Toshiba’s nuclear woes a hot ticket for bankruptcy financiers

NEW YORK: Westinghouse Electric Co’s financial distress sparked a feeding frenzy among Wall Street lenders keen to give the nuclear developer a lifeline while it reorganizes in bankruptcy, according to court papers and people familiar with the matter.

Westinghouse, the nuclear arm of Japanese conglomerate Toshiba, filed for Chapter 11 bankruptcy protection on Wednesday after facing billions of dollars in cost overruns at power plants under construction in Georgia and South Carolina.

It has a proposal in hand for US$ 800 million in bankruptcy financing from the credit arm of Apollo Global Management ,which must be approved by a bankruptcy judge.

The private equity firm won the high-profile deal after Westinghouse said it was ‘inundated’ with offers from investment banks, private equity houses and hedge funds for the financing, a so-called ‘debtor-in-possession’ (DIP) loan, Westinghouse’s turnaround adviser said in court papers.

“It’s a coveted corner of the market,” said David Tawil, president of Maglan Capital, a distressed-focused hedge fund. “People like DIPs a lot; there’s not a lot of opportunity.”

With lenders starved for yield, there are few opportunities to park nearly US$ 1 billion and earn about 10 percent, the ‘all-in’ interest rate on the loan, according to a person familiar with the matter.

Lenders were drawn to Westinghouse to provide the DIP because of the size of its funding needs, and because, unlike most companies facing bankruptcy with too much debt, it had no other loans or bonds already backed by its collateral.

“(That’s) extremely rare, when you have no secured debt on a company,” Tawil said.

Westinghouse also has a profitable nuclear services and maintenance business separate from its troubled power plant construction division that was highly attractive to lenders.

The company received 14 proposals for the financing, according to court papers. — Reuters