By Jacqueline Palank
CHICAGO--Edison Mission Energy won court approval of a plan to
exit Chapter 11 protection via its $2.6 billion sale to NRG Energy
Inc.
Judge Jacqueline Cox of the U.S. Bankruptcy Court in Chicago on
Tuesday confirmed Edison Mission's Chapter 11 plan, which the
company recently overhauled to incorporate a settlement with its
parent company that will boost creditor recoveries.
Under the plan, Edison Mission's operations will be sold to NRG,
which will pay $2.285 billion in cash and $350 million in stock.
Sale proceeds will be used to pay Edison Mission's creditors, most
of whom support the plan.
A prior plan would have also given unsecured creditors--such as
unsecured bondholders owed $3.85 billion in principal, interest and
fees--new equity in the Edison Mission unit that remains following
the sale of its operations. Those creditors would have also
received a stake in any proceeds of potential litigation against
Edison Mission's publicly traded parent, Edison International.
But a recent settlement between Edison Mission and its parent
drops the threat of litigation and allows Edison International to
retain its equity in Edison Mission for tax purposes. Court papers
show the deal boosts unsecured creditors' expected recovery to more
than 80% of their claims from a prior estimate of about 58%.
Specifically, the settlement allows unsecured creditors and
Edison International to split $1.2 billion in federal and
California tax attributes, which mainly includes net operating
losses and tax credits. The creditors would receive $225 million of
this upon Edison Mission's exit from bankruptcy, while the
remainder will be paid out over the next two years.
The settlement further calls for Edison International to take
responsibility for $350 million of Edison Mission's debts,
including tax and pension liabilities.
The settlement releases Edison International from the possible
legal claims that Edison Mission and its unsecured creditors fought
to bring against the parent company, whom they accused of draining
Edison Mission of hundreds of millions of dollars ahead of its
bankruptcy filing. Edison International disputed these claims.
Edison Mission, which operates about 40 coal, wind and gas
facilities in 12 states, sought Chapter 11 protection in December
2012.
Write to Jacqueline Palank at jacqueline.palank@wsj.com
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