By Nick Brown
Dec 17 Edison Mission Energy, the unregulated
power generation business of Edison International, filed
for Chapter 11 bankruptcy protection on Monday with a proposal
to transfer control of the company to holders of $3.7 billion in
In court papers filed in U.S. Bankruptcy Court in Chicago,
Edison Mission said a "perfect storm" of heavy debts, weak power
prices and high fuel costs have threatened its ability to stay
Reuters had reported on Saturday that Edison Mission was
preparing a bankruptcy filing to avoid defaulting on a bond
Based in Santa Ana, California, Edison Mission owns and
operates coal, natural gas and renewable power plants totaling
more than 10,000 megawatts in states including California,
Illinois, Pennsylvania and West Virginia.
Like many coal plant operators, it has suffered as the
2007-2009 recession cut power demand and wholesale power prices
fell because of the supply of cheaper natural gas.
Under a proposal outlined in the bankruptcy filing, Edison
International would transfer its 100 percent equity stake in
Edison Mission to bondholders, which include York Capital
Management and other distressed debt investors.
The company is projecting the transfer to occur in late
2014, which could allow Edison Mission to continue benefiting
from projected tax-sharing payments from its parent through the
end of that year.
Federal tax laws allow companies to offset taxable income by
making payments to unprofitable units, but only as long as they
retain at least 80 percent of the equity in the units.
The proposal, which would need bankruptcy court approval, is
not final, Edison Mission said in Monday's filing.
"To be clear, the debtors are not at this time seeking
authority to assume" the agreement, Edison Mission said. But, it
added, the agreement would "position the debtors, should they
choose to move forward with the turnover proposal, to propose
and obtain court approval of a consensual, value-maximizing"
In all, Edison Mission subsidiaries hold about $1.2 billion
in debt on top of the company's $3.7 billion in bond debt.
Other issues in the reorganization include the possible
refinancing of $345 million owed on leveraged leases at two coal
plants leased by the company's Midwest Generation unit.
Edison International Chief Executive Ted Craver has told
investors that the Midwest Generation leases may need to be
The bondholders who financed those leases have hired
restructuring lawyers from Cadwalader Wickersham & Taft.
The case is Edison Mission Energy, Case No. 12-49219, U.S.
Bankruptcy Court, Northern District of Illinois.