Talen Energy amends plan to include settlement, remove sale option

By Sarah Lizee

Olympia, Wash., Nov. 29 – Talen Energy Supply LLC made amendments to its Chapter 11 plan to reflect a settlement it reached recently with the official committee of unsecured creditors and other parties, according to documents filed Monday with the U.S. Bankruptcy Court for the Southern District of Texas.

Most notably, the amended plan contains enhanced recoveries for holders of general unsecured claims, an increased threshold for general unsecured convenience claims, and improved treatment for holders of claims asserted for damage caused directly or indirectly by winter storm Uri, which have been separated into a new class.

The plan was also amended to show that Talen Energy Corp. will file a Chapter 11 petition and become a debtor in order to effectuate certain transactions, but its creditors will remain unimpaired.

It was also amended to remove provisions in the plan relating to a potential sale transaction, given the bid deadline passed on Nov. 14 with no qualified bids received.

The plan will be funded with new common equity, including under a rights offering, new warrants, and new debt – with an at least $1 billion priority revolving credit facility.

According to a new plan treatment summary, holders of other priority claims, other secured claims, prepetition Cumulus intercompany claims, prepetition intercompany claims, intercompany interests, and Talen Energy Corp. creditor claims will receive 100% recovery.

Holders of $2.14 billion of prepetition first-lien non-CAF claims will receive payment in full in cash of their pro rata share of the settled first-lien non-CAF claim amount on the effective date. The projected recovery is 99%.

Holders of $1.04 billion of prepetition CAF claims will receive their pro rata share of the settled CAF claim amount on the effective date, for a projected 88% recovery.

Holders of $1.5 billion of unsecured notes claims will receive their pro rata share of the following, for a projected 23% to 46% recovery:

• 99% of new common equity, less the new common equity distributed on account of the retail PPA incentive equity, and subject to dilution from the rights offering, the backstop periodic premium, the backstop put premium, the new warrant equity, and the employee equity incentive plan;

• 1145 subscription rights; and

• With respect to eligible holders of unsecured notes claims, only if the holder fully exercises its 1145 subscription rights, 4(a)(2) subscription rights. With respect to ineligible holders of unsecured notes claims, if any, only to the extent they fully exercise their 1145 subscription rights, new common equity or cash, at the option of the requisite consenting parties, in the amount equal to the value of the (4)(a)(2) subscription rights that would have been distributable to them otherwise.

Holders of general unsecured claims will receive their share of GUC trust net assets, with each share to be determined based on a settlement allocation. The GUC trust assets will consist of $26.05 million in cash; 10% of net proceeds recovered by the debtors under the PPL Corp. adversary proceeding, subject to an $11 million cap; $200,000 in cash for making distributions to holders of general unsecured convenience claims; and committee budget excess amounts.

Holders of winter storm Uri claims may pursue their claims to final judgment or settlement. Any judgment or settlement will be satisfied only to the extent of any available insurance proceeds.

On the effective date, the debtors will be discharged of all Uri claims.

To the extent that any applicable insurance policy issued to the debtors by a Uri claim carrier contains a self-insured retention (SIR), such SIR on an allowed Uri claim will be satisfied by the allowance of a class 5A general unsecured claim in the amount of the applicable SIR.

Holders of $300,000 general unsecured convenience claims will receive a pro rata share of the general unsecured convenience claims fund for an expected recovery of up to 63%.

Section 510(b) claims will be canceled with no distribution.

The voting deadline has been pushed back to 6 p.m. ET on Dec. 9. The plan hearing is still set to take place on Dec. 15.

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, 2022 under Chapter 11 case number 22-90054.

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