Hedge funds said to buy Scana Corp $2bn Toshiba penalty
New York, US - A South Carolina utility that Toshiba Corp owed US$2.2bn in a penalty is selling the rights to those funds, according to people with knowledge of the matter.
Scana Corp is offloading rights to the compensation, which stems from a settlement reached after the Japanese conglomerate bailed on unfinished nuclear reactors in the Palmetto State. The claim, which was shared with partner utility Santee Cooper, will change hands at about 92 cents on the dollar through the distressed-debt trading desk at Citigroup Inc, the people said, asking not to be identified.
The sale allows the utilities to get cash now for the Toshiba settlement, instead of taking installment payments for five years starting in October.
The buyers taking the other side of the trade were hedge funds, one of the people said, without naming the firms. Those parties are expecting to profit from the discount at which they purchased the claims from Scana.
Advisory firm Ducera Partners helped Scana carry out the trade, one of the people said. Representatives for Citigroup and Ducera declined to comment. Scana hasn’t closed on any transaction to sell its claim, spokeswoman Rhonda Maree O’Banion said by email.
Santee Cooper’s board is set to consider authorising a ‘purchase agreement’ regarding its rights to the Toshiba payment guarantee and its claims in the Westinghouse bankruptcy, according to the board’s agenda.
The compensation traces back to a settlement reached between the South Carolina utilities and Toshiba. The nuclear plants were being constructed by its now bankrupt subsidiary Westinghouse Electric Co.
The settlement for Scana and Santee Cooper came about after Toshiba was overwhelmed by cost overruns at the project and decided to abandon the project. The spiraling costs were also one of the reasons Westinghouse found itself filing for bankruptcy earlier this year, and Scana subsequently halted construction.
An accord signed in July awarded US$1.19bn for Scana’s 55 per cent stake and US$976mn for the 45 per cent allocated to Santee Cooper, formally known as the South Carolina Public Service Authority.
The sale comes amid Scana federal and state investigations into its handling of the cancelled nuclear expansion project. Scana had asked state utility regulators for permission to recover US$4.9bn in expenses for the project before withdrawing the request in August to give officials more time for review.