USEC Inc reorganization gets court approval
08 September 2014
The bankruptcy court for the District of Delaware has confirmed USEC Inc's plan of reorganization, which becomes effective later in September. USEC will then emerge from Chapter 11 restructuring under the name Centrus Energy Corp.
Chapter 11 is a chapter of Title 11 of the United States Bankruptcy Code, which permits reorganization under the bankruptcy laws of the United States. In contrast, Chapter 7 governs the process of a liquidation bankruptcy. None of USEC Inc's subsidiaries, including its primary operating subsidiary the United States Enrichment Corporation - which supplies enriched uranium fuel for commercial nuclear power plants - have filed for bankruptcy protection.
USEC Inc said on 5 September that confirmation of the plan of reorganization is the "last major court step" in the Chapter 11 bankruptcy process it began when it filed a voluntary petition for relief on 5 March. USEC Inc said the bankruptcy was a "pre-arranged" filing that included the proposed plan of reorganization, which was supported by a group of noteholders that owned more than 66% of the value of the notes outstanding. USEC Inc has continued to operate its business as a "debtor-in-possession" under the jurisdiction of the court.
The new common stock to be issued under the plan is also expected to begin trading on the effective date, which has yet to be set. The new common stock is expected to trade on the New York Stock Exchange under the ticker symbol "LEU".
"We are completing the final steps of a restructuring process that will strengthen our balance sheet and will enable the company to build on its decades of reliability and technical innovation," John Welch, president and chief executive officer of USEC Inc, said. "Since our voluntary filing in March, we have moved to accomplish the objectives of this process. We are now in a stronger position to continue serving the nuclear fuel needs of our utility customers around the world and the national and energy security needs of the United States," Welch said.
On the effective date, USEC will replace its $530 million debt and its preferred stock with a new debt issue totalling $240.4 million and new common stock. The new debt issue would mature in five years and can be extended for an additional five years subject to certain conditions. The noteholders would receive $200 million of the new debt and about 79% of the common stock. Preferred investors would each receive $20.19 million of the new debt and about 8% of the new common stock. Current common stockholders would receive about 5% of the new common stock in exchange for the existing common stock. Distribution of the new common stock is subject to dilution on account of a new management incentive plan. A new board of directors will provide corporate governance oversight and strategic direction beginning on the plan's effective date.
USEC Inc ended the second quarter of 2014 with $123 million in cash and said it will not require an external source of exit financing upon emergence.
The new corporate name, Centrus Energy Corp, "symbolizes the key attributes" of the reorganized company, USEC Inc said. It reflects the role the company's advanced centrifuge uranium enrichment technology will play in its future and "conveys the strength, reliability, leadership, innovation, technology and energy that are the key driving forces behind the company," it said. The operations and the names of USEC Inc's subsidiaries will remain unchanged after emergence from bankruptcy, it said.
"As we take the steps necessary to meet our near-term obligations to provide our customers with nuclear fuel, we continue to keep our eye on their long-term fuel requirements and our nation's national security requirements that we can meet with advanced centrifuge technology," Welch said. "While there is work to be done in this challenging market environment, we are confident that with a stronger financial foundation, Centrus is well positioned to build on our record of reliability and innovation to supply enriched uranium fuel in a safe, secure, profitable and environmentally responsible manner," he said.
USEC Inc said last month that more than 99% of votes cast by its convertible noteholders favoured the plan. Both holders of preferred equity - Toshiba Corporation and The Babcock & Wilcox Company - also voted in favour.
USEC Inc said the filing has no impact on USEC's daily operations, which includes the transition of the Paducah Gaseous Diffusion Plant back to the Department of Energy (DOE), the sale of SWU from its inventories and purchases of Russian low-enriched uranium, and USEC's efforts to commercially deploy the American Centrifuge technology. The petition and plan for reorganization involve restructuring debt and equity at the parent company - USEC Inc - level and is not a restructuring of the United States Enrichment Corporation, where the company's daily business operations reside. Welch said in July that USEC was working closely with Oak Ridge National Laboratory to continue demonstration of the American Centrifuge technology. He said USEC's Kentucky employees had "done an outstanding job" of preparing the Paducah Gaseous Diffusion Plant for de-lease and return to DOE in October.
Researched and written
by World Nuclear News