Edison Mission Energy on Tuesday announced a settlement with its retirees that allows the company to pay off their claims for $22.9 million, less than a third of what the retirees have demanded, and unload obligations to pay their benefits.
The reorganization trust for EME, which recently sold its assets to NRG Energy Inc. after a stint in bankruptcy, will stop paying for non-unionized retirees’ benefits through the last day of the month following the month in which the deal is approved by a judge and for unionized retirees’ benefits in March 2015.
The trust will pay the retirees $22.9 million of the $70.5 million they are owed. The deal comes after several objections from the retirees to the company’s bid to end their benefits, arguing that their benefits were vested and could not be unilaterally terminated.
“While the reorganization trust believes in the merits of its litigation position, the benefits of the Settlement Agreement and the resolution of all pending disputes outweigh the risks associated with ongoing litigation,” the trust said in a court filing.
The company’s reorganization plan, which included the asset sale to NRG, was confirmed in March. NRG did not assume EME’s pension obligations, so the company’s reorganization trust reserved the $70.5 million that would be owed to retirees in the absence of a deal.
A June 18 hearing is scheduled in Illinois bankruptcy court for a judge to consider the settlement.
A week after the plan was confirmed, the Federal Energy Regulatory Commission signed off on EME’s $2.6 billion sale of its assets to NRG, the final approval needed from regulators for EME to effectuate its reorganization plan. Under the deal, NRG acquired nearly all of EME’s assets, adding nearly 8,000 megawatts of power generation and making it into the second-largest U.S. power company and third-largest renewable energy generator.
In connection with the deal, NRG assumed more than $1.5 billion in nonrecourse debt, of which $273 million is associated with assets designated as noncore assets. The company paid a $350 million portion of the deal with approximately 12.7 million shares of NRG common stock, and the rest with cash on hand.
California-based EME entered bankruptcy in December 2012, citing plummeting electricity prices because of increased natural gas production and the cost of complying with coal plant emission requirements imposed by state and federal regulators.
The company listed $5.13 billion in assets against $5.09 billion in liabilities as of the petition date, including $3.7 billion in principal owed to holders of senior unsecured notes.
EME is represented by James H.M. Sprayregen, David R. Seligman, Seth A. Gastwirth and Joshua A. Sussberg of Kirkland & Ellis LLP.
The case is In re: Edison Mission Energy et al., case number 1:12-bk-49219, in the U.S. Bankruptcy Court for the Northern District of Illinois.
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