FirstEnergy Solutions Corp. expects to emerge from Chapter 11 bankruptcy protection before the end of the year as the judge overseeing the case signals he will approve the company's reorganization plan.
U.S. Bankruptcy Judge Alan Koschik on Oct. 15 "indicated he will confirm the plan that was supported by more than 93[%] of voting creditors," FirstEnergy Solutions, or FES, and FirstEnergy Nuclear Operating Co., or FENOC, said in a news release.
"This is a landmark day in the history of our company," FES President and CEO John W. Judge said in the release. "We are now in a position to successfully conclude the Chapter 11 process and will emerge from the restructuring as a fully independent energy company well-positioned to continue serving the needs of our 800,000 customers."
FES on Oct. 11 filed its eighth amended plan of reorganization with the U.S. Bankruptcy Court for the Northern District of Ohio. FES, its subsidiaries and FENOC filed for Chapter 11 bankruptcy protection in late March 2018.
The latest plan calls for the separation of FES from FirstEnergy Corp. upon the effective date and incorporates a court-approved agreement between the two entities.
Under the terms of the agreement, FirstEnergy will pay $225 million and issue $628 million of senior notes due December 2022 to FES and FENOC.
In addition, FES will receive $475 million and bankrupt subsidiary FirstEnergy Generation will receive $25 million from a $500 million credit revolver facility obtained by FirstEnergy and FES.
FirstEnergy and FES revised their agreement in April to eliminate nonconsensual third-party releases at the heart of objections filed by several federal government agencies, environmental groups and consumer advocates. The move came after the U.S. Bankruptcy Court rejected FES' first amended joint plan of reorganization on the grounds that it would have released legal parent FirstEnergy from any potential, future environmental claims tied to merchant coal and nuclear generation assets.
FirstEnergy Generation and FENOC also "reached framework agreements" with unions representing workers at its nuclear plants in order for the plan to proceed.
Under the plan, a newly formed holding company will issue up to 250 million shares of new common stock in a private placement to help satisfy claims against the debtors from creditors and the holders of allowed unsecured bondholder claims. The holding company may also use cash on hand, in addition to new common stock, to satisfy claims.
A new eight-member board of directors will be seated to lead the reorganized company, which is expected to retain FES' retail business and customers.