Talen’s RSA tweaked, rights offering upsized; eyes December emergence

By Sarah Lizee

Olympia, Wash., Aug. 10 – Talen Energy Supply LLC has reached an agreement with an informal group of its unsecured noteholders holding over 80% of the principal amount of the company's unsecured notes on amendments to its existing restructuring support agreement and backstop commitment letter.

The amendments provide for an additional $250 million of equity capital commitments and other provisions that will advance the company’s transformative recapitalization process, Talen said in a Wednesday evening press release.

On May 9, the company entered into the restructuring support agreement with the consenting noteholders and subsequently, on May 31, it entered into the backstop commitment letter that provided for, among other things, the infusion of up to $1.65 billion of new equity capital under a common equity rights offering, $1.3 billion of which was backstopped by some of the consenting noteholders.

Wednesday’s amendments increase the upper limit of the rights offering to up to $1.9 billion, which includes an increase in the backstop parties' committed backstop of the rights offering to $1.55 billion from $1.3 billion.

In addition, the amended restructuring support agreement permits Talen to conduct a process to solicit and consider proposals for sale alternatives.

The sale process, known as the go-shop, will be led by Evercore, the company’s financial adviser, during which time Talen will solicit bids for the sale of the company.

As of Wednesday, the company's restructuring committee of the board had received an unsolicited proposal to purchase 100% of Talen in an all-cash transaction. The go-shop process will start following approval of the amended backstop commitment letter by the U.S. Bankruptcy Court for the Southern District of Texas.

A hearing on the amended backstop commitment letter is currently scheduled for Aug. 29.

"The upsizing of the company's rights offering to up to $1.9 billion allows TES to continue advancing our recapitalization with incremental equity, strategically repositioning TES for long-term value creation as an energy transition and digital infrastructure platform," said chief executive officer Alejandro Hernandez in the release.

The company said it expects to have a Chapter 11 plan confirmed in December.

Committee’s clawback effort

In other news, Talen’s official committee of unsecured creditors is seeking authority to assert, on behalf of the debtors, claims that could potentially bring in “hundreds of millions of dollars of recovery” for general unsecured creditors, according to court documents filed with the bankruptcy court.

The group claims that, motivated by the “desire to extract value from the debtors ahead of their creditors,” in 2017, equity sponsor Riverstone Holdings LLC caused Talen to issue a dividend of $500 million to its shareholders – Riverstone affiliates.

The committee’s complaint seeks to avoid this dividend as an actual or constructive fraudulent transfer under section 544(b) of the bankruptcy code and Texas Uniform Fraudulent Transfer Act.

Additionally, the complaint seeks to avoid as a preferential transfer, under section 547(b) of the bankruptcy code, over $900,000 in expense reimbursements paid by Talen to Riverstone Equity Partners, LP during one year before the Chapter 11 cases started, while Talen was insolvent.

The committee said it wants the court’s authorization to assert and litigate the Riverstone claims that are property of the debtors’ estates, restoring value to the estates for the benefit of unsecured creditors.

Houston-based Talen Energy Supply is one of the largest competitive power generation and infrastructure companies in North America. The company filed bankruptcy on May 9 under Chapter 11 case number 22-90054.

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