On April 23, 2012, Bicent Holdings LLC, and various related entities (collectively “Bicent” or the “Debtors”) filed petitions for bankruptcy in the United States Bankruptcy Court for the District of Delaware. According to a Declaration of Bicent’s CFO (the “Declaration” or “Decl.”), the company’s need for bankruptcy protection stems in part from the continued drop in prices for natural gas, followed by Bicent defaulting under its loan agreements. Decl. at * 12. This post will look in greater detail to the events that led to Bicent filing for bankruptcy. Further, it will provide a brief summary of the company’s operations, debt structure and objectives while in bankruptcy.
Bicent is a privately held Delaware limited liability company. As a result of acquisitions that date back to 2007, Bicent currently owns and operates two electric power plants – one in Montana, and a second in California. Bicent’s Montana electricity plant is a “coal-fired facility” which, according to Bicent, operates under a state-of-the-art control system and utilizes clean emissions systems. The company views its Montana plant as one of the cleanest burning coal-fired electricity plants in operation. Decl. at *5.
Whereas the Montana plant is coal-fired, Bicent’s California facility is a natural gas-fired electric facility. This facility is located approximately 70 miles east of San Francisco and began operations in 1990. Decl. at *6.
Besides power generation, Bicent also operates a power management services company known as CEM. Based in Colorado, CEM provides operation and maintenance, design and construction management and other related services to power production companies. Through CEM, Bicent can build, operate and run power plants for its customers. Decl. at *7.
Events Leading to Bankruptcy
Bicent enters bankruptcy with prepetition debt totaling approximately $383 million. The company’s debt arises under three credit agreements – a first lien credit agreement, a second lien credit agreement and a mezzanine credit agreement. According to Bicent, when it entered the credit agreements with its lenders, the company assumed it would continue to grow and would eventually refinance the credit agreement under favorable terms. Decl. at *12. Due to a substantial drop in the price of natural gas, however, Bicent’s assets (specifically, the company’s future earnings capacity) have also dropped, making it difficult for Bicent to refinance the loan agreements.
Earlier this year, Bicent was hit with a $22 million arbitration award. The arbitration arose from one of Bicent’s contracts to build a power plant in Hobbs, New Mexico. Although Bicent is attempting to vacate the arbitration award, Bicent views the award as a significant legal proceeding which has adversely affected its business. Bicent estimates that it has lost in excess of $50 million due to the events underlying the arbitration. Decl. at *13. Most significant, however, was the fact that Bicent had to write-off certain receivables from the Hobbs project, which in turn triggered defaults under the company’s loan agreements. Decl. at *15.
Objectives in Bankruptcy
Prior to filing for bankruptcy, Bicent and its lenders entered into a Restructuring Support Agreement. Under this agreement, Bicent intends to seek approval of a disclosure statement within the first 55 days of its bankruptcy proceeding and confirmation of its plan of reorganization within the first 105 days following the commencement of its bankruptcy petition.
Bicent’s bankruptcy proceeding is before the Honorable Kevin Gross. Judge Gross is the Chief Judge of the Delaware Bankruptcy Court. Bicent is represented by the law firm Young Conaway Stargatt & Taylor. A copy of Bicent’s Declaration in support of its bankruptcy petitions is available here for review. A copy of Bicent’s bankruptcy petition is available here for review.