Talen Energy Bank Lenders Tap Counsel as Company Reviews Options
(Bloomberg) -- Lenders who provided Talen Energy Corp. with a $690 million credit line have begun working with Davis Polk & Wardwell to navigate upcoming debt talks, according to people with knowledge of the situation.
The Riverstone Holdings-backed company’s bank lenders are the latest to organize as the company evaluates ways to manage its roughly $4 billion debt load.
As of the end of June, Talen had roughly $281 million of availability under its $690 million secured revolving credit line, according to Moody’s Investors Service. Its net secured debt was nearly 3.7 times earnings before interest, taxes, depreciation and amortization. Investor protections allow for a maximum ratio of 4.25 times earnings.
The company’s total debt was 7.28 times its earnings, above the 4.5 times allowed under its credit facility, the people said. That level would breech debt covenants and prohibit the company from paying dividends to equity holders, a report this month from Moody’s shows.
Representatives from Davis Polk and the company didn’t return to requests for comment.
Earlier, large holders across the company’s secured debt and unsecured notes huddled with Paul, Weiss, Rifkind Wharton & Garrison and Perella Weinberg Partners. That group held a call last week to expand its reach, Bloomberg reported.
Meanwhile, certain term loan holders banded together with King & Spalding, and Talen itself is represented by investment bank Evercore and legal counsel Weil Gotshal & Manges.
Talen’s bonds cratered last month after management released a downbeat earnings outlook and failed to quell concerns around its debt-reduction strategy. Investors were particularly worried about the potential transfer of the company’s prized Susquehanna nuclear asset, though any move is likely to face litigation risks, according to credit analysts.
The company’s 10.5% unsecured notes due 2026 traded around 47 cents on the dollar on Monday, after hitting a low of 39 cents on Aug. 25, according to Trace data. Its 6.625% secured notes due 2028 traded at 89.5 cents on Sept. 10, up from approximately 83.375 cents last month.
Moody’s said Talen “faces significant headwinds over the next 12 to 18 months” amid its weak financial results, uncertain power markets and an unproven pivot into cryptocurrency mining. The credit grader downgraded the company to B3 on Sept. 1.
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