The Connecticut Resources Recovery Authority's (CRRA) mid-Connecticut project received $111.2 million from Deutsche Bank for an approximately $220 million Enron Power Marketing Inc. (EPMI) claim--approximately $24 million more than anticipated under a bankruptcy settlement. As first reported on Loan Market Week's Web site, five bidders participated in the auction and the cover bid was around the 49 5/8 context, market players said. The winning bid was 50.2. An official at Deutsche Bank declined comment.
The EPMI claims were guaranteed by the parent Enron Corp. Without the guarantee from the parent, the semi-public waste company would have expected an 18 or 19% recovery, a CRRA spokesman said. However, because of the cross guarantee the value of the claim doubled and CRRA was slated to receive $82.7 million in cash and stock under Enron's bankruptcy plan. A third of the amount was slated to be equity in PRISMA, the restructured Enron. This was approximately 37% of the $220 million loss CRRA suffered when Enron filed for Chapter 11 protection.
The waste company decided not to wait for the end of the process to get a settlement from the bankruptcy court. By selling the claim, CRRA accelerated the reception of the funds, the spokesman explained, noting it could take years to get the money back through the bankruptcy process. Auctioning the claim also eliminated the risks, as the claims objections process could impact their value. Furthermore, CRRA was not interested in receiving the $27.5 million of equity. "We learned there might be a market for this type of claim," the spokesman noted. After analyzing the bids CRRA could have decided to hold on to the claim and aim for the settlement agreed in the bankruptcy plan.
Three years ago, CRRA and Enron reached an agreement in which Enron received approximately $220 million up-front from the trash authority. In exchange, the energy giant agreed to pay CRRA $28.5 million per year for power generated at the mid-Connecticut Project, a CRRA plant that transforms trash into energy. The payments were supposed to go on for about 12 years. However, Enron declared bankruptcy after making only eight monthly payments and some predicted the end of the project. "We are very happy and assured that our mid-Connecticut project will be financially stable for the foreseeable future," the spokesman concluded.