Talen Energy Supply files bankruptcy, lines up $1.76 billion DIP loan

By Sarah Lizee

Olympia, Wash., May 10 – Talen Energy Corp. announced that subsidiary Talen Energy Supply LLC filed Chapter 11 bankruptcy on Monday in the U.S. Bankruptcy Court for the Southern District of Texas, according to a press release.

Talen said the company plans to implement a recapitalization transaction that will include a new equity investment of up to $1.65 billion, which will accelerate its clean power transformation, advance carbon-free data center growth initiatives, and maximize value to stakeholders.

Talen Energy Supply has executed a restructuring support agreement with an informal group of its unsecured noteholders, which hold about 62% of the company’s unsecured notes.

Under the RSA, some of the consenting noteholders have agreed to enter into a backstop commitment with respect to a common equity rights offering of up to $1.65 billion, subject to adjustments at closing.

The consenting noteholders have also agreed to equitize more than $1.4 billion of their unsecured notes.

The company said it expects additional senior unsecured noteholders will join the RSA in the coming weeks.

Talen Energy Supply said it plans to confirm a Chapter 11 plan of reorganization in about six months.

The company has secured $1.76 billion of debtor-in-possession financing led by Citigroup, Goldman Sachs and RBC Capital Markets.

The DIP facilities are comprised of a $1 billion term loan, a $300 million revolving credit facility and a $458 million letter-of-credit facility.

The $1 billion term loan is being provided by an investor group of leading financial institutions.

Interest on the DIP facilities is the sum of the base rate plus 375 basis points or the sum of adjusted term SOFR for the applicable interest period plus 475 bps.

The facilities are set to mature 18 months after closing.

The company is also seeking court approval to use cash collateral.

Talen Energy Supply expects to continue its day-to-day business in the normal course and has filed customary first-day motions with the court to ensure no interruption to employee wages, health care and other benefits as well as the ability to conduct routine business with vendors and other business partners, including the resumption of hedging activities. The company’s plants will continue to generate electricity for the markets they serve.

Talen Energy Supply has retained Weil Gotshal & Manges LLP as its legal adviser, Evercore as its investment banker and Alvarez & Marsal as its financial adviser for its restructuring. The consenting noteholders are represented by Kirkland & Ellis LLP and Rothschild & Co. US Inc.

The company listed $10 billion to $50 billion in both assets and liabilities.

Its largest unsecured creditors include Bank of New York Mellon, based in New York, with a $625.45 million 10˝% senior notes due 2026 claim, a $557.31 million 6˝% senior notes due 2025 claim, a $121.48 million 6% senior notes due 2026 claim, a $24.41 million 6˝% senior notes due 2024 claim, a $20.36 million 7% senior notes due 2027 claim, and a $17 million 9˝% senior notes due 2022 claim, and Pennsylvania Economic Development Financing Authority, based in Harrisburg, Pa., with a $231.71 million Pedfa series 2009A, 2009B and 2009C bonds claim.

Houston-based Talen Energy is one of the largest competitive power generation and infrastructure companies in North America. The Chapter 11 case number is 22-90054.

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