Edison Mission Energy misses payment, faces likely bankruptcy
* Edison International unit misses $97 million interest payment
* Says bankruptcy likely if cannot make payment within 30 days
By Nick Brown
NEW YORK, Nov. 15(Reuters) - Edison Mission Energy said on Thursday it missed a $97 million interest payment on its unsecured bonds and could file for bankruptcy as soon as next month.
Edison Mission, the unregulated power generation business of Edison International, made the announcement in a filing with the U.S. Securities & Exchange Commission. It said the interest payment deadline carries a grace period that expires on December 17.
In a statement, Edison Mission said failure to make the payment by the end of the grace period "will likely" trigger a bankruptcy filing.
"(Edison Mission) and its parent, Edison International, continue to engage in discussions with financial and legal advisers to our noteholders on a potential financial restructuring," the company said.
The energy sector has been hit hard as power prices have fallen. Edison Mission has spent months in discussions with debtholders in hopes of restructuring $3.7 billion in unsecured bonds.
Ted Craver, Edison International's chief executive, acknowledged the possibility of a restructuring at Edison Mission as early as February. Craver said on a conference call that power price declines, impending debt maturities and the need for retrofit investments could force the unit into bankruptcy.
The company has hired restructuring lawyers from Kirkland & Ellis and financial advisers from Moelis, according to two people familiar with the matter. Its bondholders have tapped law firm Ropes & Gray and financial adviser Houlihan Lokey, they said.
Bringing the company into bankruptcy poses some challenges. Craver has said Edison Mission may also have to refinance leveraged leases at two coal plants leased by Edison Mission's Midwest Generation unit.
The bondholders who financed those leases have hired restructuring lawyers from Cadwalader Wickersham & Taft, said the people familiar with the matter.
There is also the issue of how to restructure Edison Mission's debt. Bondholders traditionally demand equity in a reorganized firm, but for Edison International, giving up equity in Edison Mission would mean losing certain tax breaks related to Edison Mission's operating losses.
That could pose a challenge in a restructuring, said the people familiar with the matter.
Federal tax laws allow companies to offset taxable income with operating losses at their subsidiaries, but only if they retain at least 80 percent of the unit's equity.
A spokeswoman for Edison International declined to comment on the issue of the tax losses.