|
|
|
|
|
Talen Hands Power Plants to Bondholders; Latam Creditors Fee Stands; Russia Faces Sanction Exemption Deadline
|
|
|
|
|
|
Good day and welcome to WSJ Pro Bankruptcy's Daily Briefing. It's Wednesday, May 11. Talen Energy is planning to hand its power plants to creditors and is committed to transform to clean energy. Latam Airlines inched closer to exiting bankruptcy after a federal judge dismissed an appeal to challenge its backstop fees. And Treasury is debating whether to extend sanction carveouts to Russia.
|
|
|
|
|
Talen Energy power-generation facilities include nuclear, coal and gas plants.
PHOTO: MATTHEW BROWN/ASSOCIATED PRESS
|
|
|
|
Talen Energy to hand power-plant business to bondholders. Riverstone Holdings LLC’s Talen Energy Corp. placed a collection of power plants into bankruptcy, planning to hand control of the business to bondholders after a cash crunch caused by surging natural-gas prices last year.
Power generation unit Talen Energy Supply LLC has struggled to navigate weak electricity markets while spending heavily to meet clean-energy mandates, and has accumulated nearly $4.5 billion in debt before a liquidity crisis forced the business into chapter 11 on Monday, court papers say.
A group of unsecured bondholders have agreed to provide $1.65 billion in equity financing to Talen to take control of its fleet of nuclear-, gas- and coal-fired facilities, one of the largest in the country. Bondholders would also convert $1.4 billion in debt to equity, while the company’s $2.9 billion in secured debt would be paid in full under its proposed restructuring.
|
|
|
|
|
Latam Airlines filed for chapter 11 protection in 2020 as travel ground nearly to a halt during the Covid-19 pandemic.
PHOTO: CRISTOBAL OLIVARES/BLOOMBERG NEWS
|
|
|
|
Latam Airlines beats early appeal of creditors' $734 million creditor fee. Latam Airlines Group SA’s agreement to pay its major creditors $734 million in fees can’t be appealed ahead of a bankruptcy-court trial next week on the Chilean airline’s chapter 11 exit proposal, a federal judge said Tuesday.
Judge Jesse Furman of the U.S. District Court in New York dismissed unsecured creditors’ appeal of the cash fee payment, saying its legality isn’t a “discrete dispute” that can be appealed separately from Latam’s overall bankruptcy plan.
The fees are earmarked for Sixth Street Partners, SVPGlobal, Sculptor Capital Management and other creditors in return for their pledge to backstop a sale of $3.67 billion in common stock and convertible notes. Latam shareholders have agreed to backstop another $1.77 billion for a total capital raise of $5.44 billion for the Chilean airline to leave chapter 11.
|
|
|
|
|
Bankrupt Armstrong Flooring faces fight over chapter 11 loan. Pathlight Capital LP, an existing lender to newly-bankrupt Armstrong Flooring Inc., objects to new financing that the vinyl tile manufacturer has arranged to get through its chapter 11 reorganization.
Pathlight on Tuesday filed a preliminary objection to a new $30 million loan that would be senior to its debt. Pathlight said it had advanced an additional $35 million last December to Armstrong and made other concessions to help keep the Pennsylvania-based business afloat while it looked, unsuccessfully, for a buyer.
Armstrong filed for bankruptcy Sunday and will keep looking for a buyer. Pathlight, which said it is owed a total of $98 million, also complained that Armstrong executives received $1.4 million in retention payments days before the bankruptcy. – Becky Yerak
|
|
|
Treasury weighing whether to let Kremlin payment exemption expire, Yellen says. Treasury Secretary Janet Yellen says the department is actively examining whether or not to extend a carveout in sanctions allowing US financial institutions and investors to process and receive sovereign debt payments made by the Russian Federation.
The carveout, which expires on May 25, has allowed Russia to avoid a default on its foreign debts since the war in Ukraine began and coordinated sanctions targeting Russia's access to payments systems were levied by the US and its allies. During a meeting of the Senate Banking Committee, Yellen says the Treasury Department wants to ensure in understands what the "consequences and spillovers would be" if it allowed the carveout to expire and hadn't yet reached a decision. – Amara Omeokwe, Alexander Saeedy
|
|
|
Cypress Environmental Partners LP, 9 a.m. ET: The pipeline inspector has a creditor motion hearing.
Armstrong Flooring Inc., 10:30 a.m. ET: The flooring manufacturer has the first-day hearing.
|
|
|
Stock turmoil spreads to junk bonds, hurts deals. Shockwaves from the stock market's declines are spreading into junk bonds, sending prices tumbling and forcing some companies to cancel new deals.
Average prices of U.S. high-yield bonds fell to around 91 cents on the dollar Monday, the lowest level since May of 2020 when pandemic shutdowns slammed the global economy, according to data from Bloomberg.
The selloff has punished companies with below-investment grade credit ratings and poor reported earnings. It is also making it harder and more expensive for some to raise new debt for capital investments, acquisitions and refinancings.
|
|
|
National Cinemedia LLC's 2026 debt was the biggest loser Tuesday, dropping roughly 14%. Heritage Power's term loan jumped the most with a 14% gain. Check out movers in high yield bonds and leverages loans here.
|
|
|
|
|
|
A gas station in Albacete, Spain. Energy prices surged after Russia invaded Ukraine in late February.
PHOTO: CONTACO/ZUMA PRESS
|
|
|
|
Western economies are creaking under high oil and gas prices, with no relief in sight. As the war in Ukraine drags on and Western sanctions against Russia tighten, the prospect of a normalization in energy prices is receding, raising the conflict’s toll on global economic growth, with Europe looking particularly vulnerable.
After a first climb in 2021 as the global economy began to recover from the Covid-19 pandemic, energy prices surged again following Russia’s Feb. 24 invasion of Ukraine, reflecting worries that oil and gas supplies from one of the world’s largest exporters would dry up because of military activity, Western sanctions or retaliation by Moscow. With Russia having failed to gain a swift victory, economists now think energy prices may not fall back significantly this year and could rise further, even in the absence of fresh sanctions as the West shuns Russian oil and gas, shrinking the global supply of hydrocarbons it can tap.
This means inflation rates are likely to stay high for longer than was anticipated when the invasion began, weighing on household spending power and keeping production costs high.
|
|
|
|
Christopher Waller says there is no ‘magical formula in a textbook’ to guide central bank officials on how to reduce inflation without triggering unemployment.
PHOTO: BESS ADLER/BLOOMBERG NEWS
|
|
|
Fed official says central bank must contain inflation. A Federal Reserve official said that the central bank is committed to bringing inflation down by reducing demand for goods and services and that it is possible to slow price growth without pushing the economy into a recession.
|
|
|
|
“Inflation is too high, and my job is to get it down."
|
— Christopher Waller, Fed Reserve official
|
|
|
|
|
|
|
Avaya’s $1.5 billion leveraged loans fall on profit forecast. (Bloomberg)
If you want a new home soon, prepare now for student loan repayments. (Washington Post)
|
|
|
|
|
|