPatterson Global Advisors LLC said Boston Generating has enough cash to get through a Chapter 11 bankruptcy and therefore a sale to Constellation Energy Group Inc. (CEG) or any competing bidder is unnecessary.

Instead, MatlinPatterson wants Boston Generating to file a reorganization plan, something other creditors are also backing. The investment firm says that if Boston Generating shows it needs money to fund its bankruptcy case then MatlinPatterson could provide the debtor-in-possession financing.

MatlinPatterson joins CarVal Investors LLC and Fortress Investment Group (FIG) as objectors to the sale. Constellation's $1.1 billion price for Boston Generating is a "low-ball" bid, MatlinPatterson said, all for the benefit of first-lien lenders and Boston Generating insiders.

The deal would likely provide the company's senior lenders with close to a full recovery but would wipe out more junior creditors.

Boston Generating's official committee of unsecured creditors is also objecting to the sale, saying in a court filing that unsecured creditors holding debt of about $425 million are the victims of a "fire sale of a fundamentally healthy company."

In its filing, MatlinPatterson pointed out that many of Boston Generating's directors are also directors of parent U.S. Power Generating Co., and that "USPG's self-interest put this company on the auction block." A Boston Generating spokesman declined to comment.

"The debtors should be compelled to hold an open and fulsome process and meaningfully consider restructuring alternatives," MatlinPatterson said, "but this time, for the first time, run by an independent board with the interests and input of their major creditor constituencies in mind."

In September the firm objected to the establishment of bidding procedures for the auction, but Judge Shelley C. Chapman of U.S. Bankruptcy Court in Manhattan approved the rules with the caveat that she could revisit the matter to decide whether a sale itself showed sound business judgement.

Boston Generating filed for Chapter 11 protection in August with the Constellation sale in place, subject to higher bids at auction. Chapman will oversee an auction and sale next week.

(Dow Jones Daily Bankruptcy Review covers news about distressed companies and those under bankruptcy protection.)

-By Joseph Checkler; Dow Jones Newswires; 212-416-2152; joseph.checkler@dowjones.com
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