Homer City pre-pack bankruptcy plan scheduled for Dec. 6 confirmation

By Jim Witters

Wilmington, Del., Nov. 7 - Homer City Funding LLC's pre-packaged Chapter 11 bankruptcy plan is scheduled for confirmation on Dec. 6, according to the schedule approved Nov. 7 by the U.S. Bankruptcy Court for the District of Delaware.

Homer City attorney Zachary I. Shapiro told the court that the plan received unanimous support from voting creditors.

An affiliate of General Electric Capital Corp. has been paying Homer City's expenses, since the company is a shell with no operations, no revenue and no employees, Shapiro said.

He said it is in the interests of all parties to close the deal as quickly as possible.

The U.S. Trustee's Office agreed to waive the formation of an official committee of unsecured creditors for 60 days to allow Homer City to complete its restructuring.

Reorganization plan

As previously reported, Homer City Generation, LP, General Electric Capital Corp., EFS-N Inc. and Metropolitan Life Insurance Co. have entered into a plan of reorganization support agreement with holders of roughly 76% of bonds issued by Homer City Funding.

According to the proposed disclosure statement, facility operator EME Homer City did not make a required Oct. 1 lease rent payment.

As a result, the company said, the owner lessors and Homer City Funding failed to make payments on their lessor notes and existing bonds.

Under the agreement, the parties committed to support and implement a reorganization and restructuring of Homer City Funding and its obligations through a solicitation of votes on a pre-packaged Chapter 11 plan of reorganization.

In addition, the support agreement requires the applicable parties to forbear from exercising remedies under existing operative documents during the term of the support deal.

Restructuring transactions

EME Homer City said last month that the plan calls for a series of restructuring transactions, including the closing of a Sept. 21 master transaction agreement.

The restructuring transactions will eliminate the existing organizational and contractual structure associated with the company's Homer City plant and simplify the capital structure.

GECC revolver

The company said other transactions to be completed under the plan include the issuance by the GECC of new secured bonds in exchange for the existing bonds, as well as GECC's entry into an up to $75 million new revolving credit facility.

The facility will have a five-year maturity with automatic five-year extensions.

Interest will be either Prime rate plus 450 basis points or Libor plus 550 bps.

The transactions also include an agreement with a third-party operator for the operation and maintenance of the plant.

New bond terms

EME Homer City said the new bonds will have the same maturity and cash interest rate as the existing bonds.

In addition, interest payments on the new notes would be made at a payment-in-kind basis at 50 bps above the existing cash interest rate from Oct. 1 to April 1, 2014, at Homer City Funding's option.

That rate will increase by an additional 50 bps if substantial completion of the project is delayed under specified circumstances beyond Nov. 29, 2014.

The new secured bonds would be voluntarily callable at any time by the surviving owner lessor at 115% of par from the date of issuance through Aug. 1, 2013, 107.5% of par from Aug. 2, 2013 through Aug. 1, 2014, 103.5% of par from Aug. 2, 2014 through Aug. 1, 2015 and at par thereafter.

However, if an EPC agreement is amended or modified to delay the guaranteed substantial completion date for both units one and two at the facility beyond Aug. 31, 2014 other than for any delay caused by Kiewit or substantial completion does not occur for both units as a result of the termination of the EPC agreement by Kiewit, the redemption price for the new secured bonds will not be less than 107.5% for any period before substantial completion.

Also, after any delay amendment on and after the date that substantial completion for both units has occurred, the redemption price will be paid in accordance with the agreement.

The company said a payment default under an EPC agreement, the termination of the EPC agreement or delivery of a notice of termination of the EPC agreement at any time when less than $325 million has been paid by a GE contract obligor toward the project will constitute an event of default under the new secured bonds, except when the termination results from a change in environmental laws and the facility is capable of being in compliance with the laws while operating at a monthly average availability factor of 80%.

Creditor treatment

Treatment of creditors under the plan would include the following:

• Holders of priority non-tax claims will be paid in full in cash;

• Holders of existing bond claims will receive a share of new secured bonds, with a principal amount equal to $174 million for the 8.137% senior secured bonds due 2019 and $465.98 million for the 8.734% senior secured bonds due 2026, plus interest due on the bonds for the period of April 1, 2012 through Sept. 30;

• Holders of other claims will be unimpaired. The company said it does not believe there will be any other claims; and

• Holders of equity interests will receive no distribution.

HCF Charitable Remainder Trust holds 100% of Homer City's equity.

The Homer City, Pa.-based company owns three coal-fired electric generating units, which it collectively refers to as the Homer City plant. The Chapter 11 case number is 12-13024.

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