USEC Chapter 11 plan effective Sept. 30; emerges as Centrus Energy

By Kali Hays

New York, Sept. 30 – The approved Chapter 11 plan of USEC Inc., now named Centrus Energy Corp., is in effect as of Tuesday, according to a news release from the company.

As previously reported, USEC announced its expected emergence as the reorganized Centrus Energy in a Sept. 18 news release after it received confirmation of its plan from the U.S. Bankruptcy Court for the District of Delaware Sept. 5.

USEC filed a pre-packaged bankruptcy on March 5, 2014 to implement a restructuring plan agreement reached in December 2013 with a majority of the holders of its senior unsecured convertible notes.

New stock, notes

Under the plan, USEC will replace its $530 million debt and its preferred stock with a new debt issue totaling $240.4 million and new common stock. The new debt issue will mature in five years and can be extended for an additional five years subject to certain conditions.

All shares of the company’s old common stock, series B-1 12¾% convertible preferred stock and 3% convertible senior notes due 2014 are canceled as of Sept. 30.

The company said it will issue 9 million shares of new common stock to begin trading on the New York Stock Exchange on Sept. 30, according to the news release.

The new notes are guaranteed by United States Enrichment Corp. which entered into a pledge and security agreement and a note subordination agreement with Centrus, according to an 8-K filed Tuesday with the Securities and Exchange Commission.

Enrichment Corp. is USEC’s primary operating subsidiary.

Interest on the new notes will be 8% with an option to pay in kind up to 5.5% interest from Oct. 1, 2015 through maturity.

The company issued new class A common stock at $0.10 par value per share, new class B common stock a $0.10 par value per share and new 8% PIK toggle notes, according the 8-K.

Pursuant to the plan, former holders of the company’s 3% convertible senior notes due 2014 received a $15.86 million payment.

Noteholders will receive $200 million of the new debt and about 79% of the common stock.

Preferred investors Toshiba Corp. and Babcock & Wilcox Co. will each receive $20.19 million of the new debt and roughly 8% of the new common stock.

Current common stockholders will receive around 5% of the new common stock in exchange for the existing common stock, though distribution of the new common stock is subject to dilution on account of a new management incentive plan, according to a Sept. 5 news release.

All secured claims will be reinstated and otherwise not impaired, and all liens will be continued until the claims are paid in full.

All general unsecured claims will be unimpaired and will be either reinstated or paid in full in the ordinary course of business upon the later of the plan effective date or when they become due according to their terms.

USEC also said that it ended the second quarter of 2014 with cash of $123 million and “will not require an additional source of exit financing upon emergence,” according a previous release.

Replacement board

Upon filing for bankruptcy, USEC said its board of directors and management team are substantial holders of the common stock and their holdings will be treated exactly as all other common shareholders. In addition, any unvested or unexercised stock awards they hold will be forfeited under the plan.

With the plan in effect, the company intends to bring in a new board of directors of up to 11 members, consisting of five members of the previous USEC board, four new members approved by the Bankruptcy Court, one member appointed by Toshiba and one member appointed by Babcock & Wilcox.

USEC, the Bethesda, Md.-based supplier of nuclear fuel and advanced technology services, filed for bankruptcy on March 5, 2014 in the U.S. Bankruptcy Court for the District of Delaware. The Chapter 11 case number is 14-10475.

Issuer: Centrus Energy Corp.

Issue: PIK toggle notes

Amount: $240.38 million

Maturity: Sept. 30, 2019/Sept. 30, 2024

Trustee: Delaware Trust Co.

Interest margin: 8%

Price: Par

Settlement date: Sept. 30

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