Teesside Power will conduct a £160 million auction of British Energy's trade claims in the coming weeks, according to sources familiar with the situation. Fieldstone Private Capital Group, an investment bank that works with power companies, is advising Teeside on the sale.
Distressed investors in both the U.S. and Europe are interested in holding the trade claims, because they will be converted into equity and bonds. Potential investors are betting on power prices recovering in the U.K. based on changes introduced by new European carbon emissions legislation, a U.K.-based trader noted. "Based on the current trading value of the existing British Energy bonds, the look-through value of Teesside's claims produces a value slightly above par," he explained. British Energy's bonds are currently trading at 142.
Teesside was a power supplier to British Energy back in 2002, when British Energy announced an out-of-court restructuring of its debt. An agreement was reached between Teesside and the company's other two main creditors for unmet contract terms. As part of the arrangement the company's creditors would trade their claims for both British Energy's equity and bonds. The power company's other two main creditors Enron and Totalfinaelf have already sold their claims. Fieldstone officials in London did not return calls.
"After the restructuring process is finished 97.5% of British Energy will be held by creditors of various sorts, it's possible that a large part will be held by people who hold distressed positions," a British Energy spokesman noted.