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Anyone else have these still?
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folgore,

You wrote, Anyone else have these still?

Yes.

I received a solicitation from an Emily S. Gottlieb on behalf of GCG, Inc. to purchase my shares. The offer was for like 45 cents on the dollar. Odd since the bonds are trading for north of 60 cents on E*Trade. I ignored it.

There is news today though. NRG has reached a deal to purchase EME: http://online.wsj.com/article/PR-CO-20131018-909481.html

I haven't had the time to tease out how this affects existing bond holders of if the information even exists in the announcement.

There has been a fair amount of action on the court docket recently as well: http://www.edisonmissionrestructuring.com/maincase.php

- Joel
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Thanks Joel!

I found nothing but old news via Google. At this point, I think I'll just sell my position at current prices. It wouldn't be that big of a loss since I bought them relatively low.

I'll look over the articles you linked to. Unless I get the feeling that the new owner will pay bondholders, I might as well ditch before things really go bad.
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Joel,

Thanks from me too… I hadn’t seen this news.

From the RTT article linked below, my simple calculation gives $2.635B to cover $3.7B of debt which translates to 71.2 cents on the dollar (about where the bonds are now trading)

The news says that NRG will retain $1.272B of non-recourse debt, so those bonds may/should eventually workout better. I don’t know which issues are non-recourse. I hold 2 issues (7.75% & 7.00%). Does anyone know which are non-recourse?

Anyway 71 is close enough to my target of 75, so I will consider selling my small Etrade holding because they nickel and dime me on reorg charges. I will probably just let my larger FIDO position get converted since Fidelity is more reasonable about reorg fees.


http://www.rttnews.com/2204996/nrg-energy-to-acquire-edison-...
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With Edison being bought out, shouldn't that result in continued interest payments on our bonds or having the bonds called? If that's the case, patience would be in order. Is there anything about this setup that would leave bondholders in the lurch?
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I really don’t know much about bankruptcy law, but here is my take on it.

EME already defaulted, so what bondholders receive is now up to the bankruptcy judge.

It sounds like NRG and the creditors have AGREED on a reorg plan, so the judge will probably approve it.

The details of the reorg may be somewhere in those dockets that Joel linked or will be disseminated later.

From my past experience with BK workouts, I’m guessing we may get cash, NRG stock, or a new bond (or a combination of the above), but I’ve never gotten an existing bond reinstated after a chapter 11. But maybe NRG will find keeping the non-recourse debt alive to their advantage.

Like I said, I know nothing about BK law, I’m just guessing from past experience in my BK bonds.

Maybe someone else here can give a professional opinion.
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howardqt,

You wrote, The news says that NRG will retain $1.272B of non-recourse debt, so those bonds may/should eventually workout better. I don’t know which issues are non-recourse. I hold 2 issues (7.75% & 7.00%). Does anyone know which are non-recourse?

Any unsecured bond is non-recourse. Non-recourse simply means the obligation does not grant a security interest in title to some property. Likely your bonds are/were non-recourse.

- Joel
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Joel said......

"Any unsecured bond is non-recourse. Non-recourse simply means the obligation does not grant a security interest in title to some property. Likely your bonds are/were non-recourse."

Joel:

Are you sure, you statement is completely the opposite of my understanding. It is my understanding that ton-recourse debt is secured debt. The collateral is the lender's only security....meaning that the lender can't not file a lean against the borrower or force bankruptcy.

From Wikipedia......

"Non-recourse debt or a non-recourse loan is a secured loan (debt) that is secured by a pledge of collateral, typically real property, but for which the borrower is not personally liable. If the borrower defaults, the lender/issuer can seize the collateral, but the lender's recovery is limited to the collateral. Thus, non-recourse debt is typically limited to 50% or 60% loan-to-value ratios,[citation needed] so that the property itself provides "overcollateralization" of the loan."
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Joel,

My general understanding of recourse vs non-recourse debt is the same as Prophet43M.

It is my understanding that in the case of bankruptcy, unsecured bond holders have recourse against the debt issuer (could be a corporation or a subsidiary). So I think of unsecured debt as "recourse" debt.

But, as is usually the case, it’s not quite so simple. I learned this from my Amerenenergy bonds.

My Amerenenergy Genco bonds were also trading on the verge of bankruptcy until Dynegy (DYN) bought Genco from Ameren (AEE) and promised to continue paying interest on the bonds because they said: “the Genco unit came with non-recourse debt”. I guess what they really meant is Genco debt was non-recourse to it’s parent (see S&P quote below).

So it seems that recourse and non-recourse is also dependent on how the parent/subsidiary structure is setup and who issued the bonds. It comes down to recourse against whom! This is what I was wondering about, in the case of Edison Mission Energy bonds.

Howard


This is what S&P said about the Ameren/Genco capital structure:

Capital structure

GenCo has a stand-alone debt structure that is nonrecourse to its parent company or any of its parent company's other subsidiaries. GenCo's debt consists of three series of senior unsecured notes totaling $825 million.

We further note that the Ameren Corp. and its various other operating subsidiaries also have their own debt obligations that are nonrecourse to GenCo.
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howardqt,

You wrote, My general understanding of recourse vs non-recourse debt is the same as Prophet43M.

You're right. I've been distracted lately and I think I was thinking of something else.

- Joel
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I've got some Edison kicking around a bit.

I might be adding these numbers up incorrectly.

The articles both state the Aggregate purchase Price is $2.635B. They go on to mention the acquired cash.

Following the math in the RTT article.

$2.635 B
-$1.063 B Acquired Cash
---------
$1.572 B Net Cash/Stock Purchase Price
+$1.272 B Non-Recourse Debt Assumed
---------
$2.844 B Transaction Enterprise Value Cited in RTT Article.

If I understand this correctly, NRG is 'paying' $3.907 B in cash, stock, and debt for the company (which includes $1.063 B in cash).

If the $3.7B Howard mentions in his post is the correct amount of debt (and not debt net of cash), it could be that we're getting full face value. I should know the total amount of debt, but have to admit I haven't followed this one closely. Grabbing $1000 back in May of 2010 for $70.875 and collecting a few coupons before the BK proceedings.

I could be way off, it seems like I might be missing something, but when I add the numbers up and include the $350m in stock discussed in the article, this is the only way they seem to close out.

For my money, I'll just hold on and wait until some money and shares show up in my account.

Scott
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If the $3.7B Howard mentions in his post is the correct amount of debt (and not debt net of cash), it could be that we're getting full face value.

Scott,

I got the $3.7B debt from the RTT news report… I didn’t check out the real numbers until you got me excited:) about the possibility of receiving a full face value recovery.

Well I started digging, and it turns out that the $3.7B is ONLY the unsecured recourse debt. There is additional debt of $1.393B outstanding (probably mostly the non-recourse stuff).

I’m guessing there are other minor assets to account for, and it all works out close to the 73 that the unsecured bonds are currently trading at.

I sold my small lot at Etrade for 72.6 and I’m holding my larger Fido position for the mandatory conversion. Should be interesting to see what I get. Like you, my cost basis is in the low 70’s and I received a few interest coupons, so not too bad for a defaulted bond.

Howard



From Page 51 of Presentation to Senior Unsecured Noteholders - January 9, 2013

Capitalization Summary Source: Company financials

Issue Amt Outstanding (1) Maturity Coupon (2)

Big Sky Wind Vendor Financing 219.4 10/02/14 L + 350 bps
Broken Bow Wind Term Loan 52.0 12/21/27 L + 288 bps
Cedro Hill Wind Term Loan 125.8 12/31/25 L + 300 bps
Crofton Bluffs Term Loan 27.0 12/14/27 L + 288 bps
Laredo Ridge Term Loan 72.2 03/31/26 L + 275 bps
Tapestry Wind Term Loan 211.6 12/21/21 L + 250 bps
Viento Funding II Term Loan 199.6 12/31/20 L + 275 bps
Walnut Creek Energy Construction Loan 319.0 06/30/13 L + 225 bps
WCEP Holdings Construction Loan 51.5 06/30/13 L + 400 bps
American Bituminous Pwr Prtnrs Bonds 46.0 10/01/17 Tax-Exmpt Wkly
High Lonesome Mesa Bonds 69.3 11/01/17 685 bps

Total Project Debt $1,393.4

Senior Unsecured Notes due 2013 500.0 06/15/13 7.50%
Senior Unsecured Notes due 2016 500.0 06/15/16 7.75%
Senior Unsecured Notes due 2017 1,200.0 05/15/17 7.00%
Senior Unsecured Notes due 2019 800.0 05/15/19 7.20%
Senior Unsecured Notes due 2027 700.0 05/15/27 7.63%

Total Recourse Debt $3,700.0

Total Debt $5,093.4



1. Debt balances as of 12/20/12 and exclude letters of credit and working capital facilities; Letter of credit facilities of various project financings amounted to approx. $164.0 million

2. All amounts illustrated based on contractual spread as of 12/20/12, however, term loans are subject to traditional rate step ups. In addition, many floating rate notes are also subject to swap agreements locking in LIBOR rates

http://www.edisonmissionrestructuring.com/Presentation_to_Se...
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Sorry to get you excited for nothing.

Scott
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From WSJ Dec. 6, 2013

Edison Mission Bondholders Turn to Wilder for Bankruptcy Help


Edison Mission Energy's bondholders are hiring a team led by TXU Corp.'s former chief executive to help them navigate a coming legal battle in Edison Mission's bankruptcy.

Judge Jacqueline Cox, of the U.S. Bankruptcy Court in Chicago, on Thursday authorized Edison Mission to pay the bills of Bluescape Advisors LLC as Bluescape advises the bondholder group in connection with possible litigation against Edison Mission's parent, Edison International.

....

Edison Mission and its unsecured creditors, which include the bondholders, have been preparing to sue Edison International over allegations that it siphoned hundreds of millions of dollars from Edison Mission before the Chapter 11 filing. Edison International has vowed to fight the allegations, which it says lack merit.

It is a dispute in which the bondholders—and other unsecured creditors—have a lot at stake, as any money that is recovered from a potential lawsuit or settlement will be added to the cash and stock they are already set to recover from Edison Mission's restructuring.

....

Depending on such variables as an Edison International lawsuit or settlement, unsecured creditors will recover 57.3% to 100% of what they are owed under the restructuring plan.
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Thanks for pointing out this article - I had missed it.

I'm still sitting on my bonds and was contemplating closing out at $75 as no real movement has shown itself in the past few weeks.

The range that the article lists is quite interesting. I don't know where the low percentage comes from. It's not a likely outcome IMHO based upon the bond trading hands near $75 with some regularity.

Scott
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The range that the article lists is quite interesting. I don't know where the low percentage comes from. It's not a likely outcome IMHO based upon the bond trading hands near $75 with some regularity.

The WSJ indicated that the filing last week indicated that the company had said they expected a 57.3% recovery if they don't get better offers than the NRG offer http://online.wsj.com/news/articles/SB1000142405270230409610...

Edison Mission on Tuesday filed an updated version of its Chapter 11 plan with the Chicago bankruptcy court, adding the percentages it expects its creditors to recover of their claims upon the company's exit from bankruptcy by way of a $2.6 billion sale to NRG Energy Inc.

Edison Mission has already pledged to give its unsecured creditors, including bondholders owed $3.85 billion in principal, interest and fees, a cut of the sale proceeds and equity in the restructured company. The company now estimates that the payout will amount to a minimum recovery of 57.3% of what the unsecured creditors are owed, although a full recovery isn't off the table.


Apparently, the people buying the bonds at 75 are pretty certain that bondholders will be able to extract at least an extra 18% or so.

AJ
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aj485,

You wrote, Apparently, the people buying the bonds at 75 are pretty certain that bondholders will be able to extract at least an extra 18% or so.

I wouldn't be surprised if they got that additional 18% through a combination of shopping the company and/or litigation against the parent.

When I saw that article, I figured an up-side from here was less likely than the down-side and the down-side had further to fall than the up-side had to gain. That's why I sold the rest of my position last week.

- Joel
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Don't look now, but the bonds are now trading near $90. ETRADE is listing $89.25 today.

Still holding.

Scott
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Just received my EME reorg payout credited to my account.

Held:
5000 7.75% 6/15/2016 cusip (281023AR2)

Credited:
 
Cash 3358.40 67.168
NRG stock 17 shares (marked@32.15/shr) 546.55 10.931
EME reorg Trust 5193 units ?

It’s my understanding that the Unit Trust is entitled to future payments according to the following EIX settlement agreement:

EIX would make $634 million in total payments through 2016 (including interest):
$225 million upon closing
$199 million on September 30, 2015
$210 million on September 30, 2016

So if my analysis is correct, maybe another 17 cents on the dollar (634/3700) in the future.
This works out to over 95 cents on the dollar… not too bad for a BK workout…it pays to be patient!

From my experience, reorg workouts have been very good recently. My defaulted OSG bonds are trading above par and Exide bonds are trading in the 70’s. It will be interesting to see how unsecured bondholders make out with TXU and James River?

Howard
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Howard,
Thanks for the post, I was trying to skim through and determine the future of the EME Reorg as I saw the cash, NRG, and EME Reorg hit my account this morning and the total market value was obviously shy of the $95 the bond was trading at Monday/Tuesday.

In at $70 pre-BK, and received a few coupons. I'm a little over 15% annualized on this one - not too shabby for a BK.

Scott
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Scott,

From the news releases below, I think we may end up getting close to 105, but I’m not sure, maybe I’m counting the 2015/16 payments twice. I interpret these reports as $3.2B cash now plus $0.4B stock plus $0.41B in 2015/16 payments, equaling a total of $4.1B among $3.824B of claims. This equates close to $1.05 to the dollar.

Anyway, as you said, it was a good outcome for a BK bond. Taught me to hang on to the end. My costs were in the mid 70’s and high 50’s after interest payments. I sold 2 bonds at Etrade in the mid 70’s (mistake, live and learn). I held 5 bonds for a total return of about 60% over 4 years.

I’ve come to the conclusion that defaulted bonds are not necessarily a problem… many times they create an opportunity!

Howard


Here are some news release notes I kept today:

According to the notice, the reorganization trust that will distribute assets to the company’s creditors received roughly $3.2 billion in cash and about $400 million in NRG stock (based on about 12.67 million shares and NRG’s stock price in late morning trading of $31.90/share) as a result of the closings of the sale and settlement.

According to the company’s disclosure statement, total unsecured claims in the case will be roughly $3.824 billion.


http://www.highyieldbond.com/edison-mission-emerges-from-ban...



(a) the Reorganization Trust received the Estimated Cash Purchase Price (as defined in the Purchase Agreement and subject to certain adjustments) of approximately $3,024,181,595 and 12,671,977 shares of NRG Energy, Inc. common stock as part of the Sale Transaction and pursuant to the Purchase Agreement.
(b) the Reorganization Trust received the Effective Date Cash Amount (as defined in the EIX Settlement Agreement) of $225,000,000 (less $50,000,000 deposited to fund the EIX Escrow Account) as contemplated under the EIX Settlement Agreement. In accordance with the Plan, the Reorganization Trust has commenced the distributions provided for under the Plan.


http://www.edisonmissionrestructuring.com/pdflib/2260_49219....



EIX would make $634 million in total payments through 2016 (including interest):
$225 million upon closing
$199 million on September 30, 2015
$210 million on September 30, 2016


http://www.edison.com/files/Teleconference_Slide_Deck_021914...
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