A panel of judges has denied an appeal by Boston Generating creditors hoping to overturn the sale of the company's assets to Constellation Energy Group Inc. (CEG).

In a filing with the U.S. Court of Appeals for the Second Circuit made last week, three judges denied the appeal of MatlinPatterson Global Advisors LLC and Wilmington Trust FSB, the agent for Boston Generating's second-lien lenders.

The creditors had appealed a $1.1 billion sale of Boston Generating to fellow utility Constellation, which closed in early January after receiving approval from both Judge Shelley C. Chapman of U.S. Bankruptcy Court in Manhattan and the Federal Energy Regulatory Commission. The closing of the sale made it unlikely that an appeal would succeed.

MatlinPatterson and Wilmington Trust contended that Boston Generating was worth far more than what it was sold for, and that a proper "appraisal" of the company wasn't conducted in bankruptcy court.

Chapman in December allowed for the creditors' appeal, but ruled not to stop the sale pending the appeal.

A clerk at the U.S. Court of Appeals said there wouldn't be a written opinion about why the appeal was denied. Lawyers for MatlinPatterson and Boston Generating didn't immediately respond to a request for comment.

Boston Generating filed for Chapter 11 bankruptcy protection in August with the Constellation deal in place, but creditors fought the sale from the outset. After a protracted sale hearing in November that even spilled into a Sunday, Chapman approved it.

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

A group of Boston Generating's unsecured creditors took a different route by suing the lenders behind more than $2 billion in loans that they say loaded the power company with debt and made its bankruptcy filing "inevitable."

If successful in that lawsuit--which technically isn't an appeal--the unsecured creditors would get money from those lenders that could be distributed among Boston Generating's creditors. Named in the lawsuit filed in December are Credit Suisse Group, Goldman Sachs Group Inc., loan agent Wilmington Trust FSB and the holders of the first- and second-lien debt.

That matter has been sent to mediation, according to court papers. A lawyer for the unsecured creditors didn't immediately respond to a request for comment.

(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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