April 4, 2022 – The Debtors filed a Revised Chapter 11 Plan and a related Disclosure Statement [Docket Nos. 435 and 436, respectively]; and separately filed blacklines of each showing changes to the versions filed on March 22, 2022 [Docket No. 437] which reflect the terms of the now 75% supported Fifth Amended RSA which was entered into on April 1st. The Disclosure Statement is to be considered at an April 6th hearing, which was delayed by a day as the Debtors put finishing touches on the considerably revised Plan documents.
UPDATE: On April 6, 2022, the Debtors filed solicitation versions of their Revised Plan of Reorganization and Disclosure Statement [Docket Nos. 464 and 465, respectively]. On the same day, the Court issued an order approving (i) the adequacy of the Debtors’ Disclosure Statement, (ii) Plan solicitation and voting procedures and (iii) a timetable culminating in a May 13, 2022 Plan confirmation hearing [Docket No. 463].
Material Amendments are highlighted in blue bold below.
The Revised Disclosure Statement [Docket No. 436] notes, “The Plan reflects all material terms of a revised version of the pre-negotiated restructuring that was agreed among the Debtors and certain of their major stakeholders, evidenced by the Restructuring Support Agreement dated as of April 1, 2022.
The anticipated benefits of the Plan include, without limitation:
- restructured obligations (the ‘New and A&R Obligations’), which shall include the Working Capital Facility, the Amended & Restated Secured Exit Financing Facility, the 1L Secured Obligations, the Amended & Restated 2L Secured Obligations and the New Common Equity;
- The exchange or payment of the up to $50 million DIP Credit Facility with the proceeds of an Amended & Restated Secured Exit Financing Facility;
- Unimpairment of general unsecured creditors, with allowed General Unsecured Claims to be satisfied by contributions from AES Andes; and
- The prospect of expeditious emergence from Chapter 11.
The Plan provides for a comprehensive restructuring of the Debtors’ prepetition obligations, preserves the going-concern value of the Debtors’ business, and maximizes creditor recoveries."
The Revised Disclosure Statement drills down as to treatment of claims and interests: “The Plan provides for the treatment of Claims against and Interests in the Debtors through, among other things, the following:
- Each Holder of an Allowed Administrative Claim shall receive in full and final satisfaction of its Allowed Administrative Claim an amount of Cash equal to the unpaid portion of such Allowed Administrative Claim;
- Each Holder of an Allowed Professional Fee Claim shall receive payment in Cash of the reasonable and documented legal, professional, or other fees and expenses related to implementation of the Plan and Consummation incurred by such Debtor or Reorganized Debtor (as applicable);
- Each Holder of an Allowed Alto Maipo Senior Secured Obligation shall receive, without setoff or recoupment by any Debtor or Reorganized Debtor, its Pro Rata Share of the 1L Secured Obligations and Amended & Restated 2L Secured Obligations, provided, however, that Strabag’s Pro Rata Share of such secured notes shall be held in escrow pending satisfaction of all conditions to payment of the Supplier Deferred Payment;
- Each Holder of an Allowed Secured Claim shall receive, at the option of the Debtors, either (i) Cash in an amount equal to such Allowed Secured Claim or (ii) the collateral securing such Allowed Secured Claim, on or as soon as reasonably practicable after the later of the date such Claim is Allowed and the Effective Date;
- Each Holder of an Allowed Priority Claim shall receive treatment in a manner consistent with section 1129(a)(9) of the Bankruptcy Code;
- Each Holder of an Allowed a General Unsecured Claim shall have its Claim paid in full in cash, funded by a cash contribution by AES Andes of up to $300,000.00 as set forth in Annex A to the Plan. That certain contingent and unliquidated General Unsecured Claim set forth in Annex B to the Plan shall survive unimpaired. Remaining General Unsecured Claims shall be disallowed and expunged and/or estimated at zero for distribution purposes, or be resolved and released pursuant to the terms of the Plan, as detailed on Annexes C and D to the Plan;
- All Allowed DIP Claims shall be exchanged for, or paid with the proceeds of, the Amended & Restated Secured Exit Financing Facility, and, in consideration for, inter alia, the impairment of the DIP Claims, certain contributions to the Borrower for the payment in full in cash of certain allowed unsecured claims, and for their agreement to pay up to $10 million to satisfy certain other claims to the extent set forth in the Plan Term Sheet AES Andes or its designee shall receive the New Common Equity, as provided for in the Restructuring Term Sheet;
- In consideration of Strabag’s Other Claims that are Allowed, Strabag shall be entitled to payment as described in Section 3.3(f)(ii) of the Plan (less any payments on account of any such items made prior to the Effective Date);
- Each Holder of an Allowed Intercompany Claim shall have its Claim: (a) Reinstated or (b) cancelled, released, and extinguished and without any distribution, in each case, at the Company’s election with the consent of the Required Consenting Creditors;
- Each Holder of an Existing Equity Interest shall have such Interest cancelled, released, and discharged and without any distribution, in each case, at the Company’s election and to the extent permitted under applicable law. In order to effectuate such cancellation, release and discharge, as of the Effective Date, Strabag shall, upon request and at the direction of the Debtors or the Reorganized Debtors, re-deliver its shares to AES Andes or such other entity as is designated by AES Andes.”
The Revised RSA
On stakeholder negotiations and the resulting revised RSA, the Disclosure Statement adds: :The parties spent the majority of February 2022 in intense negotiations over a revised plan structure, and reached agreement on the terms of a further amended RSA (the ‘Third Amended RSA’) and plan structure. The Third Amended RSA provided for certain necessary revisions to resolve the near-term liquidity shortfall (including certain deferrals from the Sponsor, Strabag, and the Senior Lenders; an increase in the size of the Amended & Restated Secured Exit Financing Facility; and an additional $15 million in working capital to be contributed by the Sponsor).
The parties subsequently agreed to certain further amendments to the RSA and plan structure (as memorialized in the plan term sheet attached to the RSA), resulting in the execution of a further revised RSA dated as of April 1, 2022 (the ‘Fifth Amended RSA’)
As of the date hereof, the following parties have executed the current version of the Restructuring Support Agreement: Alto Maipo, AES Andes, Norgen er Renovables SpA, Strabag SpA, Banco De Crédito e Inversiones, DNB Bank ASA, Itaú Corpbanca, Cerberus, Santana S.A., Moneda Deuda Latinoamericana Fondo de Inversión, Moneda Alturas II Fondo de Inversión, CVIC Cayman Securities Ltd., CVI EMCOF Cayman Securities Ltd., CVI CVF IV Cayman Securities Ltd., CVI CVF V Cayman Securities Ltd., CVI AV Cayman Securities LP., CVI AA Cayman Securities LP., Carval GCF Cayman Securities Ltd., and Carval CCF Cayman Securities Ltd, Nineteen77 Capital Solutions LP, Clover Private Credit Opportunities Secondary II LP and Clover Private Credit Opportunities Secondary (Levered) II LP. The Restructuring Support Agreement is currently supported by holders of approximately 75% [up from 50%] of the Debtors’ senior secured debt. The Plan described herein, and as filed contemporaneously herewith, is consistent with the terms of the Fifth Amended RSA.
As provided in the Plan, AES Andes has agreed to make significant new money contributions to the Debtors’ go-forward capital structure, which underscore its ongoing commitment to the Debtors’ restructuring efforts and go-forward potential. Pursuant to the RSA, AES has agreed to provide both the Amended & Restated Secured Exit Financing Facility and the Working Capital Facility on terms that are substantially below market rates. Further, the Fifth Amended RSA obligates AES Andes to (i) roll its DIP Claims into an upsized Amended & Restated Secured Exit Financing Facility and (ii) waive its rights to repayment in cash at exit, agree to certain deferrals and fund up to $300,000.00 in satisfaction of Allowed General Unsecured Claims, and (iii) agree to make capital contributions of up to $10 million to fund any necessary payments relating to certain litigation claims that will ride through unimpaired. In total, the Debtors estimate that the value of these contributions range between approximately $4.5 to $28.8 million, with a midpoint estimate of $16.9 million.
The Debtors, having commenced these Chapter 11 Cases in order to pursue an orderly restructuring process under the terms of the Orig inal RSA, now seek to implement the Plan on modified terms that have been agreed in the Restructuring Support Agreement attached as Exhibit E. The Debtors seek to (i) create a sustainable capital structure that will permit them to finish construction on the Project and fully transition into a revenue-generating enterprise; (ii) secure sufficient liquidity to facilitate the final phase of construction and the commencement of operations of the Project, as well as to support long-term operations; and (iii) maximize long-term value for all of their creditors.”
The following is an amended and updated summary of classes, claims, voting rights and expected recoveries showing changes in blue (defined terms are as defined in the Plan and/or Disclosure Statement, see also the Liquidation Analysis below):
- Class 1 (“Alto Maipo Senior Secured Obligations”) is impaired and entitled to vote on the Plan. The aggregate amount of claims is $2.04bn and estimated recovery is 60.0-66.8%. Each Holder shall receive, without setoff or recoupment by any Debtor or Reorganized Debtor, its Pro Rata Share of the 1L Secured Obligations and Amended & Restated 2L Secured Obligations which shall, in the aggregate, represent a 60.0-66.8% recovery on the total face amount of the total Allowed Alto Maipo Senior Secured Obligations.
- Class 2 (“Secured Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan.
- Class 3 (“Priority Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan.
- Class 4 (“General Unsecured Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The aggregate amount of claims is $149,000 and estimated recovery is 100%.
- Class 5 (“DIP Claims”) is impaired and entitled to vote on the Plan. The aggregate amount of claims is $50.0mn and estimated recovery is up to 100%. All Allowed DIP Claims shall be exchanged for, or paid with the proceeds of, the Amended & Restated Secured Exit Financing Facility. Additionally, in consideration for, inter alia, certain deferrals from the Sponsor; an increase in the size of the Amended & Restated Secured Exit Financing Facility; the impairment of the DIP Claims; AES Andes’ contribution of up to $300,000.00 to satisfy Allowed General Unsecured Claims, and AES Andes’ agreement to contribute up to $10M to satisfy obligations in connection with certain other claims. AES Andes or its designee shall receive the New Common Equity, as provided in the Restructuring Term Sheet.
- Class 6 (“Strabag’s Other Claims”) is impaired and entitled to vote on the Plan. The aggregate amount of claims is $17.5mn and estimated recovery is up to 100%. In consideration of Strabag’s Other Claims, which are hereby Allowed, Strabag shall be entitled to payment as follows (less any payments on account of any such items made prior to the Effective Date) (all capitalized terms used in subsections 1-5 below and not otherwise defined herein are as defined in the Tunneling Contract): (1) $761,030 upon completion of signed Change Order 1; (2) $326,240 upon completion of signed Change Order 2; and (3) $53,827 upon completion of signed Change Order 4; provided that payments due to Strabag pursuant to (1), (2), and (3) above shall be subject to deferral until December 31, 2022, and shall bear interest at a rate of 4.0% per annum starting from the date that the Company accepts the completion of relevant Change Order (the “Strabag Change Order Deferral”); (4) $112,000 in the aggregate upon completion of an eco-flow monitoring system for all intakes; (5) $10,000,000 upon Substantial Completion of Critical Milestone F, which payment shall be subject to deferral until it is paid pursuant to the excess cash flow sweep (as described in the Restructuring Term Sheet), shall bear interest at a rate of 4.0% per annum starting from the date of Substantial Completion of said Critical Milestone F, and shall be payable pursuant to the excess cash flow sweep (the “Strabag Construction Deferral”); and (6) upon receipt, approximately $6,268,021 in insurance proceeds to be paid by Seguros Generales Suramericana, S.A. and Chilena Consolidada S.A. corresponding to insurance claims (No. 118495032, No. 119488886, No. 19448014, and No. 119448021) against the Construction All Risks insurance policy (Policy No. 4492152) (or the amount determined to be payable in connection with such claims in connection with such policy) which amount shall be subject to deferral until December 31, 2022, and shall bear interest at a rate of 4.0% per annum from the date of receipt by the Company until payment to Strabag (the “Strabag Insurance Deferral” and, together with the Strabag Change Order Deferral and Strabag Construction Deferral, the “Strabag Deferrals”). The Strabag Deferrals shall be secured, pari passu with the 1L Secured Obligations, until paid in full.
- Class 7 (“Intercompany Claims”) is impaired/unimpaired, deemed to accept/reject and not entitled to vote on the Plan. The aggregate amount of claims is $1.1bn and estimated recovery is up to 100%/0%.
- Class 8 (“Existing Equity Interests”) impaired, deemed to reject and not entitled to vote on the Plan.
The Disclosure Statement [Docket No. 402] attached the following exhibits.
- Exhibit A Joint Chapter 11 Plan of Reorganization (filed separately at Docket No. 401)
- Exhibit B Liquidation Analysis
- Exhibit C Valuation Analysis
- Exhibit D Corporate Organizational Chart
- Exhibit E Restructuring Support Agreement
- Exhibit F Financial Projections
- Voting Deadline: May 5, 2022
- Objection Deadline: May 5, 2022
- Confirmation Hearing: May 13, 2022
Petition Date Perspective
On November 17, 2021, Alto Maipo Delaware LLC and Alto Maipo SpA (together “Alto Maipo” or the “Debtors,” with the Delaware LLC created just prior to filing) filed for Chapter 11 protection with estimated liabilities between $1.0bn and $10.0bn*.
* Includes, inter alia, $1.471bn of first lien debt and $960.0mn of subordinated debt. See "Prepetition Debt" below.
As noted in "Corporate Structure" below, the Debtors, owners of a not yet operational hydroelectric facility located 50km from Santiago, Chile, are indirectly controlled by AES Andes which is in turn 67% owned by Virginia-based AES Corporation (NYSE: AES). In a November 17th 8-K, AES Corporation stated that: "On November 17, 2021, AES Andes announced that its subsidiary Alto Maipo SpA ('Alto Maipo') has commenced a reorganization proceeding in accordance Chapter 11 of the U.S. Bankruptcy Code, through a voluntary petition that was filed today (the “Chapter 11 Proceeding”). The AES Corporation (the “Company”) is no longer considered to have control over Alto Maipo and, therefore, in accordance with ASC 810-10-15-10, will derecognize from its Consolidated Statement of Financial Position the assets and liabilities of Alto Maipo and recognize an after-tax loss of approximately $800 million – $1 billion, net of non-controlling interests, in the Consolidated Comprehensive Income Statements for the fourth quarter of 2021, associated with the loss of control attributable to the former controlling interest.
In a press release announcing the filing, the Debtors advised that: “Alto Maipo SpA has filed for Chapter 11, Title 11 of the United States Code through a Pre Arranged financial restructuring agreement [although see below as to some doubt as where any support agreement stands] reached with its creditors, with the aim of initiating a financial reorganization process.
This process is intended to create a sustainable long-term capital structure maximizing recovery for all of its creditors and ensuring the liquidity necessary to meet the short-term obligations for the start-up of the project.
The reasons for this decision are linked to the circumstances previously communicated, when it was informed about the update of studies and market and hydrology projections prepared by independent experts. These estimate a reduction of more than 50% in the price of energy in different scenarios, considering the incorporation of multiple renewable projects to the national electricity system and in a time frame that was not foreseen years ago. Likewise, there was a significant decrease in hydrology in the last 10 years, compared to the historical average, which could mean a reduction in the expected annual generation of the project.
Alto Maipo is currently 100% complete in the excavation of its tunnels and 99% complete overall. Its construction will be completed within the costs estimated in its last restructuring and approximately one year ahead of the dates guaranteed in the current construction contracts.”
Board minutes from a meeting held in Santiago on November 16th at 5pm (filed with the lead Petition) cast some shade on the Debtors' press release contention that they have already reached an restructuring support agreement with creditors. Those minutes note: "As a result of the work of the Company and its advisors, significant progress has been made with the Lenders regarding the restructuring of the Company's financing through the submission of the Company to the Chapter 11 regime. While the Company and the Lenders remain in discussions and have made progress towards proposed terms for a restructuring of the Company’s obligations, the Company and the Lenders have not yet reached definitive terms on a restructuring support agreement."
Prepetition Secured Debt
- First Lien Indebtedness. Alto Maipo is the borrower under a series of prepetition term loans (the “Term Loans” and the lenders thereunder, the “Term Lenders”), all of which are secured by substantially all assets of the Company (the “Prepetition Collateral”) and rank pari passu as between each other. Itaú Corpbanca S.A. serves as administrative agent for the Term Loans. The Term Lenders include certain international development banks, local and international commercial banks, and syndicated lenders, including (i) the U.S. International Development Finance Corporation, (ii) the Inter-American Development Bank, (iii) Banco de Crédito e Inversiones, (iv) Banco Itaú, (v) DNB ASA, (vi) Deutsche Bank AG, (vii) UBS Group AG, (viii) Moneda Asset Management, (ix) Finepoint Capital, (x) Santana Capital Group, (xi) Clover Capital, Ltd., and (xii) Regera Sàrl. The Term Lenders collectively hold $1.471 billion in outstanding senior secured term loan debt.
- Strabag Construction Agreement. Alto Maipo is party to a construction agreement with Strabag (the “Strabag Construction Agreement”), under which: Strabag holds a secured claim of up to $392 million against the Debtors, payableupon the fulfilment of certain contractual conditions.To date, Strabag has asserted secured claims of no less than $131 million against the Debtors (the majority of which is payable in shares of Alto Maipo), and the Debtors hold claims of up to approximately $36 million against Strabag.
- Interest Rate Swaps. Certain of the Term Loans are also subject to interest rate swaps (the “Swaps” and together with the Term Loans, the “Prepetition Secured Debt”) held by the originating banks as well as KfW IPEX-Bank GmbH (the “Swap Counterparties” and together with the Term Lenders, the “Prepetition Secured Parties”). The total mark-to-market value of the Swaps, in the event of their termination, is approximately $164 million (as of October 25, 2021). The Swaps are also secured by the Prepetition Collateral and rank pari passu with the Term Loans.
The Debtors’ Prepetition Unsecured Debt
- Voith. Alto Maipo is party to an agreement with Voith Hydro Ltda. and Voith Hydro S.A. (together, “Voith”), under which Voith has to date asserted contingent unsecured claims of no less than $20 million against the Debtors, and the Debtors hold contingent claims of approximately $29 million against Voith.
- CNM. Alto Maipo was party to an agreement with CNM under which CNM had asserted contingent unsecured claims of up to $166 million (exclusive of legal fees and expenses) against Alto Maipo. Alto Maipo, in turn, held contingent claims of up to $236 million against CNM. The CNM claims were in arbitration proceedings in Chile until October 2021. On November 5, 2021, the Company received the decision of the arbitral panel, which awarded net damages of $106,889,431.86 to the Company.
- Subordinated Debt. The Debtors are party to certain unsecured and subordinated debt instruments which are held by AES Andes and Strabag (total amounts owed thereunder, the “Subordinated Debt”), and which is pledged as security for the Prepetition Secured Debt. The Subordinated Debt is subordinated and junior in right of payment to the repayment in full of the Prepetition Secured Debt and other amounts payable under the Project’s financing documents. As of the Petition Date, the total principal amount of Subordinated Debt currently outstanding as of COD is $960 million, of which AES Andes currently holds $867 million and Strabag holds $94 million.
Events Leading to the Chapter 11 Filing
In a declaration in support of the Chapter 11 filings (the “Dib Declaration”), Javier Dib, the Debtors’ Board President and Chief Restructuring Officer, detailed the events leading to Alto Maipo's Chapter 11 filing which in short comes down to (i) a 50% drop in electricity prices, (ii) a climate change-induced 50%* drop in the power generating capacity of the Debtor's hydroelectric facility (see more below on less snowfall and reduced water flows) and (iii) project costs that have run 70% over budget.
* 1,100 GWh of energy projected for 2021 vs an average of 2,218 GWh over the previous 59 years.
The Dib Declaration provides: “Unfortunately, the energy market that Alto Maipo will enter into next year is not the same energy market that Alto Maipo projected would exist upon its initial Commercial Operation Date (the ‘COD’) when construction began in 2013. Since that time, there have been significant shifts both on the supply and demand side that have rendered Alto Maipo’s existing capital structure unsustainable. On the demand side, increased generation capacity has driven down electricity prices in Chile, such that spot prices at which Alto Maipo could sell power are now less than half of what they were in 2013. On the supply side, climate change has significantly impacted the hydrology of the Maipo Valley, where the Project is being constructed, and lower precipitation levels reduce in turn the amount of power that the Project can produce. As a result, Alto Maipo can no longer rely on its prior revenue projections, which assumed economic and environmental factors that are no longer in place.
Additionally, the cost of construction for the Project has increased by approximately 70% from Alto Maipo’s initial projections, due to unexpectedly difficult geological conditions as well as delays caused by certain of Alto Maipo’s contractors. These increased construction costs necessitated two prior restructurings that significantly increased the amount of debt owed by Alto Maipo to its creditors. These prior restructurings, however, were based on revenue projections that did not take into account the worsening hydrology and market conditions that have become apparent in the years since. As a result, the capital structure created through these prior restructurings is no longer sustainable.”
Drilling down on the impact of climate change, the Dib Declaration provides: "Even more problematic for the Project’s estimated revenue, however, is the significant impact that climate change has had on the energy supply available to the Project. The tributary rivers whose flow will power the Hydroelectric Plants begin at the peaks of the Andes Mountains, and are primarily fed by seasonal snowmelt from the glaciers on these peaks.
Unfortunately, in recent years, climate change has had a devastating impact on precipitation in the Andes Mountains, with the result that the rivers that will supply the Project have experienced a steep decline in overall water flow.
In order to assess the impact that climate change and the attendant decrease in precipitation will have on the Project, Alto Maipo commissioned a report by Systep to evaluate the long-term projections for expected generation and energy market prices (the “Market Report”).
The Market Report compared expected generation through the Project’s source rivers across two time periods: across the past 59 years, and across the past 10 years. Across the past 59 years, the Project would have generated an average of 2,218 GWh of energy per year. In contrast, across the past 10 years, precipitation and water flow through those same rivers would have generated an average of only 1,711 GWh of energy per year. The Market Report identified even further decreases in water flow in recent years, resulting in approximately 1,390 GWh of energy in 2019; 1,303 GWh of energy in 2020; and 1,100 GWh of energy projected for 2021, based on annualized figures.
Liquidation Analysis (see Exhibit B to Disclosure Statement for notes)
About the Debtors
According to the Debtors: “Alto Maipo is a special purpose company, incorporated under Chilean law for the purpose of developing, constructing, and operating a run-of-river hydroelectric energy project in the Santiago Metropolitan Region of Chile, approximately 30 miles southeast of the city of Santiago. The hydroelectric energy project that is presently under construction (the 'Project') will consist of two run-of-river hydroelectric plants (the 'Hydroelectric Plants') which, once completed, will provide significant zero-emissions energy to Chile’s electric grid…Construction of the Project is currently expected to reach commercial operation in the first half of 2022, after which Alto Maipo will provide clean, renewable energy to power Chile’s economy."
Corporate Structure (sourced from lead Petition and Declaration)
- Alto Maipo SpA is 93% owned by Norgener SpA and 7% owned by Strabag SpA.
- Norgener SpA is 100% owned by AES Andes S.A. which is 66.7% owned by the AES Corporation.
- Strabag SpA is 100% owned by Strabag SE.
- Alto Maipo Delaware LLC is 100% owned by Alto Maipo SpA
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