Rumors of a possible Chapter 11 bankruptcy filing have swirled around EME for much of this year. In a November 15 filing with the U.S. Securities and Exchange Commission, EME disclosed it elected not to make $97 million in interest payments that were due on unsecured EME bonds maturing in 2017, 2019 and 2027. Those unsecured bonds generally provide for a 30-day grace period for interest payments before a default is deemed to have occurred, the company said.
“If the interest payments are not made prior to the expiration of the grace period on December 17, 2012, then generally either the trustee or the holders of not less than 25% in aggregate principal amount of the bonds may declare the entire principal amount of the bonds and the interest accrued thereon to be due and payable immediately,” EME said.
In such an event, EME said, it likely would file bankruptcy.
In a subsequent SEC filing on November 21, EME said discussions were ongoing among several parties, including itself, its parent, California-based Edison International, and EME’s noteholders “regarding potential restructuring transactions of EME.”
Midwest Gen has indicated that if a bankruptcy petition is filed, its four remaining coal plants in northern Illinois—Joliet, Powerton, Waukegan and Will County—probably would continue to operate. In September, the company decided to shutter its Fisk and Crawford coal plants in Chicago earlier than planned under a deal brokered by Chicago Mayor Rahm Emanuel.
Over the next several years, Midwest Gen is facing the expenditure of several hundred million dollars to install pollution controls on the four operating plants to meet government mandated air quality regulations. Midwest Gen is a merchant generator, meaning it sells electricity from the plants into the wholesale market. The company has been hurt by low power prices that have dogged the wholesale market for months.
Altogether, the four plants generate more than 4,200 mw of electricity.