Talen Energy unit files for bankruptcy, seeks to reduce $4.5 billion debt

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Signage is seen at the United States Bankruptcy Court for the Southern District of New York in Manhattan, New York City, U.S., August 24, 2020. REUTERS/Andrew Kelly

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May 10 (Reuters) – Talen Energy Supply, a unit of Talen Energy Corp that owns a number of its power plants, filed for bankruptcy after rising natural gas prices depleted its cash position.

The Woodlands, Texas-based company, which operates 18 power generation facilities, filed for Chapter 11 protection in the U.S. Bankruptcy Court for the Southern District of Texas on Monday night, according to court documents. His goal is to substantially reduce his $4.5 billion debt load and obtain $1.65 billion in new shares from certain bondholders, the documents show.

The company says it has committed to eliminating coal at all of its facilities and hopes the proposed restructuring will help accelerate its “clean energy transformation.”

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The proposal is supported by holders of 62% of the company’s unsecured bonds, who have also agreed to convert $1.4 billion of their existing debt into company stock. Talen Energy Supply says it expects to get more support from those creditors in the coming weeks.

“Our Company is at an important turning point to strategically reposition TES for long-term value creation,” CEO Alejandro Hernández said in a statement.

Talen Energy Supply had used derivative contracts to limit its exposure to commodity price volatility risks, but the company ended up being forced to provide more cash collateral to its counterparties when prices rose in 2021, according to court documents. .

Of the company’s 18 plants, eight are natural gas.

In addition to the agreement with the bondholders, Talen Energy Supply has secured a $1.76 billion loan from Citigroup, Goldman Sachs and Royal Bank of Canada that would finance operations during bankruptcy proceedings.

Lawyers for the company are scheduled to appear for a hearing before US Bankruptcy Judge Marvin Isgur on Tuesday afternoon.

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Reporting by Maria Chutchian in New York Editing by Alexia Garamfalvi and Matthew Lewis

Our standards: the Thomson Reuters Trust Principles.

Mary Chutchian

Thomson Reuters

Maria Chutchian reports on corporate bankruptcy and restructuring. She can be reached at [email protected]

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