Constellation Is Successful Bidder For Boston Generating Assets

Boston Generating said Monday that Constellation Energy Group Inc. (CEG) is the winning bidder for its assets, setting the stage for a bankruptcy judge to decide later this week whether to approve the transaction.

Boston Generating auctioned the assets in front of a special committee, with Constellation's $1.1 billion bid winning, according to court papers. Boston Generating filed for Chapter 11 protection in U.S. Bankruptcy Court in Manhattan in August with the Constellation sale in place, subject to higher bids at the auction.

In addition to Constellation, Short Hills, N.J.-based Energy Capital Partners made a preliminary bid, according to a partially redacted court filing made by Boston Generating earlier Monday. An Energy Capital spokesman didn't immediately respond to a request for comment.

A second group that submitted a preliminary bid was a group of Boston Generating's second-lien lenders, including CarVal Investors LLC and Fortress Investment Group (FIG).

Those two have previously come out against the sale, and the official committee of unsecured creditors have called nonsenior lenders victims of "a fire sale of a fundamentally healthy company.

The initial Constellation deal would likely provide the company's senior lenders with close to a full recovery but would wipe out more junior creditors. Lawyers for CarVal and Fortress didn't immediately respond to a request for comment.

Court papers containing the preliminary bidding information were partly redacted. However, when the papers were saved to a word-processing program, the redactions disappeared.

Representatives of Constellation and Boston Generating didn't immediately respond to a request for comment.

In the earlier Monday court filing, the company struck back at creditors trying to halt a sale of its assets, saying second-lien lenders have waged "unwarranted attacks" on the utility's business judgment.

Boston Generating said its sale process--both before and after filing for bankruptcy protection--was appropriate and "well-managed," and that it has discussed with the objecting lenders its alternatives if a sale isn't concluded by 2011.

In the filing, Boston Generating said J.P. Morgan Chase & Co. (JPM) contacted 242 potential bidders as part of the post-bankruptcy filing sales process, and by Saturday only one acceptable bid existed.

To creditors' arguments that the company should file a plan to reorganize itself in bankruptcy court, Boston Generating said, "There is no evidence to suggest that a plan of reorganization can be fully negotiated and completed before the debtors run out of cash in 2011."

Boston Generating added that it probably wouldn't be able to get a favorable debtor-in-possession loan if it tried to reorganize outside of a sale.

Judge Shelley C. Chapman of U.S. Bankruptcy Court in Manhattan approved the rules governing the auction back in September, but said she could revisit the matter to decide whether a sale itself showed sound business judgment. The sale hearing is scheduled for Wednesday.

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

--Patrick Fitzgerald contributed to this article.

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