Toronto-headquartered retail energy provider Just Energy Group Inc. entered into a support agreement and backstop commitment letter that, if approved, will result in the company's emergence from Chapter 15 bankruptcy.
On March 9, 2021, Just Energy and its affiliates sought creditor protection from the Ontario Superior Court of Justice. On that same day, the company also filed for Chapter 15 bankruptcy protection in the U.S. Bankruptcy Court for the Southern District of Texas.
The move was prompted by more than $250 million in charges from the Electric Reliability Council of Texas Inc. that Just Energy amassed as the state's power system buckled during a rare arctic blast in February 2021.
Through its restructuring plan, described in a statement May 13, Just Energy will launch a US$192.6 million new equity offering to buy 80% of the new common equity of a new parent company.
The company also intends to repay in full its first-lien credit facility, other than up to C$20 million which may remain outstanding under an amended credit agreement. The amended agreement will provide for a C$250 million facility.
The pre-filing secured claims of BP Canada Energy Group ULC and BP Energy Co. of about US$229.5 million and C$200,000, plus interest, which will be exchanged for preferred equity of the new parent company.
Claims of creditors of about US$208.6 million under the company's unsecured term loan agreement, plus fees and interest, will be settled in exchange for 10% of new common equity of the new parent company.
Just Energy will cease to be a reporting issuer and the new parent will be a private company.
Beneficial subordinated note claim holders may not expect to receive any recovery under the plan, with their claims being canceled without any entitlement.
The plan is subject to the approval of both the secured and unsecured creditor classes, as well as by courts.
Just Energy also entered into a support agreement with the lenders under the company's debtor-in-possession financing facility.
Under the agreement, the company is not allowed to solicit any alternative restructuring transaction but is permitted to consider unsolicited alternative restructuring proposals.
The backstop commitment letter provides for the issuance of 10% of the new common equity of the new parent company to the backstop parties as a fee for their agreement to backstop the equity offering.
Just Energy and certain of its affiliates plan to bring the motions before the Ontario Superior Court of Justice on May 26 for the proposed proceedings.
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