Optim Energy agreed to pay $5 million to settle its disagreement with Blackstone Group in a bankruptcy case. In exchange, the private equity firm will drop its appeal of Optim Energy’s court-approved plan to exit bankruptcy.
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In February last year, Optim Energy filed for bankruptcy after suffering from declining electricity prices for years. The situation made it difficult for the company to repay the borrowed money, which was used to acquire Altura Cogen plant in Texas and to build another plant.
Cascade Investment will retain control of Optim Energy
Optim Energy submitted a filing in the U.S. Bankruptcy Court in Wilmington indicating that the settlement with Blackstone will stop all litigation between the parties. Cascade Investment will retain control of Optim Energy.
Additionally, the Texas power plant operator said the deal will serve as a support for a liquidation plan for its six bankrupt entities that were not included in the approved reorganization plan last month.
Under the settlement, Blackstone will drop its critical claim of $190 million for the so-called rejection damages. The court will conduct a hearing on the settlement on August 19. The private equity firm will not officially drop its appeal of the reorganization plan of Optim Energy until it receives approval on the liquidation plan for the six bankrupt entities.
Blackstone’s argument against Optim Energy
Walnut Creek Mining, a subsidiary of Blackstone supplied fuel to the power plants owned by Optim Energy. The fuel supplier rejected Optim Energy’s court-approved reorganization plan and argued that it was being shortchanged as it would only recover 1% of its claims. The majority of unsecured creditors were expected to recover around 75% to 95% on their claims.
In August last year, Blackstone purchased an Optim power plant at a bankruptcy auction with a $126 million offer—more than double the amount or earlier bids. The private equity firm was expected to bid on the two remaining plants of Optim Energy.
The Texas power plant operators cancelled the bankruptcy sale of the two plants and decided to seek confirmation of its restructuring plan. The lawyers of Optim Energy said Blackstone was using Walnut Creek to undermine the plan to acquire the assets at a cheap price. Walnut Creek rejected the statement of Optim Energy’s lawyers.