Panda Gila plan confirmed after reaching agreement with Aretex, Franklin

By Caroline Salls

Pittsburgh, April 19 - The Union and Gila River power plants' plan of reorganization was confirmed Tuesday by the U.S. Bankruptcy Court for the District of Arizona after an agreement was reached with dissenting creditors Aretex LLC and Franklin Mutual Advisors, LLC on Monday.

Panda has agreed to modify the new limited liability company agreement and the new credit agreements in exchange for Aretex and Franklin Mutual resolving the objections.

The company will also change the release agreement with the administrative agent and banks to allow any releases provided to the agent and the pre-bankruptcy banks to also be provided to Aretex and Franklin.

TECO Energy, Inc., the indirect parent of Panda, agreed to pay Aretex and Franklin $1.8 million as a condition to the reorganization plan becoming effective. Upon payment, the claim filed by Aretex and Franklin for fees, costs and expenses they have incurred in the Chapter 11 cases will also be withdrawn.

Confirmation follows voting. On April 5, Panda reported that all voting impaired creditors had voted to accept the plan except Aretex and Franklin, which filed preliminary objections to confirmation of the plan in a Feb. 18 hearing and further objections to plan confirmation on April 14.

Regency Intrastate Gas, LLC also filed a stipulation resolving its objection to Panda's plan on Monday. Regency objected to the plan's permitting Panda to assume or reject executory contracts after plan confirmation.

Regency agreed to withdraw the objection after an order is made saying Panda will assume or reject the executory contracts by May 18.

The reorganization is expected to be completed in May, according to a TECO Energy news release.

Under the plan, ownership of the Union and Gila River power stations will be transferred from TECO Energy to the lending bank group.

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 - listed as Union Power Partners, LP, Panda Gila, Transunion Interstate Pipeline, LP and UPP Finance Co., LLC - filed for bankruptcy on Jan. 27 after failing to receive support for a restructuring agreement from all their lenders. The Chapter 11 case number is 05-01143.

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