NEG walks away from GenHoldings
PG&E's National Energy Group has walked away from its
investment in the GenHoldings I portfolio and has effectively
handed over the assets to its lenders. The move is the first time
in recent memory that a sponsor has resorted to such drastic
action, and has not pursued a strategic sale. As such it
demonstrates the central attraction of non-recourse structures to
sponsors ? that such a burden can be abandoned ? and opens up the
possibility of further similar actions by distressed corporates.The
GenHoldings portfolio consists of the Millennium project, a 360MW
plant located in Massachusetts that is operating, a 1080MW plant
located in Athens, New York, the 1092MW Harquahala facility in
Arizona, and a 1170MW Covert, Michigan plant. Harquahala was
originally a synthetic lease candidate, and Covert was only to be
included if the GenHoldings portfolio raised enough in syndication.
The Citi- and SG-led financing raised $1.46 billion towards a $1.7
billion target. The difference of $240 million was to have been
made up with NEG equity.NEG has said that it will write off $150
million that it has already injected, leaving the banks to find an
additional $355 million. It has also decided to ignore the
requirement to put more equity into the 1121MW La Paloma project,
saying that such injections were forbidden under the amended and
extended revolving credit agreement that it signed with SG, Citi
and JP Morgan, among others. NEG owes $369.5 million to fund it's
share of the capitalisation of the 99% complete plant. La Paloma
was a hybrid project/ synthetic lease that closed in 2000, and
required equity post-completion in part to comply with...
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