By Dow Jones Business News, October 24, 2013, 11:26:00 AM EDT
By Jacqueline Palank
A bankruptcy judge on Thursday approved bidder protections, including a $65 million breakup fee, to NRG Energy Inc.
( NRG ) as it works to close a $2.6 billion offer to take Edison Mission Energy out of Chapter 11 protection next year.
Less than one week after announcing what Edison Mission's bankruptcy attorney called a "monumental moment" in the
company's Chapter 11 case, Judge Jacqueline P. Cox of the U.S. Bankruptcy Court in Chicago signed off on the bidder
protections for NRG.
Edison Mission attorney Joshua Sussberg, of Kirkland & Ellis LLP, said such bidder protections as the breakup fee and
a pledge to reimburse NRG's sale-related expenses were necessary to securing the deal that Edison Mission hopes will
take it out of bankruptcy next year.
"To secure commitment from NRG, and ensure that this baseline transaction that everyone agrees maximizes value, is
secure and available to the debtor, NRG has insisted upon certain protections. These protections, in our view, are
customary and reasonable," Mr. Sussberg said.
Judge Cox also authorized Edison Mission to continue shopping its assets to other buyers through Dec. 6. If the
company were to find a better deal than NRG's offer to acquire the company for $2.285 billion in cash and $350 million
in stock, NRG would receive the $65 million breakup fee.
None of Edison Mission's creditors or a federal bankruptcy watchdog objected to the breakup fee, which Mr. Sussberg
acknowledged is a large dollar amount. However, at 2.4% of the total purchase price, Mr. Sussberg said the breakup fee
is actually smaller than other bankruptcy-breakup fees that typically clock in at 3% of the purchase price.
Judge Cox also signed off on Edison Mission's request to extend the time in which it alone may file a bankruptcy-exit
plan. By shielding the company from the threat that its creditors may file rival plans, the judge is letting Edison
Mission retain control of its case.
Edison Mission said it would file its plan, which is expected to have the NRG sale as its backbone, by mid-November.
The company hopes to win court approval of the plan by March 31, and close the sale by the end of July.
At the hearing, Judge Cox held off from ruling on Edison Mission's request to pay up to $7.5 million in bonuses to
executive and rank-and-file workers to motivate them to secure the best possible path out of Chapter 11, whether through
a sale to NRG or some other strategy, as well as to ensure they remain with the company in the coming months.
A government bankruptcy watchdog, U.S. Trustee Patrick Layng, had objected to the bonuses, arguing that Edison Mission
was trying to get around bankruptcy-law restrictions on retention payments for high-level employees, which Edison
After hearing from both sides on the dispute, Judge Cox said she would consider the bonuses at a Nov. 6 hearing.
Edison Mission, a unit of Edison International ( EIX ), generates energy at about 40 facilities in 12 states. It sought
Chapter 11 protection in December.
(Dow Jones Daily Bankruptcy Review covers news about distressed companies and those under bankruptcy protection. Go to
Write to Jacqueline Palank at firstname.lastname@example.org.
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
Copyright (c) 2013 Dow Jones & Company, Inc.