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Bicent powers up Chapter 11 case

by Hayley Kaplan | Published April 24, 2012 at 10:45 AM

Private equity-backed Bicent Holdings LLC on Monday, April 23, commenced a prenegotiated Chapter 11 case that would hand substantially all equity in the electricity producer to first-lien lenders.

The Lafayette, Colo., debtor and 12 affiliates filed bankruptcy petitions with the U.S. Bankruptcy Court for the District of Delaware in Wilmington. Bicent, a portfolio company of private equity firm Natural Gas Partners, plans to fund its restructuring with a $57 million debtor-in-possession loan from a group of first-lien lenders led by agent Barclays Bank plc.

Chief Judge Kevin Gross is set on Tuesday to consider first-day motions, including interim use of the DIP and cash collateral as well as joint administration of the cases.

The company said in court documents the use of cash collateral alone would not be enough to sustain its operations, and without the help of postpetition financing, the company's liquidity crisis would be exacerbated.

The DIP consists of a new-money $25 million term loan and a $32 million synthetic letter-of-credit facility, which would replace the debtor's $31.6 million outstanding letters of credit under its first-lien credit facility.

The DIP would mature on Sept. 20 and accrue interest at 10% over either a base rate or a Eurodollar rate. Base rate is the highest of prime, 2%, the federal funds rate plus 0.5% and the one-month Eurodollar rate. The Eurodollar rate has a floor of 2%.

The financing carries a 10% undrawn commitment fee, a nonrefundable 3% standby fee and unspecified administration, structuring and arrangement fees for Barclays. In addition, the loan has a fee equal to 5% of the debtor's common stock for prepetition lenders GSO Capital Partners LP and Strategic Value Partners LLC, which have agreed to backstop an exit financing that could refinance the DIP, court papers show.

The DIP would carve out $250,000 for professional fees.

Bicent seeks to tap $6 million of the term loan and issue up to roughly $2.23 million in letters of credit with interim DIP approval.

The company operates two electric power generating facilities in Lathrop, Calif., and Hardin, Mont., which together produce more than 168 megawatts of energy. The Lathrop natural gas-fired plant produces 48 MW, while the Hardin plant, located outside of Billings, Mont., produces 120 MW and is one of the cleanest-burning coal-fired plants in operation, the declaration said, due to a new distributed control system.

Nondebtor affiliates produce 237 MW of power at two natural gas-fired plants in Brush, Colo.

Bicent sells the capacity and energy generated by the plants, which continue to operate, under power purchase and sale agreements.

According to a declaration filed by CFO Christopher Ryan, Bicent filed for Chapter 11 because of "a series of unexpected and unforeseen events," which left it unable to meet covenants in its credit agreements or refinance its debt, a portion of which matures in 2012.

The debtor said its loans, made when it acquired its plants in 2007, assumed the business would grow and capital markets remain stable, allowing for the debt to be refinanced. In addition, a drop in natural gas prices by 60% to 70% from June 2007 to April 12 reduced the value of Bicent's collateral -- its plants -- as they have a lower potential future earnings capacity.

Finally, an arbitration loss by Bicent unit Colorado Energy Management LLC related to the completion of a New Mexico power plant resulted in a loss of more than $50 million in cash flow.

Bicent ultimately defaulted on its first-lien debt on Dec. 31 and its second-lien debt on March 30. It entered a forbearance agreement with first-lien lenders Feb. 24 following negotiations, but second-lien lenders accelerated the debt on April 6.

Negotiations with first-lien lenders began roughly six months ago and spread to include second-lien lenders in March. The debtor and more than two-thirds of both first- and second-lien lenders executed a restructuring support agreement, or RSA, on April 18, court papers show.

Under the deal, administrative and priority claims would be paid in full.

Holders of allowed first-lien claims, owed $178.9 million plus interest, would receive substantially all equity in a reorganized Bicent. Holders of allowed second-lien claims, owed $128.5 million plus interest, would receive warrants for new shares, provided the class accepted the plan.

Court papers did not indicate whether unsecured creditors or equity holders would receive any recovery.

Bicent would sell the Brush, Colo., plants.

To avoid violating the RSA, Bicent must file its disclosure statement and reorganization plan by April 30, secure disclosure statement approval by June 17, win confirmation by Aug. 6 and emerge from Chapter 11 by Aug. 21.

In court papers, holding company Bicent listed less than $50,000 in assets and $50 million to $100 million in liabilities.

Bicent's first-lien debt includes the letters of credit that would be rolled up into the DIP, a $330 million term loan with $117.1 million outstanding, a $30 million revolver with $16.4 million outstanding and $13.8 million in reimbursement obligations. The debt, issued on July 10, 2007, matures on July 30, 2014.

U.S. Bank NA is collateral and administrative agent on the second-lien debt, issued on July 10, 2007, and maturing on Dec. 31, 2014.

Bicent also has $65.2 million outstanding on a mezzanine credit agreement with Barclays that matures on June 30, 2015.

Aside from Barclays, the debtor's largest unsecured creditors include Lea Power Partners LLC (owed a disputed $22.04 million), the Montana Department of Revenue ($820,475) and NorthWestern Corp. ($109,567).

Affiliates of Natural Gas Partners indirectly own 87.07% of Bicent.

Maris J. Kandestin and Pauline K. Morgan of Young Conaway Stargatt & Taylor LLP are debtor counsel. Brian S. Hermann and Samuel E. Lovett of Paul, Weiss, Rifkind, Wharton & Garrison LLP also advised Bicent.

Moelis & Co. is the company's financial adviser.

Albert A. Pisa, Abhilash M. Raval and Michael E. Comerford of Milbank, Tweed, Hadley & McCloy LLP represent first-lien agent Barclays, and RPA Advisors LLC is financial adviser for the lender.

Andrew Goldman of Wilmer Cutler Pickering Hale and Dorr LLP is counsel to second-lien agent US Bank.

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Tags: Bankruptcy | Bicent Holdings LLC | electricity | Natural Gas Partners

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