Southern Montana Electric amended plan includes noteholder settlement

By Caroline Salls

Pittsburgh, Aug. 15 - Southern Montana Electric Generation and Transmission Cooperative, Inc.'s Chapter 11 trustee filed an amended plan of reorganization and disclosure statement on Aug. 14 with the U.S. Bankruptcy Court for the District of Montana.

The amended plan incorporates a settlement with noteholders that resolves the issue of the value of the noteholders' collateral and under which the noteholders' current claim for a $46 million "make-whole amount" is waived.

As previously reported, the plan also includes a 10-year power supply agreement that includes pricing "at historical lows."

The new power supply agreement replaces a pre-bankruptcy long-term agreement with PPL Montana that required the company to buy more power than needed at prices higher than market value, according to the disclosure statement.

The trustee said the new agreement should save the debtors more than $100 million. Those savings will allow Southern Montana Electric to pay off the debt on its Highwood Generating Station gas-fired facility on restructured terms and still charge significantly lower rates than under the PPL contract.

Treatment of creditors

Treatment of creditors under the amended plan includes the following:

• Priority non-tax claims will be paid in full;

• Holders of Prudential Series 2010(A) notes will be paid in equal monthly installments based on a 12-year amortization, with the claim to be paid in cash, provided that the payment may be in-kind until the first anniversary of the effective date as necessary to maintain the reorganized company's rates to its members at the same level as on the bankruptcy filing date for one full year after the effective date.

The claim will bear interest at 6%;

• Holders of Modern Woodmen Series 2010(B) notes will be paid in equal monthly installments based on a 10-year amortization, with the claim to be paid in cash, provided that the payment may be in-kind until the first anniversary of the effective date as necessary to maintain the reorganized company's rates to its members at the same level as on the bankruptcy filing date for one full year after the effective date.

The claim will bear interest at 5¼%;

• Holders of CFC and First Interstate Bank claims will be paid in full over seven years;

• Holders of construction lien claims will be paid over seven years. The amount paid will equal the amount owed on the petition date, an agreed amount or an amount determined by the bankruptcy court.

To the extent that these are not valid, properly perfected and enforceable construction lien claims, any allowed amount will be treated as a general unsecured claim;

• Holders of general unsecured claims will receive a share of the unencumbered cash in the estate;

• Holders of convenience claims will receive cash equal to 50% of their claims on the later of the plan effective date and the date the claim is allowed;

• Holders of member patronage capital and similar claims will retain their allowed claims; and

• Member interests and member certificates will be retained by the members.

Plan comparison

Treatment of creditors under the original plan was slated to include the following:

• Priority non-tax claims would have been paid in full on the plan effective date;

• Holders of Prudential Series 2010(A) notes would have received the unpaid principal balance on the confirmation date in 120 equal monthly installments or in 120 equal installments that have a present value equal to the value of the collateral that secures the claim;

• Holders of Modern Woodmen Series 2010(B) notes would have been paid the principal balance due on the confirmation date in 84 equal installments that have a present value equal to the value of the collateral that secures the claim or an amount agreed to by the trustee and Modern Woodmen;

• Holders of CFC and First Interstate Bank claims would have been paid in full over five years in equal monthly installments;

• Holders of construction lien claims would have been paid over five years. The amount paid would have equaled the amount owed on the petition date, an agreed amount or an amount determined by the bankruptcy court;

• Holders of general unsecured claims would have received a share of the unencumbered cash in the estate;

• Holders of convenience claims would have received cash equal to the claims on the later of the plan effective date or the date the claim is allowed;

• Holders of member claims would have retained their allowed claims; and

• Member interests and member certificates would have been retained by the members.

Southern Montana filed for bankruptcy on Oct. 21, 2011. The Billings, Mont.-based cooperative's Chapter 11 case number is 11-62031.

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