GenOn Submits Plan, DS in Next Steps Under RSA, Contemplates Sept. 20 Plan Confirmation

Relevant Documents:
Joint Chapter 11 Plan
Disclosure Statement
DS Approval Motion
 
The GenOn debtors filed their plan and disclosure statement Thursday, which closely tracks their prepetition restructuring support agreement. The plan documents do not provide an update on any potential tax consequences of the restructuring and the contemplated worthless stock deduction to be taken by NRG. The documents do reiterate that the GenOn steering committee, in consultation with the debtors and NRG, shall determine the exit structure, and if, notwithstanding any actions intended to minimize adverse tax consequences, “the Worthless Stock Deduction may reasonably be expected to result in a net increase in the tax liability of the Reorganized Debtors under realistic assumptions regarding the operation of, or asset sales by, the Reorganized Debtors in the future, NRG (in good faith consultation with GenOn and the GenOn Steering Committee) will make a proposal to address such adverse impact.”
 
GenOn Energy filed for chapter 11 on June 14 with a restructuring support agreement in hand that has the support of parent equityholder NRG Energy, more than 93% of GenOn senior unsecured notes and more than 93% of GenOn Americas Generation, or GAG, unsecured notes. Under the RSA, GenOn senior noteholders would receive 100% of reorganized equity, a share of a cash pool of approximately $75 million and the right to participate in a subscription auction for $900 million in new secured notes. Certain noteholders agreed to backstop the new notes offering and have received a 5% cash commitment fee. GAG noteholders would receive cash in the amount of 92% of par plus accrued interest, as well as a share of a cash pool. Projected percentage recoveries for Class 4 GenOn notes claims and Class 5 GAG notes claims remain bracketed in the disclosure statement.
 
The debtors say that the proposed restructuring would “significantly delever their balance sheet by at least $1.75 billion and implement an orderly transition to a standalone power generation company better situated for success in the current market environment.” The disclosure statement provides the following overview of the proposed restructuring:
   
The financial projections, liquidation analysis and a valuation analysis of the reorganized entity have not yet been provided.
 
The debtors have also filed a motion seeking to estimate the claims of owner lessor plaintiffs in the Morgantown OL1 LLC vs. GenOn Energy, Inc. case. The confirmation and effectiveness of the plan is conditioned on a resolution of all claims related to or arising from the GenMA cash distribution - one or more distributions of cash in the aggregate amount of approximately $320 million made by GenMA to GenOn or subsidiaries thereof on or about May 2014, including as alleged in the complaint filed on June 8, 2017, in the leveraged lease disputes - in a manner acceptable to the GenOn and GAG steering committees.
 
The second day hearing is scheduled for July 14 at 10 a.m. EDT, and objections are due July 10 at 5 p.m. EDT. The disclosure statement hearing is scheduled for Aug. 3 at 3:30 p.m. EDT, with objections due July 27 at 5 p.m. EDT.
 
DS Approval Motion / Confirmation Timeline
 
The debtors’ disclosure statement approval motion proposes the following confirmation-related timeline:
 

• July 27 at 5 p.m. EDT - disclosure statement objection deadline
• Aug. 1 - voting record date
• Aug. 3 at 3:30 p.m. EDT - disclosure statement hearing
• Aug. 9 - solicitation and publication deadline
• Sept. 8 at 5 p.m. EDT - plan objection and voting deadline
• Sept. 18 at 1 p.m. EDT - confirmation brief, plan response, voting report deadline
• Sept. 20 at 10 a.m. EDT - plan confirmation hearing.

 
Plan / Disclosure Statement
 
Below is a chart of the plan’s classes, along with their impairment status and voting rights.
 
Treatment of Claims and Interests
 
The debtors’ plan sets forth the following classification of and proposed distributions to holders of allowed claims and interests:
 

• Class 1 - Other secured claims: Payment in full in cash; delivery of the collateral securing any such claim and payment of any interest required under section 506(b) of the Bankruptcy Code; reinstatement of the claim; or other treatment rendering such claim unimpaired.
   
• Class 2 - Other priority claims: Payment in full in cash or other treatment rendering such claim unimpaired.
   
• Class 3 - Revolving credit facility claims: Payment in full in cash in accordance with the NRG settlement and, in respect of undrawn letters of credit obtained by NRG, such letters of credit shall be canceled and/or replaced with new letters of credit, deemed to have been issued as letters of credit under the new exit facility or continued pursuant to other arrangements satisfactory to NRG. To be deemed allowed “in the aggregate amount of $126,651,082.39 (including all accrued and unpaid interest at the non-default contract rate, fees and expenses) plus all postpetition interest at the non-default contract rate, fees (including letter of credit and fronting fees) and expenses plus the aggregate amount of all unreimbursed obligations in respect of letters of credit that are drawn on or after the Petition Date; provided that NRG shall be entitled to set off against the amount of the NRG Settlement Payment any claims for the principal amount of outstanding cash borrowings, unreimbursed obligations determined, without duplication, in respect of letters of credit that are drawn on or after the Petition Date and accrued interest at the non-default contract rate and accrued letter of credit and fronting fees, in each case, under the Revolving Credit Agreement; provided, further, that notwithstanding the foregoing, no setoff will be allowed for undrawn letters of credit issued under the Revolving Credit Agreement to the extent that the treatment set forth in Article III.B.3(c) for such letters of credit has been provided; provided, further that NRG shall provide an estimate of the amount of Claims proposed to be set off against the NRG Settlement Payment no later than ten (10) Business Days prior to the Effective Date.”
   
• Class 4 - GenOn notes claims: To receive pro rata share of 100% of the new common stock, subject to dilution by the management incentive plan, the GenOn notes cash pool and the subscription rights to participate in the $900 million new secured notes offering. Impaired, entitled to vote. To be allowed “in the aggregate amount of not less than $1,874,906,601, comprised of $718,292,857 for Claims derived from or based upon the 7.875% GenOn Notes, $659,598,136 for Claims derived from or based upon the 9.50% GenOn Notes, and $497,015,608 for Claims derived from or based upon the 9.875% GenOn Notes, in each case including accrued interest as of the Petition Date.”
   
  • The GenOn notes cash pool is a cash pool in the amount of (i) 4% of the aggregate principal amount of GenOn notes outstanding plus accrued interest as of the petition date (approximately $75 million), funded on the effective date from the NRG settlement payment, for distribution to all holders of allowed GenOn notes claims and (ii) such other cash for distribution to all holders of GenOn notes claims.
     
• Class 5 - GAG notes claims: To receive cash equal to 92% of the principal amount and accrued interest as of the petition date and its pro rata share of the GAG notes cash pool. To be allowed “in the aggregate amount of not less than $704,796,634, comprised of $372,210,762 for Claims derived from or based upon the 8.50% GAG Notes and $332,585,872 for Claims derived from or based upon the 9.125% GAG Notes, in each case including accrued interest as of the Petition Date.”
   
  • The GAG notes cash pool is a cash pool in the amount of: 2% of the aggregate principal amount of GAG notes outstanding plus accrued interest as of the petition date, or approximately $14.1 million, approved pursuant to the confirmation order and funded on the effective date from the NRG settlement payment, for distribution to all holders of GAG notes claims; and beginning 180 days after the petition date, liquidated damages accruing at an annual rate of 6% of the aggregate principal amount of GAG notes outstanding plus accrued interest as of the petition date.
     
• Class 6 - General unsecured claims: Payment in cash equal to the amount of the claim or such other treatment rendering the claim unimpaired.
   
• Class 7 - Intercompany claims and interests: Reinstated or canceled at the option of the debtors with the consent of the GenOn steering committee, such consent not to be unreasonably withheld.
   
• Class 8 - Section 510(b) claims: Canceled and released, and there shall be no distribution on account of such claims.
   
• Class 9 - Interests in GenOn: Released and canceled.

 
Other Plan Provisions
 
Under the plan, the terms and conditions of the management incentive plan would be determined by the reorganized GenOn board of directors.
 
The plan provides for releases of the debtors and reorganized debtors, including their directors and officers, the consenting noteholders, the GenOn notes trustee, the GAG notes trustee, the GenOn steering committee, the GAG steering committee, the NRG parties, the backstop parties and the ad hoc committee. In addition, the plan includes an exculpation provision in favor of the debtors, reorganized debtors, the consenting noteholders, the GenOn notes trustee, the GAG notes trustee, the GenOn steering committee, the GAG steering committee, the NRG parties, the backstop parties and the ad hoc committee.
 
According to the plan documents, the officers and directors of the new board for reorganized GenOn will be identified in a plan supplement the debtors intend to file no later than seven days prior to the Sept. 8 plan objection deadline.