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Union/Panda Gila plan of reorganization receives objection from dissenting banks
By Caroline Salls
Pittsburgh, April 15 - Aretex LLC and Franklin Mutual Advisors LLC filed an objection to the confirmation of TECO Energy, Inc.'s Union and Gila River power stations' plan of reorganization, saying the company will need further financial reorganization.
Aretex and Franklin Mutual, the non-consenting banks in the case, said in an objection filed Thursday with the U.S. Bankruptcy Court for the District of Arizona that the plan is not feasible because the company will still be overleveraged even after the reorganization and that the payment-in-kind feature of the term debt increases it to $600 million by 2011, at which time the company "is expected to somehow refinance."
According to the objection, the company had initial secured debt of $1.5 billion, compared to Panda and the consenting bank's "inflated" $1.1 billion estimate of enterprise value.
"Despite a paper-thin liquidity cushion and covenants that effectively guarantee defaults, the debtors assume future operations will somehow remain within 10% of each budget line item (something the debtors have been unable to achieve to date) to avoid defaults," the filing said.
The non-consenting banks also said the plan's ownership caps violate good corporate governance, public policy and the bankruptcy code.
In addition, they said members of the bank group are "insiders" whose votes cannot be counted to determine if there is an impaired voting class, according to the filing.
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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