Talen Energy subsidiary inks equity financing for exiting Chapter 11 bankruptcy

Talen Energy Supply LLC has received a commitment of at least $1.3 billion in new equity investment as part of its voluntary restructuring agreement, with an option to increase the offering to as much as $1.65 billion.

The Riverstone Holdings LLC-backed independent power producer, which filed for Chapter 11 bankruptcy protection May 9 to resolve a liquidity deficit, also satisfied a requirement that debtors holding at least two-thirds of the company's unsecured notes support the restructuring, according to a June 3 announcement from parent Talen Energy Corp. Talen Energy Supply, or TES, has received signatures from holders of more than 71% of its unsecured notes on the restructuring support agreement.

Those noteholders will convert more than $1.4 billion of that debt to equity once TES concludes the reorganization, enabling it to shed $3.2 billion of debt.

"The completion of these two key milestones represents another step forward as we strategically reposition TES for long-term value creation," Talen Energy CEO Alex Hernandez said in a statement, adding that the backstop parties' commitment will help repair the balance sheet of TES and provide equity capital for its data center startup, Cumulus Growth Holdings LLC.

In December 2021, TES secured an $848 million first-lien revolving credit facility, allowing the independent power producer to avoid potential liquidity issues ahead of the winter heating season. The company expected its cash deficit to reverse in early 2022 as natural gas prices climbed, according to a May 10 declaration by Ryan Leland Omohundro, Alvarez & Marsal's managing director and restructuring adviser. However, a requirement to pay off $114 million of unsecured notes due in 2021 left little collateral available for hedging contracts.

Talen Energy has committed to exiting coal generation, expanding battery storage and co-investing in about 1,400 MW of utility-scale renewable energy projects over the next five years.

Talen Montana LLC has also asked the Texas court presiding over the bankruptcy case to allow recovery of hundreds of millions of dollars of pension funds and Colstrip coal plant remediation costs that former corporate owner PPL Corp. allegedly transferred out of the TES subsidiary.

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