Union/Panda Gila disclosure statement approved by court

New York, March 3 - The disclosure statement for TECO Energy, Inc.'s Union and Gila River power stations was approved by the U.S. Bankruptcy Court for the District of Arizona Thursday.

The deadline for objections and for votes to reach the agent was fixed as April 1, and the confirmation hearing will be held on April 19 and 20.

Approval follows an agreement between the companies, the pre-petition bank agent and dissenting bank lenders Aretex LLC and Franklin Mutual Advisers, LLC. Under the agreement, a hearing to give conditional approval to the disclosure statement was continued to Feb. 25 from the originally scheduled date of Feb. 11 and became a final hearing. No witnesses will be called.

Under the plan, bank lenders will receive recoveries of 93.7% and 94.3% in the form of new term loan notes and the membership interests of a new company, Entegra Power Group, LLC, that will own the power stations.

The Union bank lenders' $550 million secured claim will receive a 93.7% recovery rate through the issuance of new term B loan notes and equity in Entegra, and the Gila bank lenders' $620 million secured claim will similarly receive a recovery of 94.3%. The project lenders will take ownership of the power stations and TECO will pay them $30 million in exchange for a full release.

Specifically:

* The Union bank lenders' $550 million secured claim will receive a 93.7% recovery rate through the issuance of new term B loan notes and new term B letter-of-credit notes plus equity in Entegra. Banks can choose to convert the term B notes into new term A notes and term A letter-of-credit notes. Banks that participate in this conversion can also take up any unused allocation of new term A notes and revolving loans;

* The Union bank lenders' $304.89 million unsecured claim will receive less than 1% recovery in cash;

* The Panda Gila banks' $32.25 million of secured letter-of-credit claims will receive 100% recovery through new letters of credit;

* The Panda Gila banks' $620 million secured claim will receive a recovery rate of 94.3% through the same treatment as the Union banks' $550 million secured claim;

* The Panda Gila bank lenders' $334.70 million unsecured claim will receive less than 1% recovery in cash;

* All old equity interests will receive nothing.

On exit from Chapter 11, the new Entegra company will have $30 million in revolving loans, $200 million in letter-of-credit facilities, $675 million in term loan A debt and $650 million in term loan B debt, composed of:

* A $20 million revolver at Union due in seven years with an interest rate of Prime rate plus 400 basis points with a floor of 6%;

* A $60 million letter-of-credit facility at Union due in seven years with an interest rate of Prime rate plus 400 basis points with a floor of 6%;

* A $250 million term loan A at Union due in seven years with an interest rate of 4%;

* A $240 million term loan B at Union due in 15 years with an interest rate of 9%;

* A $10 million revolver at Panda Gila due in seven years with an interest rate of Prime rate plus 400 basis points with a floor of 6%;

* A $140 million letter-of-credit facility at Panda Gila due in seven years with an interest rate of Prime rate plus 400 basis points with a floor of 6%;

* A $425 million term loan A at Panda Gila due in seven years with an interest rate of 4%;

* A $410 million term loan B at Panda Gila due in 15 years with an interest rate of 9%.

Citibank, NA will be the agent.

The two projects filed for Chapter 11 after failing to receive support for a restructuring agreement from all their lenders.

Union Power Partners LP, Panda Gila River LP, Trans-Union Interstate Pipeline LP and UPP Finance Co. LLC filed for Chapter 11 on Jan. 27. The case number is 05-01143.

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