Optim Energy LLC won approval of its plan to exit bankruptcy
protection, a win for Bill Gates's private investment firm in its
fight with private-equity firm Blackstone Group LP for control of
the Texas energy company.
Judge Brendan Linehan Shannon of the U.S. Bankruptcy Court in
Wilmington, Del., said he'd sign off on Optim's plan, which leaves
the energy company in control of Mr. Gates's private-equity firm,
Cascade Investment. Blackstone had argued Optim's plan was "a
sham," designed to benefit Mr. Gates and his investment firm.
"This has obviously been a bit of a brawl," noted Judge Shannon
at the conclusion of a hearing on Friday. But, he added, "I am not
satisfied here that the debtors' conduct rises to the level of sham
or chicanery that other Courts have found in rejecting a proposed
plan."
A Blackstone spokesman declined to comment.
Optim had the votes it needs to get the plan approved, but first
had to face off with Blackstone for two days last week at a
confirmation hearing.
Walnut Creek Mining, a Blackstone subsidiary that supplied fuel
to Optim's power plants, argued it was being shortchanged under the
plan, recovering only about 1% of what it is owed while general
unsecured creditors were expected to see a recovery of up to
95%.
Blackstone had bought a third Optim power plant in August 2014
at a bankruptcy auction with a $126 million offer—a price that more
than doubled earlier offers. The private-equity company had been
expected to bid on the two remaining plants, and Optim's lawyers
had claimed Blackstone was using Walnut Creek to undermine the plan
to pick up the assets on the cheap, an idea Walnut Creek
rejected.
In May, Optim scrapped an earlier plan to sell its two remaining
Texas power plants after it didn't receive any satisfactory bids.
The company was looking for offers of at least $355 million for the
two plants. Its latest plan gives senior lenders, namely Cascade,
ownership of the reorganized company, a $50 million junior note and
residual cash.
Cascade, which is funding Optim's $110 million bankruptcy-exit
loan, is expected receive substantially less than a full recovery
on their $713 million in secured claims. However, it has agreed to
distribute some of the sale proceeds to lower-ranking creditors
under a chapter 11 plan. Those creditors that signed off on the
reorganization plan's provisions shielding Cascade and other Optim
lenders from lawsuits tied to the company's bankruptcy will boost
their recoveries to 95 cents on the dollar from 75 cents.
The reorganized Optim will be led by a board comprising Cascade
Investment's Quinn Cornelius, John Erickson, and Alan Heuberger
plus current director Richard Fleming. Chief Executive Nick Rahn
would remain at the helm of the new company.
Founded in 2007, Optim filed for bankruptcy in February 2014. It
blamed the filing on cheap electricity prices, which it said made
it difficult for the company to repay the money it borrowed to buy
one plant in Texas and to build another.
Write to Patrick Fitzgerald at patrick.fitzgerald@wsj.com
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