U.S. Energy Biogas plan confirmed; Chapter 11 exit expected on May 31

By Caroline Salls

Pittsburgh, May 24 - U.S. Energy Biogas Corp.'s plan of reorganization was confirmed by the U.S. Bankruptcy Court for the Southern District of New York, and the company expects to emerge from Chapter 11 bankruptcy on May 31, according to a news release.

According to the release, the plan, which was proposed jointly by U.S. Energy Biogas and its parent U.S. Energy Systems, Inc., establishes new financing for U.S. Energy Biogas that will allow it to pay all of its creditors in full and support the growth of the business for the benefit of U.S. Energy's shareholders.

Specifically, U.S. Energy Biogas said it has secured $80 million of exit financing from Silver Point Finance, consisting of a $77 million senior secured term loan and a $3 million revolving loan.

According to the commitment letter included in the plan, the exit financing will mature in seven years, and interest will be either Libor plus 450 basis points or Base rate plus 300 bps, at U.S. Energy Biogas' option.

The exit facility is expected to close on May 31, the release said.

Under the plan, U.S. Energy Biogas will make a $67.1 million settlement payment to Countryside Canada Power Inc., a subsidiary of Countryside Power Income Fund.

U.S. Energy will contribute a portion of the Countryside payment in the form of $1.3 million in U.S. Energy common shares.

The shares will be issued no later than the plan effective date.

As part of an agreement with the Illinois Commerce Commission, U.S. Energy Biogas also will pay the ICC $5 million on the plan effective date and establish and fund a $250,000 escrow account that will be used to pay claims for payments by utilities for retroactive rate adjustments that occur during the six-month period immediately following the effective date.

Any residual amounts remaining in the escrow at the end of the six-month rate adjustment claims payment period will be transferred to the ICC.

U.S. Energy Biogas will also make more than $1.3 million of payments to other creditors, and a $600,000 reserve will be established for any disputed claims.

In connection with the plan confirmation, U.S. Energy Biogas also obtained court approval to assume the unexpired site leases of some of its Genco entities and to assign them to a newly formed, special purpose entity to be owned by U.S. Energy Biogas.

The new entity's equity will be pledged as collateral in support of U.S. Energy Biogas' exit financing.

Plan creditor treatment

Treatment of creditors under the plan will include:

• Administrative claims and priority tax claims will be paid in full in cash;

• Holders of priority non-tax claims, general unsecured claims and other secured claims will have their claims reinstated, entitling the holder to full payment;

• Countryside will receive full payment of its claim in cash;

• Holders of Illinois Commerce Commission claims will receive $5.25 million, of which $250,000 will be placed in escrow and distributed according to terms of an Illinois Commerce Commission settlement agreement; and

• Holders of interests will have the rights to their interests reinstated.

U.S. Energy Biogas, an Avon, Conn.-based renewable energy business, filed for bankruptcy on Nov. 30, 2006. Its Chapter 11 case number is 06-12827.

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