La Paloma must file plan by Sept. 22 to avoid exclusivity termination

By Caroline Salls

Pittsburgh, Sept. 15 – La Paloma Generating Co., LLC must file an amended plan reflecting settlement terms by Sept. 22 to avoid termination of its exclusive periods for filing and soliciting votes on a plan, according to an order filed Friday with the U.S. Bankruptcy Court for the District of Delaware.

If exclusivity is terminated, first-lien lender LNV Corp. will have the right to file and solicit votes on a Chapter 11 plan, and La Paloma will have the right to object to LNV’s plan.

According to the order, the exclusivity termination stipulation is subject to La Paloma’s ability to establish that LNV did not negotiate in good faith in connection with the amended plan.

Last month, LNV asked the court to terminate the company’s exclusive periods, arguing that La Paloma runs a company designed to own and operate a natural gas power plant in California, a state that has enacted regulations designed to make it infeasible to operate the plant at a profit.

In addition, the lender said it is severely undersecured and is, therefore, the most likely candidate to take ownership of the plant.

However, LNV said “the debtors have filed these cases, and taken every action in these cases to date, in an attempt to assemble these pieces in a way that will coerce LNV to not only take the plant, but also to inappropriately absorb all of the debtors’ regulatory compliance obligations so that junior stakeholders can avoid those liabilities.”

LNV said it will not subordinate its secured and unsecured claims in this way.

The lender also said La Paloma’s precarious financial condition cannot suffer more delay.

LNV said La Paloma is using the threat of litigation and impending harm to the estates to use its exclusive periods as a sword for the benefit of junior stakeholders.

La Paloma is a 1,022 MW combined-cycle gas-fired power plant located in Kern, Calif. The company filed for bankruptcy on Dec. 6, 2016 under Chapter 11 case number 16-12700.

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