Westinghouse Files for Bankruptcy in New York

March 31, 2017

By: Alan E. Gamza and Jessica K. Bonteque

On March 29, 2017, United States nuclear firm Westinghouse Electric Company LLC, along with numerous of its afflicted entities (the “Debtors”)[1], sought protection under Chapter 11 of Title 11 of the United States Code (the “Bankruptcy Code”) in the Bankruptcy Court for the Southern District of New York.  The case has been assigned to the Honorable Michael E. Wiles.  According to the “first day” declaration filed by Lisa J. Donahue of AlixPartners, the Debtors’ Chief Transition and Development Officer, the Debtors “need to avail themselves of the protections of the Bankruptcy Code arises primarily from a series of unforeseen challenges that significantly delayed and increased the cost of construction of the nuclear plants in Georgia and South Carolina…These challenges potentially expose the Debtors to billions of dollars either in (i) cost overruns to complete the projects or (ii) penalties and liabilities if they abandon the projects. The Debtors cannot afford either option. Notwithstanding that the Debtors’ other businesses are profitable and world-class, the Construction Business cost increases have led to a liquidity crisis that the Debtors can only solve in chapter 11.”

As is typical, the Debtors filed with their Chapter 11 petitions numerous “first day motions” seeking immediate relief from the bankruptcy Court, including motions: (i) to approve the payment of certain vendors’ claims that the Debtors deem to be critical; (ii) to continue their current cash management systems and intercompany transactions; (iv) pay pre-petition taxes; (v) enforce the protections under multiple bankruptcy provisions including, the automatic stay, on world-wide basis to protect the Debtors’ international business interests; and (vi) to approve a post-petition secured financing facility agented by Citibank, N.A. and inclusive of up to $225 million in a  cash collateralized letter of credit facility issued by an affiliate of Citibank.  In their motion seeking approval of the post-petition financing, the Debtors indicate that the facilities “will allow the Debtors to fund their operations, develop a restructuring plan, and emerge from chapter 11…”

On March 30, 2017 a hearing was held to consider the relief requested in the "first day motions." The majority of the relief requested in the “first day motions” was be granted on an interim basis, including interim approval to pay certain critical vendors and authority to borrow $350 million of the proposed $800 million debtor-in-possession financing. Judge Wiles, however, had some concerns regarding the proposed debtor-in-possession financing relating to the advancing of loan proceeds to non-debtor entities based in Europe and questioned why Westinghouse’s parent company, Toshiba, could not provide funds to the European entities. Judge Wiles did not authorize the Debtors to advance any of the loan proceeds to certain non-debtors absent a further court order. A final hearing was set on several of the “first day motions” for April 26, 2017 at 2:00 p.m. that will allow creditors to be heard before approval of the certain motions are considered by the Bankruptcy Court on a final basis.

Many of the “first day motions” and the further motions filed in the cases will significantly impact the rights of creditors and counter-parties to agreements with the Debtors and should be carefully evaluated by such parties and their counsel.  Large bankruptcy cases like the Westinghouse cases typically move quickly and impact the rights of numerous parties, including those in the supply chain of the Debtors’ global nuclear power business or involved in the construction projects taking place in Georgia and South Carolina.  If you have any questions about the Westinghouse cases and would like to speak to one of our Creditors' Rights attorneys, please contact Jessica Bonteque via electronic mail at jbonteque@mosessinger.com or via telephone at 212-554-7676. Click here for Jessica’s bio and here for the Bankruptcy Group page.

 

[1] The Debtors in the chapter 11 cases, along with the last four digits of each Debtor’s federal tax identification number, if any, are: Westinghouse Electric Company LLC (0933), CE Nuclear Power International, Inc. (8833), Fauske and Associates LLC (8538), Field Services, LLC (2550), Nuclear Technology Solutions LLC (1921), PaR Nuclear Holding Co., Inc. (7944), PaR Nuclear, Inc. (6586), PCI Energy Services LLC (9100), Shaw Global Services, LLC (0436), Shaw Nuclear Services, Inc. (6250), Stone & Webster Asia Inc. (1348), Stone & Webster Construction Inc. (1673), Stone & Webster International Inc. (1586), Stone & Webster Services LLC (5448), Toshiba Nuclear Energy Holdings (UK) Limited (N/A), TSB Nuclear Energy Services Inc. (2348), WEC Carolina Energy Solutions, Inc. (8735), WEC Carolina Energy Solutions, LLC (2002), WEC Engineering Services Inc. (6759), WEC Equipment & Machining Solutions, LLC (3135), WEC Specialty LLC (N/A), WEC Welding and Machining, LLC (8771), WECTEC Contractors Inc. (4168), WECTEC Global Project Services Inc. (8572), WECTEC LLC (6222), WECTEC Staffing Services LLC (4135), Westinghouse Energy Systems LLC (0328), Westinghouse Industry Products International Company LLC (3909), Westinghouse International Technology LLC (N/A), and Westinghouse Technology Licensing Company LLC (5961). The Debtors’ principal offices are located at 1000 Westinghouse Drive, Cranberry Township, Pennsylvania 16066. 

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