Stoneway’s Restructuring Closing
May 17, 2022
Cleary Gottlieb represented an ad hoc group of holders of Stoneway Capital Corporation’s (SCC) 10% senior secured notes due 2027, including Blackrock, Baupost, Carmignac, Doubleline, Fidelity, and GML, in the May 17, 2022, closing of the restructuring of SCC’s and certain of its affiliated entities’ (together, Stoneway) indebtedness.
The restructuring of approximately $984 million of indebtedness (including accrued and unpaid interest) was implemented through a plan of reorganization pursuant to Chapter 11 of the U.S. Bankruptcy Code and a plan of arrangement pursuant to the Canada Business Corporations Act (CBCA) in conjunction with an out-of-court sale transaction of all or substantially all of Stoneway’s assets to MSU Energy Holding Ltd. (MSU). As consideration for the assets, SCC Power Plc (an affiliate of MSU) issued to the ad hoc group and certain other creditors and interest holders of Stoneway $17.86 million 6% secured first-lien notes due 2028, $310 million 8% secured second-lien notes due 2028, and $200 million 4% secured third-lien notes due 2032.
As a result of a series of business and liquidity challenges, as well as the initiation of certain arbitral proceedings against SCC, Stoneway defaulted on the notes and a mezzanine loan. Following the default and a series of enforcement actions taken by the mezzanine lenders as a result of voluntary insolvency filings in Argentina, Stoneway entered into a series of formal and informal standstill agreements with the ad hoc group and the mezzanine lenders. Having failed to reach an agreement with the ad hoc group, SCC and various related entities filed voluntary petitions for relief under Chapter 11 of the U.S. Bankruptcy Code in the U.S. District Court for the Southern District of New York in April 2021. Since that time, Stoneway, the ad hoc group, the mezzanine lenders, and MSU negotiated the terms of the restructuring, which culminated in the approval of the CBCA plan on May 3, 2022, and the Chapter 11 plan on May 12, 2022.
SCC was established in 2016 for the purpose of constructing, owning, and operating power plants to provide electricity to the wholesale electricity market in Argentina through indirect subsidiaries. The plants have an aggregate installed generation capacity of 806.5 MW, which made SCC one of the leading power generation groups in the country of Argentina based on MWs of installed generation capacity according to CAMMESA.