We are advising GenOn and SVP in connection with the restructuring of Heritage Power

Davis Polk is advising GenOn Holdings LLC and certain affiliates and Strategic Value Partners, LLC and certain affiliates in connection with the chapter 11 restructuring of Heritage Power LLC and certain of its affiliates and subsidiaries. On January 24, 2023, Heritage filed its voluntary 11 petitions in the United States Bankruptcy Court for the Southern District of Texas. Shortly before the filing, GenOn, SVP and an ad hoc committee of lenders that hold approximately 80% of the principal amount outstanding of Heritage’s term loans executed a restructuring support agreement (RSA) with Heritage. In addition, shortly before the filing, GenOn and Heritage executed a transition services agreement, pursuant to which GenOn agreed to continue to provide operational services to Heritage during its bankruptcy cases and provide certain other services to ensure an orderly transition of Heritage’s operations from GenOn to either Heritage or its designee.

The RSA contemplates a comprehensive deleveraging of Heritage’s balance sheet by equitizing Heritage’s outstanding loans under its revolving credit and term loan facility and its exposure under a heat-rate call option, and by rejecting certain burdensome contracts. Under the RSA, GenOn will receive from Heritage or reorganized Heritage various forms of consideration in exchange for providing releases and certain operational and transition services, including a $25 million cash payment and payment of its professional expenses related to the Heritage bankruptcy cases. Heritage will also assume another heat-rate call option for which GenOn provides Heritage with ongoing credit support and seek to terminate GenOn’s obligations to provide such credit support. The parties to the RSA will seek to consummate the restructuring transactions through a chapter 11 plan. If the plan is not confirmed, then Heritage will commence a marketing and sale process in which the ad hoc committee will submit a credit bid through a special purpose vehicle. At the first day hearing held on January 25, 2023, Heritage obtained all the “first day” relief it sought, including interim approval to perform under the transition services agreement.

Heritage is a power company that operates in the PJM regional transmission market with power plants in Pennsylvania, New Jersey and Ohio. GenOn Holdings LLC is the indirect parent of Heritage.

The Davis Polk restructuring team includes partners Damian S. Schaible and Eli J. Vonnegut and associates Jacob Weiner and Stella Li. Members of the litigation team include partner Elliot Moskowitz and counsel Marc Tobak. Partner Patrick E. Sigmon and counsel Leslie J. Altus are advising on tax matters. Partner Stephen Salmon is advising on corporate matters. Members of the Davis Polk team are based in the New York and Northern California offices.

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