FirstEnergy Solutions – Files Joint Chapter 11 Plan of Reorganization and Related Disclosure Statement, Requests May 7, 2019 Confirmation Hearing

Register, or to view the article

February 11, 2019 – The Debtors filed a Joint Plan of Reorganization and a related Disclosure Statement [Docket Nos. 2119 and 2120], together with a motion to requesting approval of the Disclosure Statement and the scheduling of a Plan confirmation hearing [Docket No. 2121].

Summary of the Plan

The Disclosure Statement provides the following overview of the Plan, “The Plan incorporates a global, integrated settlement of numerous disputes between and among the Debtors, the FE Non-Debtor Parties, and the Debtors’ creditors (the ‘Plan Settlement’). The Plan Settlement not only incorporates the FE Settlement Agreement between and among the Debtors, certain key creditor constituencies and the FE Non-Debtor Parties, but it also resolves numerous additional areas of potential litigation arising from (i) the historical and ongoing business relationships between and among the Debtors, including the validity, enforceability and priority of various Inter-Debtor Claims, (ii) the allocation of value of the Debtors’ assets and the consideration from the FE Settlement Agreement, and (iii) the allocation of administrative expenses incurred during the Chapter 11 Cases. The Plan also incorporates the Mansfield Settlement. Based on the Plan Settlement, the Plan resolves a variety of highly complex issues that would have been a source of contention and which, if left unresolved, would have potentially led to significant costly litigation and resulted in uncertainty and delays in distributions to creditors and the Debtors’ ability to timely exit bankruptcy protection. The largest parties in interest in these cases, including the Debtors, the Independent Directors and Managers, the Committee, the Ad Hoc Noteholder Group, the Mansfield Certificateholders Group and the FES Creditor Group independently analyzed these potential disputes, with the assistance of their respective advisors. The terms of the Plan Settlement are integrated and not severable, and are the result of hard-fought, arm’s-length negotiations between the parties. The Plan Settlement is described in greater detail in Article V.H of this Disclosure Statement.”
 
In addition to incorporating the terms of the FE Settlement Agreement, the Plan Settlement comprises the resolution of the following disputed matters:
 
  • First, the Plan resolves potential litigation surrounding the allocation of value and consideration received under the FE Settlement Agreement (the “FE Settlement Value”). 
  • Second, the Plan resolves potential litigation surrounding the allowance and treatment of Inter-Debtor Claims. 
  • Third, the Plan incorporates a settlement of potential disputes surrounding the allocation of Administrative Claims between and among the Debtors. certainty to Creditors of the various Debtors as to their projected recoveries under the Plan.
  • Fourth, the Plan incorporates the Mansfield Settlement and resolves potential litigation surrounding the rejection of the Mansfield Facility Documents and related agreements, as well as litigation surrounding the amount of any claim or claims arising from such rejection.
  • Fifth, the Plan incorporates a settlement between and among the Debtors, the Committee, the Ad Hoc Noteholder Group, the FES Creditor Group and the Mansfield Certificateholders Group concerning the allocation of New FES Common Stock and cash between the holders of Unsecured Bondholder Claims and General Unsecured Claims and overall allocations of value between and among the Debtors’ estates.
The following is a summary of FES classes, claims, voting rights and expected recoveries (defined terms are as defined in the Plan and/or Disclosure Statement):
 
  • Class A1 (“Other Secured Claims Against FES”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The estimated aggregate amount of claims is N/A and the estimated recovery is N/A.
  • Class A2 (“Other Priority Claims Against FES”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The estimated aggregate amount of claims is N/A and the estimated recovery is N/A.
  • Class A3 (“Unsecured Bondholder Claims Against FES”) is impaired and entitled to vote on the Plan. The estimated aggregate amount of claims is $2.2bn and the estimated recovery is 22.9%. Each holder of an allowed Unsecured PCN/FES Notes Claim Against FES will receive  New FES Common Stock, subject to dilution for the Management Incentive Plan, in an amount equal to its pro rata share of FES Unsecured Distributable Value, subject to the reallocation of (i) the Reallocation Pool to holders of Single Box Unsecured Claims, (ii) the FENOC-FES Claim Reallocation to holders of FES Single-Box Unsecured Claims and Holders of FENOC-FES Unsecured Claims against FES and (iii) the Mansfield Reallocation. 
  • Class A4 (“Mansfield Certificate Claims Against FES”) is impaired and entitled to vote on the Plan. The estimated aggregate amount of claims is $786mn and the estimated recovery is 22.8%. Each holder of an allowed Mansfield Certificate Claim Against FES shall receive, New FES Common Stock, subject to dilution for the Management Incentive Plan, in an amount equal to its pro rata share of FES Unsecured Distributable Value, subject to the reallocation of (i) the Reallocation Pool to holders of Single Box Unsecured Claims, and (ii) the FENOC-FES Claim Reallocation to holders of FES Single-Box Unsecured Claims and Holders of FENOC-FES Unsecured Claims against FES and (iii) the Mansfield Reallocation. 
  • Class A5 (“FENOC-FES Unsecured Claims”) is impaired and entitled to vote on the Plan. The estimated aggregate amount of claims is $138.6mn and the estimated recovery is 25.5%. Each holder of an allowed FENOC-FES Unsecured Claim Against FES shall receive cash equal to its pro rata share of (i) the FES Unsecured Distributable Value and (ii) the FENOC-FES Claim Reallocation, provided that such holders shall have the option to elect to receive their pro rata share of New FES Common Stock in equal amount, subject to dilution for the Management Incentive Plan. 
  • Class A6 (“FES SingleBox Unsecured Claims”) is impaired and entitled to vote on the Plan. The estimated aggregate amount of claims is $568.6mn and the estimated recovery is 31.4%. Each holder of an allowed FES Single-Box Unsecured Claim shall receive cash equal to its pro rata share of (i) the FES Unsecured Distributable Value, (ii) the portion of the Reallocation Pool allocated to FES, (iii) the FENOC-FES Claim Reallocation, and (iv) the NG Reallocation Pool, provided that such holders shall have the option to elect to receive their pro rata share of New FES Common Stock in equal amount, subject to the Equity Election Conditions and subject to dilution for the Management Incentive Plan. 
  • Class A7 (“Mansfield TIA Claims”) is impaired and entitled to vote on the Plan. The estimated aggregate amount of claims and the estimated recovery is needs to be decided.
  • Class A8 (“Convenience Claims”) is impaired and entitled to vote on the Plan. The estimated aggregate amount of claims is $13.9mn and the estimated recovery is 36.4%. Each holder of an allowed Convenience Claim against FES that has properly elected to be treated as such on its Ballot shall receive cash in an amount equal to 36.4% of the allowed Convenience Claim.
  • Class A9 (“Inter-Debtor Claims”) is impaired and not entitled to vote on the Plan. The estimated aggregate amount of claims is $3.2bn and the estimated recovery is 22.8%. Each holder of an allowed prepetition Inter-Debtor Claim against FES shall receive their pro rata share of the FES Unsecured Distributable Value. In lieu of Cash payment or other distribution to the Debtors holding such prepetition InterDebtor Claims against FES, the distributions on account of such prepetition Inter-Debtor Claims against FES shall be made to the Holders of allowed Unsecured Claims against the Debtor holding such prepetition InterDebtor Claims against FES by including the recovery on such prepetition Inter-Debtor Claims against FES in the calculation of the Unsecured Distributable Value relating to the Debtor holding such prepetition InterDebtor Claims against FES.
  • Class A10 (“Interests in FES”) is impaired, deemed to reject and not entitled to vote on the Plan. The estimated aggregate amount of claims is $0 and the estimated recovery is 0%. As of the Effective Date, Interests in FES shall be cancelled and released without any distribution on account of such Interests.
The following exhibits were attached to the Plan:
 
  • Exhibit A: Distributable Value Splits
  • Exhibit B: FE Settlement Agreement
 
The following exhibits were attached to the Disclosure Statement:
 
  • Exhibit A: List of Debtors  
  • Exhibit B: Plan of Reorganization 
  • Exhibit C: Current Corporate Structure of the Debtors and Certain Non-Debt or Affiliates 
  • Exhibit D: Financial Projections 
  • Exhibit E: Valuation Analysis 
  • Exhibit F: Liquidation Analysis 
  • Exhibit G: Disclosure Statement Order 
  • Exhibit H: Restructuring Support Agreement  
 
Key Dates:
 
  • Deadline for Objections/Responses to Disclosure Statement: March 12, 2019
  • Disclosure Statement Hearing Date: March 19, 2019
  • Solicitation Deadline: Five (5) business days after entry of the Order
  • Deadline to File Plan Supplement: April 19, 2019
  • Deadline for Objections/Responses to Confirmation of the Plan: April 26, 2019
  • Voting Deadline: April 26, 2019
  • Confirmation Hearing: May 7, 2019

Read more Bankruptcy News