There are typically several major Chapter 11 bankruptcy cases filed each year. Originally filed in the spring of 2017, the case of Westinghouse Electric Co. (“Westinghouse”) made headlines in 2018 with its completion. This is part two of a brief summary of the more interesting recent cases:
Westinghouse Electric Co.
Westinghouse is a leading global supplier of infrastructure services to nuclear power generating facilities, providing engineering, maintenance, facilities management, and repair services. It was forced to file its bankruptcy case in March 2017 as the result of delays and cost overruns at two U.S. nuclear sites, one located in Georgia and the other in South Carolina.
The bankruptcy filing was precipitated by Toshiba announcing that Westinghouse would be required to write-down $6.1 billion for these cost overruns at the Alvin W. Vogtle Electric Generating Plant near Augusta, Georgia, and the Virgil C. Summer Nuclear Generating Station near Columbia, South Carolina. After the project started, Westinghouse discovered that the cost to complete the U.S. projects would far exceed original estimates.
Brookfield Business Partners LP (“Brookfield”), a publicly-traded utility holding company, purchased Westinghouse out of bankruptcy from Toshiba Corporation for 4.6 billion. Brookfield announced on January 4, 2018, that it had agreed to acquire 100% of Westinghouse. It was reported that Brookfield would fund the purchase with $1 billion of equity and $3 billion of long-term debt financing. The balance would be funded by the assumption of various pension, environmental, and operating obligations.
The company released a statement that the purpose of its Chapter 11 filing was to address “a series of unforeseen challenges that significantly delayed and increased the cost of construction” of four reactors at the Vogtle and Summer sites. During the bankruptcy, Westinghouse eliminated its obligations to finish the U.S. nuclear reactor projects, as a result of multibillion-dollar severance payments made by Toshiba.
On March 27, 2018, Westinghouse confirmed a consensual restructuring plan agreeing to pay in full a class of allowed general unsecured claims while providing $7.6 billion for claims asserted by other unsecured creditors. Since plan confirmation, attorneys for the bankruptcy estate have battled subcontractors and employees asserting claims in class action suits, primarily for layoffs without sufficient warning.
José Emeterio Gutiérrez, president and CEO of Westinghouse stated:
“Confirmation of our plan of reorganization is one of the final steps in the completion of our strategic restructuring.” Our customers, employees, suppliers, vendors, and other important constituencies overwhelmingly supported our plan of reorganization. We are on track to fulfill our promise to emerge from this strategic restructuring process as a stronger business partner while retaining our primary focus on safety.”
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