TECO's Union and Gila projects file for Chapter 11

New York, Jan. 26 - TECO Energy, Inc. said its Union and Gila River projects filed for Chapter 11 on Thursday after failing to receive support for a restructuring agreement from all their lenders.

The projects made prepackaged filings in the U.S. Bankruptcy Court for the District of Arizona.

Terms of the plan are substantially similar to the terms agreed in October 2004, TECO Energy said in an 8-K filing with the Securities and Exchange Commission.

The project lenders will take ownership of the power stations and TECO will pay them $30 million in exchange for a full release.

Support for the restructuring came from 95% by number and 90% by principal amount of the lenders.

But two members of the 40-member group failed to agree to the transfer of ownership, resulting in the Chapter 11 filing.

Confirmation of the plan requires support from 50% of creditors by number and two-thirds by dollar amount.

Two classes will vote - the project lenders with secured claims and holders of unsecured claims, which include the project lenders' deficiency claims, TECO's claim and a "nominal" amount of other claims.

Confirmation of the reorganization plan is expected some time between March and May.

TECO added that the settlement agreement, which includes its payment of $30 million in exchange for releases, was approved by all the project lenders.

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