Deutsche Bank picked up $50 million of Redbud Energy Project's bank debt as the project heads for transfer to the lenders. Two $25 million pieces were bought in separate auctions from original lenders Mizuho Bank and Royal Bank of Canada. Mizuho sold for 56 and RBC for 55 1/2. Officials from the two lenders did not return calls. Deutsche Bank officials declined to comment.
Redbud is owned by InterGen, a joint venture of Royal Dutch/Shell Group and Bechtel Enterprises. The Okla.-based project was funded with $523 million of non-recourse financing, but has struggled since its inception. The credit is priced at LIBOR plus 1 5/8%.
Redbud is one of three plants that were built as part of the joint venture. Magnolia Energy Project, which has $425 million of debt, is quoted in the high 50s-low 60s. The third plant is Cottonwood, a Texas-based, natural gas-fired power facility. Lehman Brothers is said to have traded a $5 million piece of the name. Cottonwood has a $398 million "A" tranche and a $132 million "B" tranche. Citigroup, ABN Amro and Deutsche Bank are the respective leads on the debt associated with the facilities.
InterGen asked Lehman last fall to advise it on its options for the three facilities. Notwithstanding some potential pitfalls, holding the project debt for two or three years could bring 25-50% upside, one buysider speculated.
Meanwhile, Dutch/Shell and Bechtel have agreed to sell InterGen's international assets to AIG Highstar Capital II and Ontario Teachers' Pension Plan. "They could [now] be wrapping up their domestic side," a research analyst said. The sale did not include the trio of assets because the venture did not want to muddle the auction process by including merchant plants since the other facilities have power purchase agreements in place. An Intergen spokeswoman declined comment
