Mach Gen LLC files for Chapter 11 Bankruptcy

Reuters reports Mach Gen LLC, the electricity generator company, filed for Chapter 11 bankruptcy protection in Delaware. The Monday afternoon filing was a result of the decreasing demand for power and lower energy. The company also reports capacity margins destroyed the company.

Mach Gen LLC is located in Athens, New York, and owned by Bank of America Corp, affiliates of Credit Suisse Group AG, and others. The company tried to avoid bankruptcy last year by selling its Harquahala Facility but was stopped by regulators. Other means to decrease their debts also failed.

“Mach Gen has faced significant interest expenses due to the leveraged nature of its balance sheet, which, in combination with declining revenues, has impacted Mach Gen’s ability to service its long-term debt,” the filing said. Last year Mach Gen made approximately $350 million in operating revenue and had a net loss of about $120 million.

Currently the company’s balance sheet lists assets of about $750 million and liabilities of about $1.6 billion. The company is scheduled to reorganize under its Chapter 11 filing, and most stakeholders have already approved a “prepackaged plan of reorganization.” According to Reuters, under the new plan, Mach Gen would “give its second-lien debt holders 93.5 percent of the restructured company and reduce about $1 billion of debt.”

The Chapter 11 bankruptcy filing for MACH Gen lists the following affiliates: MACH Gen GP LLC, Millennium Power Partners, LP, New Athens Generating Company LLC and New Harquahala Generating Company LL as affiliates in the filing.

Detroit Reaches agreement with two investment banks

In other bankruptcy news, Reuters reports Detroit has made an agreement with two investment banks to end costly interest rate swaps. Under the deal, Detroit may be able to get revenue from casino taxes and increase its chances that the bankruptcy court will approve its bankruptcy repayment plan.

Previous agreements to end swaps proved too costly, with U.S. bankruptcy Judge Steven Rhodes rejecting them. This agreement, however, would only cost the bankrupt city $85 million and would be used to hedge interest rate risk on some Detroit pension debt.

A motion has been filed with U.S. bankruptcy Judge Steven Rhodes, the judge who is in charge of the bankruptcy case, asking him to accept the deal. Detroit suggests in their motion that these swaps with UBS AG and Merrill Lynch Capital Services are just what are needed to help the city restructure an estimated $18 billion of debt.

Kevyn Orr, the city’s appointed emergency manager, believes the proposed swap deal will “serves as a model for compromise on other matters related to Detroit’s finances.” The counterparties have also agreed to the plan, and experts suggest, if it is approved, this agreement could force other creditors to accept the plan of adjustment as well.

The debt repayment plan, which the city submitted to the bankruptcy court on Feb. 21, 2014, suggested other cuts to unsecured creditors, including Detroit’s retirement systems and certain bondholders. These groups have been fighting the plan for weeks. The pension holders claim pension cuts are not allowed under the state’s constitution, and the bondholders argue their debt should not be treated like other unsecured debt.