Longview Working on Balance Sheet Fix as Cash Fight Looms By Dow Jones Business News, September 25, 2013
Longview Power LLC is plowing ahead with plans to fix its plant and its balance sheet as it prepares to battle contractors over cash, Kirkland & Ellis LLP's Ray Schrock told a bankruptcy judge Wednesday. "The company greatly needed the breathing spell afforded by Chapter 11," Mr. Schrock said at a hearing before Judge Brendan Shannon, who is overseeing the West Virginia power plant's Chapter 11 proceeding. The Aug. 30 bankruptcy petition froze action against Longview involving a fight over who's to blame for the plant's operational troubles. Talks with secured lenders have begun, and the company last week recovered from the latest in the series of unplanned outages that have plagued the operation, Mr. Schrock said. Once the boiler tube leaks are repaired, "after that it's a simple--or maybe not so simple--matter of fixing the balance sheet," Mr. Schrock said. Built at a cost of $2 billion, the Longview plant is carrying a $1.2 billion debt load, more than it can service given the issues that have kept it operating at about two-thirds of its capacity. The bankruptcy filing followed an extended struggle with subsidiaries of Norwegian construction company Kvaerner ASA (KVAER.OS); Siemens Energy Inc., a unit of Siemens AG ( _SI_ (http://www.nasdaq.com/symbol/si) ); and German engineering firm Foster Wheeler AG ( _FWLT_ (http://www.nasdaq.com/symbol/fwlt) ). While arguing with Longview and with each other over who is to blame for Longview's alleged design flaws, the contractors recently hit the power plant operation with a barrage of motions designed to keep it from tapping $59 million in letters of credit. Judge Shannon has scheduled an Oct. 7 hearing in the U.S. Bankruptcy Court in Wilmington, Del., to weigh evidence on Longview's contention it needs the money from the letters of credit to survive. He will also consider arguments from the contractors who want an arbitration proceeding to continue, in spite of the bankruptcy filing. According to the contractors, Longview improperly resorted to Chapter 11 to escape arbitration. The company's responses to the accusations are due to be filed within days. Wednesday, Longview's lawyers grappled with lawyers for the contractors over how much probing should be permitted in advance of the Oct. 7 hearing, which will be crucial to the power plant's hopes for a turnaround. Kvaerner intends to "attack" Longview's budget and attempt to prove it is "inflated," said Dorsey & Whitney LLP's Eric Lopez Schnabel. The contractor is pushing for information from the lenders, as well as from the company, about Longview's financial condition and where the bankruptcy case is headed. That's going too far, Longview said, for a hearing where the fundamental question will be whether the company exercised appropriate business judgment when it put together its budget. The budget will be filed Friday. Additionally, the contractors will challenge whether the bankruptcy court has jurisdiction over the letters of credit because they aren't Longview's property. A 700-megawatt coal-powered plant located in Maidsville, W. Va., Longview is the largest privately funded project in West Virginia history. It began operations in December 2011, providing power to the Pennsylvania, New Jersey and Maryland markets. (Dow Jones Daily Bankruptcy Review covers news about distressed companies and those under bankruptcy protection. Go to http://dbr.dowjones.com)