A group of hedge funds, including Cargill Financial Markets, is looking to refinance approximately $1 billion in loans associated with the construction of two power plants in New England, according to Power, Finance & Risk, an LMW sister publication. The funds bought the bank debt connected to the Londonderry facility in New Hampshire and the Lake Road plant in Milton, Conn., in the secondary market at discounted prices and are now the major holders.
Separately, Lake Road and AES Londonderry debt popped up in secondary trading this week. The AES debt jumped approximately 10 points to 97-100 and Lake Road climbed from 95-105. According to traders, this was attributed to the Federal Regulatory Energy Commission's approval of a measure that will change the way power producers in New England are paid. Known as the New England Locational Installed Capacity proposal, it removes uniform capacity payments and instead varies pricing on demand from a specific region (LMW, 6/20). Boston Generating also shot up from 116-120 to 127-130 two weeks ago.
PG&E National Energy Group, which filed for Chapter 11 bankruptcy protection two years ago, sponsored construction of Lake Road but ultimately handed the keys back to a Citigroup-led creditor group. The project has approximately $630 million of bank debt and $97.5 million of accrued interest. The name was quoted in the mid-50s last July. It has since traded heavily, with Deutsche Bank and Bear Stearns among the desks brokering the paper. Last December Cargill purchased $150-200 million of the paper at 82. The Londonderry combined-cycle unit, which originally was sponsored by AES, has some $300 million in non-recourse debt, not including accrued interest.
The plan by the hedge funds to refinance the debt suggests they have a long-term outlook on the facilities. It is unclear if the debt-holders intend to initiate a formal process to select a lead arranger. The group, however, has had informal discussions with Credit Suisse First Boston about reworking both loans. Bankers at CSFB declined to comment. Calls to Cargill executives in Minnetonka, Minn., were not returned.
