Exelon GenerationCo. LLC expects to record anywhere between $115 million and $135 millionin noncash impairment on its fiscal first-quarter results, according to a Form 8-Kfiled April 5.
The pre-tax charge relate to the Exelon Corp. subsidiary's upstream unit CEU Holdings LLCwhich had borrowed $68 million under its reserve based lending agreement as of Dec.31, 2015. The loan was secured by $187 million of upstream assets.
The borrowing base under the facility was $85 million but wasdecreased to $45 million in February as part of lenders' semi-annual borrowing basere-determination testing. As a result, CEU Holdings incurred a "borrowing basedeficiency" of $23 million and chose not to provide a plan to amend the matterby March 31 as required.
The lenders have sent CEU Holdings a notice of event of defaultand are demanding cure. The parties are under discussion and a possible remedy couldinclude the sale of the upstream assets in order to wind down the business.
"[Exelon Generation] will perform an impairment assessmentas a result of these events as of March 31, 2016 and expects to record a non-cashimpairment charge for the difference between the book value and the fair value ofTHE Upstream assets in its financial results for the first quarter of 2016,"the company said.
Meanwhile, lenders have not yet accelerated debt outstandingunder the loan agreement.