CASE SUMMARY: Footprint Power Salem Harbor RSA With More Than 80% of Term Lenders Contemplates Standalone Restructuring, Sale Toggle

Footprint Power Salem Harbor Restructuring:

Relevant Documents:
Voluntary Petition
First Day Declaration
Cash Collateral Motion
First Day Hearing Agenda

Footprint Power Salem Harbor Development, a Salem, Mass.-based 674-megawatt natural gas-fired combined-cycle electric generating facility, and several affiliates filed chapter 11 petitions on Wednesday, March 23, in the Bankruptcy Court for the District of Delaware. The company filed after entry into a restructuring support agreement with more than 80% of the holders of its prepetition secured credit facility and consenting equity parties. The RSA features a “toggle” structure between a standalone restructuring transaction or a sale transaction, to be pursued simultaneously. If the debtors elect to restructure under the RSA, holders of secured credit facility claims would receive 100% of the equity of the reorganized debtors on account of their secured credit facility claims. Under a sale transaction scenario, all or substantially all of the debtors’ assets would be marketed and sold and the proceeds would be distributed to the debtors’ creditors in accordance with the absolute priority rule.

The RSA restructuring term sheet attached to the first day declaration proposes that credit facility claims receive 100% of the new common equity and exit facility loans in the event of a standalone transaction, or in the event of a sale, net sale proceeds after funding of administrative and priority claims and a wind-down. The exit facility loans would consist of new first lien term loans, which would be composed of converted prepetition secured loans “in a like amount” and new-money financing in an amount to be agreed among the debtors and the required consenting lenders. Participation in the new-money financing would be voluntary for the prepetition lenders.

General unsecured claims would receive the following, in the event of a standalone transaction: (a) in the event a holder of a general unsecured claim votes to accept and/or does not opt out of the plan’s third-party releases, they would receive a waiver of avoidance actions, and (b) a pro rata share of proceeds from the disposition of unencumbered assets. In the event of a sale, GUCs would receive proceeds from the disposition of unencumbered assets, and, solely to the extent that the prepetition credit facility claims are paid in full in cash on the effective date, the net sale proceeds remaining. GUCs include any deficiency claim arising under the credit agreement and any claims held by Iberdrola Energy Projects against the debtors.

The debtors began a marketing process on March 7 through Houlihan Lokey, which reached out to 100 parties, resulting in entry into 27 confidentiality agreements (four strategic and 23 financial parties). The consenting lenders reserve the right to credit bid in connection with the sale process.

The prepetition secured parties have agreed to the use of cash collateral to fund the cases.

The first day hearing has been scheduled for Friday, March 25, at 10:30 a.m. ET.

The debtors report in their petition $500 million to $1 billion in both assets and liabilities. The company’s prepetition capital structure includes approximately $290 million of total outstanding principal amount under the term loans and two undrawn outstanding letters of credit totaling $46.4 million, issued collectively under the debtors’ credit facility. The debtors note that the outstanding amount on the term loans is inclusive of capitalized interest, though the interest rate is not specified.

MUFG Union Bank is the administrative agent, collateral agent and depository bank for the credit agreement. The credit facility was originally entered into in January 2015. In December 2019, the facility was amended to convert the construction loans to term loans, terminate the previous $10 million working capital facility and terminate letter of credit commitments above $49.9 million. Footprint Power Salem Harbor Development LP, or DevCo, is party to a depositary agreement that requires substantially all of the debtors’ cash receipts to be deposited into specified accounts held at MUFG.

The credit facility obligations are secured by substantially all of the assets of DevCo as collateral, having granted the agent a mortgage covering the property the facility is located on and all fixtures and improvements located on the property. In addition to the mortgage, DevCo GP pledged its 100% general partnership interest in DevCo, and FinCo pledged its 100% limited partnership interest in DevCo and 100% membership interest in DevCo GP as collateral.

As discussed below, approximately $78.7 million of the term loans were paid down in October 2021 after the prepetition agent delivered a notice of events of default. An additional $10.7 million was also paid for interest and fees.

The debtors list an arbitration award of $236.4 million in favor of Iberdrola Energy Projects Inc., or IEP, in connection with the debtors’ decision to terminate a contract it had entered into with IEP to construct the facility. The arbitration award, and events leading up to and following the award, are discussed further below.

In 2015, Footprint Power sold the majority interests in the project to certain investors, with Oaktree Capital providing 87.5% of the equity for the construction of the project, and an affiliate of Toyota Tsusho Corp. investing the remaining 12.5%. It is unclear whether the Toyota affiliate remains involved, because, as discussed later, according to the declaration, affiliates of Oaktree own 100% of the Class A LP interest in Highstar Footprint Power Holdings LP, or TopCo, and a Toyota affiliate is not referred to in the declaration.

The cash collateral motion states that as of the petition date, the debtors estimate having approximately $24.3 million of available cash on hand. The debtors forecast having $41.5 million of available cash as of the week of June 25, as shown below:

 

The case docket can be accessed on the Reorg site HERE.

The case has been assigned to Judge Mary F. Walrath (case No. 22-10239). The debtors are represented by Paul Weiss and Young Conaway as co-counsel, AlixPartners as financial advisor, with John Castellano of AlixPartners serving as CRO, and Houlihan Lokey as investment banker. Prime Clerk is the claims agent.

Events Leading to the Bankruptcy Filing

The company’s chapter 11 filing was precipitated by an adverse arbitral tribunal award and subsequent Jan. 24 judgment entered by the New York State Supreme Court requiring the power project to pay its contractor, Iberdrola Energy Projects, or IEP, $237 million for wrongful termination of the engineering, procurement and construction contract between the parties.

The first day declaration describes that, as a result of the Oct. 15, 2021, arbitration award, the prepetition agent sent the company a notice of default and acceleration on Oct. 22 and took action to exercise certain rights and remedies. Specifically, the agent swept approximately $89.5 million of cash, applying about $78.7 million of that amount to pay down outstanding principal on the term loans and about $10.7 million to pay accrued interest and fees and to cash collateralize a portion of a letter of credit. The October cash sweep left DevCo with approximately $27.5 million in available cash, says the declaration.

Also on Oct. 22, the prepetition agent delivered an acceleration notice to nondebtor affiliate OCM-HighStar Footprint Aggregator LLC in connection with a completion equity contribution agreement, or CECA, between DevCo and OCM, pursuant to which OCM agreed to provide up to approximately $23 million in equity contributions to DevCo. The agent’s notice directed OCM to fund the $23 million of contemplated equity contributions to DevCo to be applied to the project’s secured obligations. After the cash sweep and the acceleration notice to OCM, each of the company’s interest rate swap parties terminated their respective swap agreements with DevCo, leaving the company with no outstanding interest rate swap agreements as of the petition date, says the declaration.

The debtors engaged restructuring advisors in mid-October 2021 and began negotiating a forbearance agreement with the secured parties immediately after the agent’s exercise of remedies. The negotiations resulted in a Nov. 4, 2021, forbearance agreement to allow the parties to pursue a comprehensive solution to the company’s balance sheet issues.

On Nov. 11, 2021, the company’s board of managers formed a special committee at each of debtors Highstar Footprint Holdings GP, or TopCo GP, and Footprint Power SH DevCo GP, or DevCo GP. The special committee consists of independent and disinterested board members D. Jan Baker and William Transier. The special committee, which subsequently engaged Young Conaway as counsel, was empowered to plan for and evaluate potential restructuring alternatives and to oversee an independent investigation of any potential claims and causes of action the company may have against insiders. On March 17, the board additionally delegated to the special committee the authority to handle any “conflict matters.” According to the declaration, on Feb. 24 the special committee reported to the board of managers its “inquiry and conclusions” with respect to its investigation, which are not described in the declaration.

The declaration describes the debtors’ attempt to engage IEP on a potential consensual restructuring framework, eventually entering into a litigation standstill agreement on Jan. 18, 2022, which was structured to be coterminous with the forbearance agreement. Among other things, the standstill agreement permitted IEP to proceed with a Massachusetts action to determine the value of any mechanic’s lien over the facility, to obtain a judgment lien on the debtors’ Massachusetts property and to perfect any such mechanic’s lien or judgment lien, provided that IEP refrain from taking action to enforce any such lien against the debtors’ property during the pendency of the agreement. In addition, IEP agreed to certain limitations on its ability to seek adequate protection under any cash collateral order in chapter 11.

“Numerous attempts” to engage IEP on a consensual restructuring transaction were unsuccessful, says the declaration, stating that IEP and its advisors “failed to respond to or otherwise engage substantively with” the debtors and their secured creditors. “Out of nowhere” on March 18, the declaration continues, IEP sent a notice terminating the standstill agreement effective as of March 23, which would have triggered a termination of the forbearance period as of that date. Prior to the filing on March 23, IEP recorded a judicial lien with respect to its judgment claim against DevCo.

At the same time the parties attempted to engage with IEP, the debtors and secured parties were negotiating the terms of a consensual restructuring, ultimately resulting in execution of the RSA on March 23, along with a consensual cash collateral arrangement. In addition, on March 7, the debtors, with the assistance of Houlihan, commenced a marketing process to sell the debtors’ assets. As of the petition date, the debtors are continuing to engage with the potential acquirers regarding the submission of nonbinding indications of interest. The debtors anticipate filing a bidding procedures motion “shortly following” the petition date to facilitate the next phase of the marketing process, the declaration adds.

Background

DevCo is the only debtor with business operations, with each of the other five affiliated debtors’ assets consisting “solely of its membership or partnership interests” in its subsidiaries, states the first day declaration. DevCo was formed to “develop, own, finance, construct, operate and maintain” the power plant facility and is the borrower on the credit facility and party to the IEP arbitration award. DevCo GP owns the GP interest in DevCo, while FinCo owns the membership interests in DevCo GP and the LP interest in DevCo. All ownership relationships are 100%. TopCo directly owns the LP interest in FinCo and indirectly owns the GP interest in FinCo via its ownership of FinCo GP. TopCo’s Class A LP interest is owned by a nondebtor affiliate that is wholly owned by funds associated with Oaktree Capital Management. Footprint Power Salem Harbor Holdings LP owns the Class B LP interest in TopCo; further details regarding this class of ownership are not provided in the declaration.

The declaration describes the Salem facility as “a more efficient and environmentally responsible replacement of a previous coal-fired power plant located at the same site.” DevCo sells energy, capacity and ancillary services from the facility through ISO New England Inc., or ISO-NE, a nonprofit organization that manages New England’s electrical grid and competitive wholesale market. DevCo sells electricity into the ISO-NE wholesale market through scheduling services offered by its energy manager, EDF Trading North America, or EDF. DevCo also receives “capacity revenues” pursuant to ISO-NE “forward capacity auctions,” says the declaration, explaining that capacity revenue consists of payments from ISO-NE in exchange for keeping the facility available to produce energy, whether or not such energy is ultimately needed or produced.

A “key incentive” for developing the facility was obtaining a “capacity award” from the ISO-NE, the declaration states, pursuant to which the ISO-NE would pay the company above-market capacity rates beginning in June 2017 through and including May 31, 2022. The current capacity award rate is $18.69 per kilowatt-month, compared with the current market capacity rate of approximately $4.63 per kilowatt-month.

During the first four years of the capacity award period, the company says, capacity payments have been “materially larger” than the energy revenue generated from selling electricity into the ISO-NE wholesale electricity market at prevailing market rates. In 2021, DevCo generated approximately $147.7 million in capacity payments, in contrast to $47.5 million in electricity sales.

DevCo’s principal assets consist of the real property and equipment composing the facility. It also has a lease agreement with Philson LP to lease certain warehouse space and loading docks located near the facility in Salem, Mass., where essential materials and replacement parts are stored, in addition to operational contracts.

In connection with its ownership and operation of the facility, DevCo is a party to two Dec. 16, 2014, dated agreements with the city of Salem. Under a payment in lieu of tax agreement, or the PILOT agreement, the debtors pay scheduled amounts to the city on a quarterly basis in lieu of regular real and personal property taxes related to the facility, according to the declaration. The term of this agreement runs through June 30, 2032. The debtors disclose that under the PILOT agreement, they paid the city approximately $5.1 million in 2021 and expect the next quarterly payment of $1.3 million to be due no later than May 1, 2022.

The second agreement with the city, which also runs through June 30, 2023, and includes Footprint Power Salem Harbor Real Estate LP as a party, is a community benefits agreement under which the debtors make scheduled payments to Salem to support community programs and initiatives including infrastructure improvements, environmental initiatives and educational programs for local schools. The debtors state that under this agreement, they paid approximately $335,000 in 2021.

The debtors have no employees, and the facility operates through contracts with independent third-party service providers which they say are “essential” to the facility’s operation and revenue generation. These contracts include:

• AMA: An asset management agreement between DevCo and Tateswood Energy Co. for management, accounting, operational and financial reporting and administrative services, for which DevCo pays an approximate monthly fee of $85,000 (escalated annually).


• NAES agreement: An O&M services agreement with NAES Corp. for day-to-day operations and maintenance services, for which DevCo pays an approximate annual fee of $325,000 (escalated annually) and additional amounts on a monthly basis including reimbursement of wages paid by NAES to personnel who manage and operate the facility. In 2021, DevCo paid NAES approximately $7.2 million (including the annual fee).


• EMA: An energy management agreement with EDF for power management, fuel management, scheduling, capacity management, emission management and related administrative and reporting services in addition to assistance with the debtors’ bidding in the ISO-NE capacity markets including developing bid strategies. In 2021, DevCo paid EDF approximately $359,000 in fees.

Other contracts include a commercial management services agreement, or CMA, with Clone Capital LLC, a contractual service agreement, or CSA, with General Electric International, Inc., and a water solutions agreement, or WSA, with GE Mobile Water. The debtors say they are current with respect to the AMA, the NAES agreement, the EMA and the WSA. As to the two other contracts, the debtors say they believe that they may have certain success fees that have been earned but remain unpaid as of the petition date under the CMA and are current under the CSA but that certain accrued but uninvoiced amounts may exist as of the petition date.

To construct the facility, DevCo entered into an engineering, procurement and construction contract, or EPC contract, with IEP in December 2014, which the declaration describes as “a turnkey, fixed-price, date-certain contract.” The contract provided “a guaranteed substantial completion date” of May 31, 2017, for a lump sum price of approximately $702.1 million and was secured by a performance letter of credit in the approximate amount of $140.9 million in favor of DevCo. The acquisition, construction and development of the facility was funded by the secured debt financing under the credit agreement and by more than $376 million of equity financing.

Under the ISO-NE capacity award, ISO-NE pays the company certain rates from June 1, 2017, through May 31, 2022, for the company’s standing readiness to deliver a certain level of capacity to the New England electrical grid as needed. To remain eligible for the capacity award, the company states, the facility was required to be on line no later than May 31, 2018.

During construction of the facility, numerous disputes arose between DevCo and IEP and it became clear that IEP had “‘seriously underbid’” the contract without the ability to complete the facility because of errors in “‘design, contracting, procurement, and execution.’” Ultimately, the project was nearly 11 months behind schedule before DevCo decided to terminate the EPC on April 15, 2018. In connection with the termination of the contract, DevCo says, it was able to draw down the performance letter of credit in the amount of $140.9 million on Feb. 20, 2019, as part of the arbitration ruling, which is deposited in an account held by DevCo at MUFG pursuant to the terms of the depositary agreement.

DevCo entered into a new contract with a third party to complete the facility on a “time-and-materials basis.” The facility began commercial operations on May 31, 2018, which was the capacity award eligibility deadline.

IEP commenced the arbitration proceedings after the termination of the EPC contract, asserting claims for wrongful termination by DevCo, and DevCo asserted counterclaims due to IEP’s failure to achieve substantial completion by May 31, 2017. IEP also commenced an action in Massachusetts state court to enforce its mechanic’s lien rights, which was subsequently stayed under the 2022 standstill agreement.

On Oct. 15, 2021, the arbitration panel awarded IEP approximately $236.4 million, concluding that DevCo lacked sufficient grounds to terminate the EPC contract. IEP obtained an order in New York state court confirming the award on Dec. 23, 2021, and the court subsequently entered a judgment against DevCo in the amount of $237.1 million on Jan. 24, 2022.

The declaration adds that, in addition to litigation against the debtors, IEP has commenced separate state court actions in New York against the prepetition secured parties and nondebtor affiliate OCM-Aggregator and certain of its affiliates. Debtors TopCo and TopCo GP are named defendants in the OCM-Aggregator litigation, the declaration states. These actions remain pending as of the petition date, with oral argument scheduled for April 4 on the prepetition secured parties’ motion to dismiss IEP’s suit against them.

The company’s corporate organizational structure chart is below:


The debtors’ use of the name Footprint Power was subject to a license granted by the trademark owner. The license was terminated prior to the petition date, and accordingly, the debtors are seeking authorization to change their names, as applicable, that will be used in connection with the chapter 11 cases. Specifically, the joint administration motion provides the following list of the debtors and their proposed name changes:

Footprint’s list of 30 largest unsecured creditors consists of 29 trade creditors with unliquidated claims and Iberdrola Energy Projects Inc. with a $237.1 million judgment claim arising from its recorded judicial lien.

The case representatives are as follows:

Representatives
Role	Name	Firm	Location
Debtors' Co-Counsel	Brian S. Hermann	Paul, Weiss, Rifkind, Wharton & Garrison	New York
	John T. Weber
	Alice Nofzinger
Debtors' Co-Counsel	Pauline K. Morgan	Young Conaway Stargatt & Taylor	Wilmington, Del.
	Andrew L. Magaziner
	Katelin A. Morales
	Timothy R. Powell
Debtors' CRO & Financial Advisor	John R. Castellano	AlixPartners	Chicago
Debtors' Investment Banker	NA	Houlihan Lokey	NA
Debtors' Claims Agent	Benjamin J. Steele	Prime Clerk	Brooklyn, N.Y.
	Shira Weiner		New York
Co-Counsel to the Prepetition Agent	Brian Trust	Mayer Brown	New York
	Joaquin M. C de Baca
Co-Counsel to the Prepetition Agent	Christopher M. Samis	Potter Anderson & Corroon	Wilmington, Del.
	L. Katherine Good
Co-Counsel to the Prepetition Agent	NA	Goodwin Procter	NA
Financial Advisor to the Prepetition Agent	NA	PJT Partners	NA
Counsel to the Consenting Equity Parties	Seth Goldman	Munger Tolles & Olson	Los Angeles
	Daniel Levin
Co-Counsel to IEP	Jeffrey Reisner	Steptoe & Johnson	Los Angeles
	Thomas Watson
Co-Counsel to IEP	Thomas J. Francella	Cozen O’Connor	Wilmington, Del.
	Wendy Venoit		Boston
United States Trustee	Joseph F. Cudia	Office of the U.S. Trustee	Wilmington, Del.
	Linda J. Casey

Cash Collateral Motion

The debtors request the use of cash collateral with the consent of the prepetition secured lenders through the earliest of 185 days after the petition date (subject to extension), entry of an order approving postpetition financing that has not been consented to by the required lenders, the effective date of a plan or an event of default. The debtors say that all of their cash on hand is encumbered.

The company proposes the following adequate protection to its prepetition lenders: replacement liens, superpriority administrative expense claims, monthly cash payments of interest at the nondefault rate (only to the extent DevCo maintains a minimum cash balance of $17.5 million after effectuating any adequate protection interest payment), current cash payment of all prepetition and postpetition fees and expenses of the prepetition agent, reimbursement of professional fees of the agent including Mayer Brown, Potter Anderson & Corroon, Goodwin Procter and PJT Partners, and budget compliance.

To the extent that the IEP lien is valid, secured, perfected and unavoidable as of the petition date, IEP would be granted adequate protection in the form of a replacement lien against any postpetition diminution in value resulting from the imposition of the automatic stay or the debtors’ use, sale or disposition of the IEP prepetition collateral during the chapter 11 cases.

The debtors are required to maintain a minimum cash balance of $7.5 million, with compliance tested on a monthly basis. In addition, payment of the monthly adequate protection payments is subject to the debtors’ ability to maintain a minimum cash balance of $17.5 million following any such payment.

“Given the limited unencumbered assets available to the Debtors and the absolute need to maintain uninterrupted use of Cash Collateral, the Debtors believe that providing the Prepetition Secured Parties with Senior Adequate Protection Liens (and IEP with IEP Adequate Protection Liens) on very limited unencumbered assets that the Debtors maintain (including the proceeds of Avoidance Actions) is a sound exercise of the Debtors’ business judgment,” the debtors say.

According to the motion, the debtors’ unencumbered assets include (a) the debtors’ equity interests in debtors Footprint Power Salem Harbor FinCo LP, Footprint Power Salem Harbor FinCo GP LLC and Highstar Footprint Holdings LP and (b) certain de minimis value assets held by DevCo such as pickup trucks and forklifts utilized in the day-to-day operations of the facility.

In addition, subject to the final order, the debtors propose a waiver of the estates’ right to seek to surcharge its collateral pursuant to Bankruptcy Code section 506(c) and the “equities of the case” exception under section 552(b).

The carve-out for professional fees is $1.25 million.

The proposed budget for the use of cash collateral is HERE.

The cash collateral use is subject to milestones as set forth in the RSA and detailed below.

The lien challenge deadline is 75 days after entry of the interim order for any party in interest. The lien investigation budget for an official committee of unsecured creditors is $100,000.

Restructuring Support Agreement

Treatment of Claims and Interests

The restructuring term sheet attached to the RSA provides for the following classification of and proposed distributions to holders of allowed claims and interests:

• Other secured claims: At the debtors’ option, (a) payment in full in cash, (b) the collateral securing its claim, (c) reinstatement or (d) such other treatment rendering its claim unimpaired.


• Other priority claims: Payment in full in cash or treatment consistent with section 1129(a)(9) of the Bankruptcy Code.


• Credit facility claims: Pro rata share of:
  
  
  
  • In the event of a stand-alone restructuring: 100% of the new common equity and the exit facility loans (if applicable); or
  
  
  • In the event of a sale transaction: The net sale proceeds after satisfaction of administrative claims (including an administrative claim reserve), priority tax claims (including the priority tax claim reserve), other priority claims and other secured claims, and funding of the wind-down, until all allowed credit facility claims are satisfied in full in cash.
  
  
  
  


• General unsecured claims:
  
  
  
  • In the event of a stand-alone restructuring: (a) if a holder of an allowed GUC votes to accept and/or does not opt out of the plan’s third-party releases, it would receive a complete waiver and release of avoidance actions and (b) a pro rata share of proceeds from the disposition of unencumbered assets; or
  
  
  • In the event of a sale transaction: Pro rata share of (a) proceeds from the disposition of unencumbered assets and (b) solely to the extent the credit facility claims are paid in full in cash on the effective date, the net sale proceeds remaining until all allowed GUCs are satisfied in full in cash.
  
  
  
  


• Intercompany claims: Reinstatement or canceled, released and extinguished without any distribution.


• Section 510(b) claims: Claims subject to subordination under section 510(b) of the Bankruptcy Code would receive no recovery.


• Interests in Highstar Footprint Power Holdings LP, or TopCo: Canceled, released and extinguished without any distribution.

Existing equity interests in the Salem Harbor entities other than interests in TopCo would remain effective and outstanding.

Milestones

The proposed restructuring milestones follow:

• Petition date: March 23;


• Interim cash collateral order: Entered within three business days of petition date;


• Bid procedures motion: Filed by Salem Harbor entities within nine days of petition date;


• Plan, disclosure statement and solicitation motion: Filed within 28 days of petition date;


• Final cash collateral order: Entered within 30 days of petition date;


• Bid procedures order: Entered within 30 days of petition date;


• DS solicitation order: Entered within 65 days of petition date;


• Transaction election: Debtors to make transaction election within 14 days prior to confirmation hearing;


• Confirmation order: Entered within 110 days of petition date; and


• Plan effective date: Within 150 days of petition date (to be automatically extended to no later than 185 days after the petition date if additional time is required for obtaining approval from the Federal Energy Regulatory Commission).

Sale Transaction / Wind-Down

To the extent a sale transaction is consummated, the debtors and the required consenting lenders would agree prior to, or at the same time of, the transaction election on a wind-down budget, with any excess amount from the wind-down budget after completion of the wind-down to be distributed to the prepetition lenders.

In the event of a sale transaction, the RSA contemplates a plan administrator to oversee a wind-down.

Exit Financing

In the event of a stand-alone restructuring, the reorganized debtors may enter into a new first lien term loan exit facility in an amount to be agreed among the debtors and the required consenting lenders, which would comprise “converted Prepetition Secured Loans in a like amount, and any new money financing as may be agreed among the Debtors and the Required Consenting Lenders.”

Participation in the new-money financing would be voluntary for the prepetition lenders and would not “create or imply any type of drag-along right requiring Lenders to participate in any new money financing.”

Letters of Credit

Also in the event of a stand-alone restructuring, each of the debtors’ two undrawn outstanding letters of credit would be either renewed in their entirety or replaced with a new letter of credit on substantially similar terms.

New Common Equity

On the effective date, TopCo, or such other Salem Harbor entity as may be determined by the debtors and the required consenting lenders, as a reorganized debtor, would issue a single class of common equity interests.

Releases

The term sheet contemplates “customary mutual releases” in favor of the debtors, reorganized debtors, plan administrator, purchaser (if any), each consenting stakeholder, the prepetition agent, the debtors’ asset managers for the Salem Harbor facility, and the affiliates and related parties of each of the foregoing. “Releasing parties” in the term sheet include, in addition to the released parties named above, all holders of claims who (i) vote to accept the plan, (ii) are unimpaired and do not elect to opt out of the releases, (iii) are entitled to but do not vote on the plan and do not opt out of the releases, or (iv) vote to reject the plan and do not opt out of the releases.

The term sheet adds that such releases would not extinguish claims against any equity party by a holder of credit facility claims for contribution or indemnification in respect of (i) claims asserted by IEP against a holder of a credit facility claims related to DevCo or the credit agreement or (ii) solely to the extent such contribution or indemnification claims are applicable to an equity party, obligations associated with the demolition or remediation of real property assets of DevCo.

The term sheet likewise preserves any claims of any equity party with respect to the preserved indemnity and contribution claims.

The term sheet also contemplates “customary” exculpation, discharge and injunction provisions.

Other Restructuring Provisions

The debtors would purchase D&O tail policies providing for coverage for at least a six-year period after the effective date.

The RSA is subject to a fiduciary out.

The term sheet provides that under a stand-alone restructuring, the new board for reorganized TopCo would initially consist of five directors or managers in total, to be designated by the required consenting lenders prior to the effective date and disclosed in a plan supplement.

Other Motions

The debtors also filed various standard first day motions, including the following:

• Motion for joint administration
  
  
  
  • The cases will be jointly administered under case No. 22-10239.
  
  
  
  


• Motion to use cash management system
  
  
  
  • The company has bank accounts with Union Bank dba MUFG Union Bank and Fifth Third Bank as well as a securities account maintained by BlackRock Institutional Management Corp. as agent for BlackRock Liquidity Funds.
  
  
  
  


• Motion to pay taxes and fees
  
  
  
  • The debtors summarize their taxes and fees as follows:
  
  
  
  

 

• The debtors estimate only de minimis amounts owed related to taxes and fees but seek authority to pay any prepetition amounts asserted under the PILOT agreement or community benefits agreements. The debtors say that they anticipate that the next quarterly payment under the PILOT agreement covering the period from April 1 through June 30, 2022, would be due and payable on or before May 1. The amount of the payment is approximately $1.3 million.

• Motion to provide utilities with adequate assurance


• Motion to file consolidated creditor matrix and top 30 creditors list


• Application to appoint Prime Clerk as claims agent