By Jacqueline Palank
A bankruptcy judge on Thursday approved bidder protections,
including a $65 million breakup fee, to NRG Energy Inc. (NRG) as it
works to close a $2.6 billion offer to take Edison Mission Energy
out of Chapter 11 protection next year.
Less than one week after announcing what Edison Mission's
bankruptcy attorney called a "monumental moment" in the company's
Chapter 11 case, Judge Jacqueline P. Cox of the U.S. Bankruptcy
Court in Chicago signed off on the bidder protections for NRG.
Edison Mission attorney Joshua Sussberg, of Kirkland & Ellis
LLP, said such bidder protections as the breakup fee and a pledge
to reimburse NRG's sale-related expenses were necessary to securing
the deal that Edison Mission hopes will take it out of bankruptcy
next year.
"To secure commitment from NRG, and ensure that this baseline
transaction that everyone agrees maximizes value, is secure and
available to the debtor, NRG has insisted upon certain protections.
These protections, in our view, are customary and reasonable," Mr.
Sussberg said.
Judge Cox also authorized Edison Mission to continue shopping
its assets to other buyers through Dec. 6. If the company were to
find a better deal than NRG's offer to acquire the company for
$2.285 billion in cash and $350 million in stock, NRG would receive
the $65 million breakup fee.
None of Edison Mission's creditors or a federal bankruptcy
watchdog objected to the breakup fee, which Mr. Sussberg
acknowledged is a large dollar amount. However, at 2.4% of the
total purchase price, Mr. Sussberg said the breakup fee is actually
smaller than other bankruptcy-breakup fees that typically clock in
at 3% of the purchase price.
Judge Cox also signed off on Edison Mission's request to extend
the time in which it alone may file a bankruptcy-exit plan. By
shielding the company from the threat that its creditors may file
rival plans, the judge is letting Edison Mission retain control of
its case.
Edison Mission said it would file its plan, which is expected to
have the NRG sale as its backbone, by mid-November. The company
hopes to win court approval of the plan by March 31, and close the
sale by the end of July.
At the hearing, Judge Cox held off from ruling on Edison
Mission's request to pay up to $7.5 million in bonuses to executive
and rank-and-file workers to motivate them to secure the best
possible path out of Chapter 11, whether through a sale to NRG or
some other strategy, as well as to ensure they remain with the
company in the coming months.
A government bankruptcy watchdog, U.S. Trustee Patrick Layng,
had objected to the bonuses, arguing that Edison Mission was trying
to get around bankruptcy-law restrictions on retention payments for
high-level employees, which Edison Mission denied.
After hearing from both sides on the dispute, Judge Cox said she
would consider the bonuses at a Nov. 6 hearing.
Edison Mission, a unit of Edison International (EIX), generates
energy at about 40 facilities in 12 states. It sought Chapter 11
protection in December.
(Dow Jones Daily Bankruptcy Review covers news about distressed
companies and those under bankruptcy protection. Go to
http://dbr.dowjones.com)
Write to Jacqueline Palank at jacqueline.palank@wsj.com.
Subscribe to WSJ: http://online.wsj.com?mod=djnwires