Bankrupt Edison Mission Energy on Wednesday won court approval for a settlement with its retirees, allowing the company to pay off their claims for $22.9 million, or less than a third of what the retirees demanded.
In a brief order, U.S. Bankruptcy Judge Jacqueline P. Cox signed off on the settlement agreement, saying it is fair and in the parties' best interest.
"The compromise and settlement set forth in the settlement agreement is fair and equitable to the reorganization trust, the retiree group, and [retiree group's counsel Pedersen & Houpt PC] and is in the best interests of the reorganization trust and creditors and parties in interest in these Chapter 11 cases," the judge's order said.
Under the settlement, the reorganization trust for EME, which recently sold its assets to NRG Energy Inc. after a stint in bankruptcy, will pay the retirees $22.9 million of the $70.5 million they are owed. The trust will pay nonunionized retirees' benefits through the last day of next month and unionized retirees' benefits through the end of March 2015.
The deal, announced in late May, came after the retirees lodged several objections to the company's bid to end their benefits, arguing the benefits were vested and could not be unilaterally terminated.
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 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 retiree group is represented by Trent P. Cornell of Pedersen & Houpt PC.
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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