Heritage Power details terms of proposed restructuring agreement

By Sarah Lizee

Olympia, Wash., Jan. 25 – Heritage Power LLC detailed the terms of its proposed restructuring support agreement with parent company GenOn Holdings and consenting lenders in documents filed Wednesday with the U.S. Bankruptcy Court for the Southern District of Texas.

The restructuring transaction will be implemented through a plan of reorganization, under which holders of first-lien claims will get their pro rata share of equity in the reorganized debtors, subject to dilution on account of new equity interests to be issued for participation in an exit facility, any backstop compensation associated with the exit facility, and any management incentive plan.

First-lien claimholders will also receive rights to participate in the exit facility, and any takeback debt.

Any other secured or priority claims will be paid in full or otherwise rendered unimpaired.

Unsecured claims that qualify as convenience claims will be paid in the ordinary course of business, while other unsecured claims will receive a pro rata share of a cash pool in the total amount of $1 million.

The consenting creditors under the restructuring support agreement will backstop the exit facility, which will be used to: fund certain amounts payable to GenOn; make distributions to holders that elect the cash-out option; if elected by the requisite consenting lenders, fund a litigation trust; pay restructuring expenses; and meet working capital and general corporate needs.

If the plan process is not successful, the debtors will instead pursue a sale of all or substantially all of their assets.

Holders of first-lien claims have agreed to establish a vehicle to act as a stalking horse bidder in any such sale process via the submission of a credit bid.

In either a plan or sale scenario, the transactions are expected to deleverage the debtors’ balance sheet by about $610 million, less the size of the exit facility and any takeback debt, and eliminate the debtors’ future obligations under its “burdensome contracts” through rejection.

Heritage Power is a Houston-based owner of natural gas and oil-fueled power generation facilities. The company filed bankruptcy on Jan. 24 under Chapter 11 case number 23-90032.

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