A group of hedge funds reportedly led by an affiliate of Cargill Financial Markets has put the kibosh on US Power Generating Company's $220 million bid to acquire the 780 MW natural-gas fired Lake Road facility. In the days preceding a Dec. 20 sale confirmation meeting, the funds bought up approximately 25% ($150-200 million) of the bank debt associated with the plant. With that ownership heft, the group had enough influence to sway voting at the meeting.
Jay Worenklein, ceo at US Power, declined to comment on the transaction, as did officials at Lehman Brothers, which is acting as advisor to the Citigroup/Société Générale-led creditor group. Calls to officials at Cargill were not returned.
Ownership of Lake Road was transferred from previous owner National Energy & Gas Transmission (NEGT) to a Citigroup-led creditors group last September after a loan default. Worenklein put in a $220 million bid to acquire the facility from its creditors. The deal would have worked out to US Power paying $42 million in cash and assuming about $180 million of debt. The creditors would also still hold a claim against NEGT that will enable them to get $239 million separate from any plant sale. Under this deal creditors would have recovered approximately 80% of the bank debt.
But the debt on the plant, which was quoted around 50 last July, has climbed above this level. Bear Stearns reportedly traded a $25 million piece of the credit at 82 last week (LMW, 12/20). After the meeting, a $57 million piece was sold by SG, according to traders. An SG trader could not confirm the sale.