Case BLS Doc 10 Filed 11/07/17 Page 1 of 133 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE

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1 Case BLS Doc 10 Filed 11/07/17 Page 1 of 133 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE x : In re: : : ExGen Texas Power, LLC, et al., 1 : : Debtors. : x Chapter 11 Case No. 17- ( ) Joint Administration Requested DEBTORS MOTION FOR ENTRY OF INTERIM AND FINAL ORDERS (I) AUTHORIZING DEBTORS TO UTILIZE CASH COLLATERAL PURSUANT TO 11 U.S.C. 363; (II) GRANTING ADEQUATE PROTECTION TO SECURED PARTIES PURSUANT TO 11 U.S.C. 361, 362 AND 363; (III) AUTHORIZING DEBTORS TO ENTER INTO, PERFORM UNDER AND ASSUME THE AMENDED HEDGE AGREEMENT PURSUANT TO 11 U.S.C. 365 AND GRANTING RELATED LIENS AND SUPERPRIORITY CLAIMS PURSUANT TO 11 U.S.C. 364; AND (IV) SCHEDULING A FINAL HEARING PURSUANT TO BANKRUPTCY RULE 4001 The above-captioned debtors (collectively, the Debtors ) hereby submit this motion (the Motion ) for entry of an interim order, substantially in the form attached hereto as Exhibit A (the Proposed Interim Order ), 2 and a final order (the Proposed Final Order and together with the Proposed Interim Order, the Proposed Orders ), pursuant to Sections 105(a), 361, 362, 363, 364, 365, 503, and 507 of title 11 of the United States Code (the Bankruptcy Code ), Rules 2002, 4001, 6004, and 9014 of the Federal Rules of Bankruptcy Procedure (the Bankruptcy Rules ), and Rule of the Local Rules of the United States Bankruptcy Court for the District of Delaware (the Local Rules ): 1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor s federal tax identification number, are: ExGen Texas Power, LLC (4129), ExGen Texas Power Holdings, LLC (2209), Wolf Hollow I Power, LLC (6945), Colorado Bend I Power, LLC (9083), Handley Power, LLC (4091), Mountain Creek Power, LLC (6288), and LaPorte Power, LLC (5101). The mailing address of each of the Debtors, solely for purposes of notices and communications, is: 1310 Point Street, Baltimore, MD Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the Proposed Interim Order or the First Day Declaration (as defined below), as applicable. RLF v.1

2 Case BLS Doc 10 Filed 11/07/17 Page 2 of 133 (i) authorizing the Debtors to use certain Collateral and Prepetition Collateral, including, without limitation, certain Cash Collateral; (ii) granting certain adequate protection to the Secured Parties; (iii) authorizing the Debtors to amend and perform under the Amended Hedge Agreement (as defined below); (iv) subject to the entry of the Proposed Final Order, authorizing the Debtors to assume and irrevocably waive any right to reject or assign (other than in accordance with its terms) the Amended Hedge Agreement; (i) granting, as of the Petition Date and in accordance with the relative priorities set forth in the Proposed Interim Order, certain liens and super-priority claims to the Commodity Hedge Counterparty with respect to the Amended Hedge Agreement; (ii) vacating the automatic stay, to the extent set forth in the Proposed Orders; (iii) waiving any applicable stay (including under Bankruptcy Rules 6004) and providing for the immediate effectiveness of the Proposed Orders; and (iv) scheduling the Final Hearing for the Court to consider entry of the Proposed Final Order. In support of the Motion, the Debtors rely upon and incorporate by reference the Declaration of David Rush in Support of Chapter 11 Petitions and First Day Motions (the First Day Declaration ) filed with the Court contemporaneously herewith. In further support of the Motion, the Debtors respectfully represent as follows: Jurisdiction and Venue 1. The Court has jurisdiction over the Debtors, their estates, and this matter under 28 U.S.C. 157 and 1334 and the Amended Standing Order of Reference from the United States District Court for the District of Delaware dated as of February 29, This is a core proceeding under 28 U.S.C. 157(b). 2. Venue is proper in this district under 28 U.S.C and RLF v.1 2

3 Case BLS Doc 10 Filed 11/07/17 Page 3 of Pursuant to Local Rule (f), the Debtors consent to the entry of a final order on this Motion if it is determined that the Court, absent consent of the parties, cannot enter final orders or judgments consistent with Article III of the United States Constitution. Background 4. On the date hereof (the Petition Date ), each Debtor filed with this Court a voluntary petition for relief under chapter 11 of the Bankruptcy Code. 5. The Debtors continue to operate their businesses and manage their properties as debtors in possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. No trustee, examiner, or official committee of unsecured creditors has been appointed in the Debtors chapter 11 cases. 6. Additional information regarding the Debtors and these chapter 11 cases, including the Debtors business operations, capital structure, financial condition, and the reasons for and objectives of these chapter 11 cases, is set forth in the First Day Declaration. Summary of Relief Requested 7. By this Motion, the Debtors respectfully request entry of the Proposed Orders, (i) authorizing the Debtors to use certain Collateral and Prepetition Collateral, including, without limitation, certain Cash Collateral, on the terms set forth in the Proposed Orders, (ii) granting certain post-petition liens and super-priority claims to the Commodity Hedge Counterparty, and (iii) authorizing the Debtors to enter into and perform their obligations under the Amended Hedge Agreement and, subject to entry of the Proposed Final Order, assume and irrevocably waive any right to reject or assign (other than in accordance with its terms) the Amended Hedge Agreement. RLF v.1 3

4 Case BLS Doc 10 Filed 11/07/17 Page 4 of 133 Concise Statement and Summary of Essential Terms of the Debtors Proposed Use of Cash Collateral 8. Pursuant to Bankruptcy Rules 4001(b) and Local Rule (a), the Debtors submit the following concise statement of the material terms of the Proposed Interim Order as it relates to the Debtors proposed use of Cash Collateral: 3 Summary of Material Terms Location Parties with an Interest in Cash Collateral Bankruptcy Rule 4001(b)(1)(B)(i) Purposes for Use of Cash Collateral Bankruptcy Rule 4001(b)(1)(B)(ii) Budget Bankruptcy Rule 4001(b)(1)(B)(iii) The Secured Parties, which include the holders of Secured Obligations, including: Bank of America, N.A., as the Secured Agent, the Issuing Lender. and the Secured Financial Hedge Counterparty; the Secured Lenders; Merrill Lynch Commodities, Inc., as the Commodity Hedge Counterparty; Wilmington Trust, National Association, as the Depositary Agent; and Exelon Generation Company, LLC ( ExGen ), as the Sponsor. The Debtors seek to use certain of the Cash Collateral, to, among other things, administer their estates during the chapter 11 cases, permit the orderly continuation of the operation of their businesses, to maintain business relationships with vendors, suppliers and customers, to make payments to the Sponsor in respect of labor costs under the O&M Agreements (as defined in the Secured Credit Agreement) incurred thereunder after the Petition Date, to pay taxes and regulatory fees, to make capital expenditures and to satisfy other working capital and operational needs. A 13 week cash flow budget (the Approved Budget ) which reflects the Debtors projected aggregate cash receipts, operating expenses and disbursements, capital expenditures and unrestricted cash on hand on a weekly basis is attached to the Proposed Interim Order as Exhibit A thereto. The Debtors are required to comply with the Approved Budget, and are also subject to requirements that (x) aggregate Variance Tested Expenses paid during any 4-week period not exceed 110% of the aggregate amount budgeted for such Variance Tested Expenses for such 4-week period pursuant to the Approved Budget (the E(i) F 3 3 Any summary of the terms of the Proposed Interim Order contained in this Motion is qualified in its entirety by reference to the actual provisions of the Proposed Interim Order. To the extent the Motion and Proposed Interim Order are inconsistent, the Proposed Interim Order shall control. RLF v.1 4

5 Case BLS Doc 10 Filed 11/07/17 Page 5 of 133 Summary of Material Terms Location Authorized Amount and Duration of Use Bankruptcy Rule 4001(b)(i)(B)(iii) Events of Default Bankruptcy Rule 4001(b)(i)(B)(iii) Permitted Variance ) and (y) aggregate capital expenditures made (or committed to be made) during the period between the Petition Date and December 31, 2017 not exceed $3.7 million (the Capital Expenditures Cap ); provided that the Final Order shall include a Capital Expenditures Cap for the period between the Petition Date and May 15, Subject to the terms and conditions of the Proposed Interim Order, including, without limitation, the Approved Budget and Budget Covenants, the Debtors will be authorized to use the Collateral, Prepetition Collateral and Cash Collateral, solely in accordance with, and arising from, the ordinary course of the Debtors businesses, which shall include Cash Collateral in the Debtors bank accounts as of the Petition Date (but not any Cash Collateral arising from asset dispositions or other transactions outside of the ordinary course of the Debtors businesses, which Cash Collateral shall, subject to entry of the Proposed Final Order, be paid to the Secured Agent for application in accordance with the terms of the Proposed Interim Order and the Intercreditor Agreement with two (2) business days after receipt thereof), during the period from the Petition Date through the Cash Collateral Termination Date. The Cash Collateral Termination Date occurs upon the earlier of (i) an Event of Default (which is not waived or cured in accordance with the terms of the Proposed Interim Order) and (ii) May 15, 2018 (unless extended in writing by the Secured Agent (acting at the direction of Secured Lenders constituting Required Lenders in their sole discretion)). The Events of Default include the following: the failure to obtain entry of the Proposed Final Order on or within thirty-five (35) days after the Petition Date; 2, 3 3(b) (A) the payment by the Debtors of expenses other than in accordance with the Approved Budget or (B) any violation of the Budget Covenants; the entry of an order by the Court invalidating, disallowing or limiting in any respect, as applicable, either (A) the enforceability, priority, or validity of the Credit Facility Liens securing the Secured Obligations or (B) any of the Secured Obligations; the incurrence after the Petition Date of indebtedness that is (A) other than the Postpetition Hedge Liens, secured by a security interest, mortgage or other lien on all or any portion of the Collateral, Prepetition Collateral or Cash 5 RLF v.1

6 Case BLS Doc 10 Filed 11/07/17 Page 6 of 133 Summary of Material Terms Location Collateral that is equal or senior to any security interest, mortgage or other lien of the Secured Parties, as applicable, or (B) other than the Postpetition Hedge Super-Priority Claims, entitled to administrative priority status that is equal or senior to that granted to the Secured Parties, as applicable, except, in each case, any such indebtedness used to refinance the Secured Obligations in full or any debtor-in-possession financing facility provided to the Debtors by the Consenting Secured Parties or, upon the consent of the Required Lenders 4 in their sole discretion, by a third party ( DIP Financing ); the entry of a final order by the Court, other than the Proposed Interim Order and the Proposed Final Order, granting relief from or modifying the automatic stay of section 362 of the Bankruptcy Code (A) to allow any creditor to execute upon or enforce a lien on or security interest in any Collateral, Prepetition Collateral or Cash Collateral in excess of $250,000 or (B) with respect to any lien on or the granting of any lien on any Collateral, Prepetition Collateral or Cash Collateral to any state or local environmental or regulatory agency or authority (in each case, with a value in excess of $250,000); reversal, vacatur, or modification (without the express prior written consent of the Secured Lenders constituting Required Lenders in their sole discretion) of the Proposed Interim Order; the entry by the Court of an order, or the filing by the Debtors of a motion that seeks entry of an order, (A) dismissing any of the chapter 11 cases, (B) converting any of the chapter 11 cases to cases under chapter 7 of the Bankruptcy Code or (C) appointing a trustee or examiner with the expanded powers to operate the Debtors businesses pursuant to section 1104 of the Bankruptcy Code in any of the chapter 11 cases; any breach by the Debtors of any of the obligations, representations, warranties or covenants set forth in the Proposed Interim Order; the failure to pay fees, professional fees, costs and 4 The term Required Lenders is defined in the Secured Credit Agreement and includes, at any time, the Secured Lenders having Revolving Loans, Term Loans and commitments to make such loans outstanding that, when taken together, represent more than 50.0% of the sum of all such loans and commitments outstanding. RLF v.1 6

7 Case BLS Doc 10 Filed 11/07/17 Page 7 of 133 Summary of Material Terms Location expenses when and as provided for under the Proposed Interim Order; the failure to obtain entry of an order of the Court on or within forty-five (45) days after the Petition Date and in form and substance satisfactory to Secured Lenders constituting Required Lenders in their sole discretion approving a disclosure statement, the procedures for the solicitation of votes in connection with a chapter 11 plan of reorganization pursuant to sections 1125 and 1126 of the Bankruptcy Code, the forms of ballots and notices and related relief; the failure to obtain entry of an order of the Court on or within fifty-five (55) days after the Petition Date in form and substance satisfactory to Secured Lenders constituting Required Lenders in their sole discretion approving a sale of all or substantially all of the assets of Handley Power, LLC pursuant to Section 363 of the Bankruptcy Code on terms satisfactory to Secured Lenders constituting Required Lenders in their sole discretion; the failure to obtain entry of an order of the Court on or within ninety (90) days after the Petition Date and in form and substance satisfactory to Secured Lenders constituting Required Lenders in their sole discretion either (A) confirming a chapter 11 plan of reorganization pursuant to section 1129 of the Bankruptcy Code or (B) approving a sale of all or substantially all of the assets of each Debtor other than Handley Power, LLC pursuant to Section 363 of the Bankruptcy Code, in each case on terms satisfactory to Secured Lenders constituting Required Lenders; or the occurrence of (A) the effective date of a plan of reorganization for the Debtors or (B) the consummation of a sale of all or substantially all of the assets of the Debtors pursuant to Section 363 of the Bankruptcy Code. Remedies Upon Cash Collateral Termination Date or Event of Default Bankruptcy Rule 4001(b)(1)(B)(iii) The Secured Agent and the Secured Lenders may exercise the following remedies immediately upon the occurrence and during the continuance of an Event of Default: declare a termination, reduction or restriction on the ability of the Debtors to use any Collateral, Prepetition Collateral or Cash Collateral, including without limitation Cash Collateral derived solely from the 16 RLF v.1 7

8 Case BLS Doc 10 Filed 11/07/17 Page 8 of 133 Summary of Material Terms Location proceeds of Collateral or Prepetition Collateral (a Termination Declaration and the date which is the earliest to occur of any such Termination Declaration, the Termination Declaration Date ); reduce any claim to judgment; and/or take any other action permitted by law and consistent with the Proposed Interim Order. Adequate Protection Bankruptcy Rule 4001(b)(1)(B)(iv) During the three (3) Business Day period after a Termination Declaration Date, the Debtors and the Committee may seek an emergency hearing before the Court. Unless during such period, the Court determines that an Event of Default has not occurred and/or is not continuing, the Proposed Interim Order will automatically terminate at the end of such three (3) Business Day period, without further notice or order. During such three (3) Business Day period, the Debtors may not use any Collateral, Prepetition Collateral and Cash Collateral except to make payments of labor costs under the O&M Agreements incurred thereunder after the Petition Date, the Amended Hedge Agreement and other expenses critical to keep the businesses of the Debtors operating in accordance with the Approved Budget. The adequate protection provided to the Secured Parties include: Adequate Protection Replacement Liens. To the extent of the diminution in value of the respective interests of the Secured Parties in the respective Prepetition Collateral, including, without limitation, the Cash Collateral, from and after the Petition Date, calculated in accordance with section 506(a) of the Bankruptcy Code, resulting from the use, sale or lease by the Debtors of the applicable Collateral, the subordination of the Credit Facility Liens to the Carve-Out, the granting of the Postpetition Hedge Liens, and the imposition or enforcement of the automatic stay of section 362(a) (collectively, Diminution in Value ), the Secured Agent, for the benefit of the Secured Parties, will be (i) immediately (except as expressly set forth in clause (ii) hereof) granted replacement liens on all property of the Debtors, now existing or hereinafter acquired, and (ii) subject to entry of the Proposed Final Order, replacement liens on proceeds of the Debtors claims and causes of action under sections 502(d), 544, 545, 547, 548, 549, 550 and 553 of the Bankruptcy Code and any other avoidance or similar action under the Bankruptcy Code or similar federal, state, local or foreign law ( Avoidance 4 RLF v.1 8

9 Case BLS Doc 10 Filed 11/07/17 Page 9 of 133 Summary of Material Terms Location Actions ) and rights under section 506(c) of the Bankruptcy Code. The Adequate Protection Replacement Liens (other than the Adequate Protection Replacement Liens securing the Revolving Facility) shall be subject and subordinate only to (i) the Postpetition Hedge Liens, (ii) the Credit Facility Liens and Adequate Protection Replacement Liens securing the Revolving Facility, (iii) Permitted Liens, (iv) any security interest or lien granted pursuant to sections 364(c)(2), 364(c)(3) and/or 364(d)(1) of the Bankruptcy Code in connection with any DIP Financing; and (v) the Carve-Out. The Adequate Protection Replacement Liens securing the Revolving Facility shall be subject and subordinate only to (iii) and (v) of the preceding sentence. Adequate Protection Super-Priority Claims. To the extent of Diminution in Value, the Secured Parties will be granted allowed super-priority administrative claims (such adequate protection super-priority claims, the Adequate Protection Super-Priority Claims ) pursuant to section 507(b) of the Bankruptcy Code, whether or not such expenses or claims may become secured by a judgment lien or other non-consensual lien, levy or attachment, which Adequate Protection Super-Priority Claims shall for purposes of section 1129(a)(9)(A) of the Bankruptcy Code be considered administrative expenses allowed under section 503(b) of the Bankruptcy Code, and which Adequate Protection Super-Priority Claims shall be payable from and have recourse to the Collateral in accordance with this Interim Order, subject and subordinate only to (i) the Postpetition Hedge Super- Priority Claims; provided that the Adequate Protection Super-Priority Claims granted on account of the Revolving Facility shall be pari passu to the Postpetition Hedge Super-Priority Claims, (ii) any super-priority administrative claims granted pursuant to Section 364(c)(1) of the Bankruptcy Code in connection with any DIP Financing and (iii) the Carve-Out. Professional Fees and Information. The Debtors will (i) timely pay in cash all reasonable out-of-pocket fees, costs and expenses (including, without limitation, fees, costs and expenses incurred prior to the date of entry of the Proposed Interim Order, to the extent not previously paid) of (a) the Secured Agent and its counsel, Norton Rose Fulbright US LLP, (b) Wachtell, Lipton, Rosen & Katz and RPA Advisors, LLC, as advisors to the Ad Hoc 9 RLF v.1

10 Case BLS Doc 10 Filed 11/07/17 Page 10 of 133 Summary of Material Terms Location Carve-Out Bankruptcy Rule 4001(b)(1)(B)(iii) Committee, and (c) any regulatory or local counsel retained, as applicable, by the Secured Agent and the Ad Hoc Committee, in each case, on a regular monthly basis during the chapter 11 cases, without further notice, motion or application to, order of, or hearing before, the Court (provided that the payment of such fees, costs and expenses shall be subject to the review and objection period set forth in paragraph 4(d) of the Proposed Interim Order) and (ii) deliver to the Secured Agent and the Secured Lenders all information, reports, documents and other material related to the Debtors that they may reasonably request, either directly or through its professionals. Subject to the terms and conditions contained in paragraph 11 of the Proposed Interim Order, each of the Credit Facility Liens, Adequate Protection Replacement Liens, Postpetition Hedge Liens, Adequate Protection Super-Priority Claims and the Postpetition Hedge Super-Priority Claims are subject and subordinate to payment of the Carve-Out. The Carve-Out includes the following: 9(a) certain statutory fees; the allowed professional fees and expenses of the Debtors that are incurred in accordance with the Approved Budget prior to the delivery by the Secured Agent of a Carve-Out Trigger Notice (the Trigger Date ); the allowed expenses of Committee Members and the allowed professional fees and expenses of the Committee that are incurred in accordance with the Approved Budget prior to the Trigger Date in an aggregate amount (for both Committee Members and the Committee s professionals) not to exceed $250,000 (the Committee Professionals Carve-Out Cap ); the allowed professional fees and expenses of the Debtors that are incurred in accordance with the Approved Budget on and after the Trigger Date in an aggregate amount not to exceed $350,000 (the Debtors Professionals Carve-Out Cap ); and in the event of a conversion of the chapter 11 cases to cases under chapter 7 of the Bankruptcy Code, the payment of fees and expenses incurred by a trustee and any professional retained by such trustee in an aggregate 10 RLF v.1

11 Case BLS Doc 10 Filed 11/07/17 Page 11 of 133 Summary of Material Terms Location amount not to exceed $50,000. Provisions to be Highlighted Pursuant to Local Rule (a)(i) 9. The Debtors believe that the following provisions of the Proposed Interim Order must be highlighted pursuant to Local Rule (a)(i) as it relates to the Debtors proposed use of Cash Collateral: Local Rule Concise Statement Location Cross- Collateralization Local Rule (a)(i)(A) Stipulations, Waivers and Releases Local Rule (a)(i)(B) The Proposed Interim Order does not provide for crosscollateralization, other than the grant of the Adequate Protection Replacement Liens on the Collateral to the extent of any Diminution in Value. In the Proposed Interim Order, the Debtors stipulate to certain facts, including, among other things, the following: The Credit Facility Liens are valid, binding, enforceable, and perfected first priority liens that are not subject to, among other things, avoidance or recharacterization. N/A E The Secured Obligations constitute legal, valid and binding obligations of the applicable Debtors, enforceable in accordance with the terms of the applicable Financing and Hedge Documents, and such obligations (including any payment of such obligations) to the Secured Parties are not subject to defense, counterclaim or offset of any kind. As of the Petition Date, the amounts owing to the Secured Lenders under the Financing Documents (exclusive of any interest, fees or expenses that accrued before the Petition Date or that will accrue after the Petition Date) is not less than $660,000, As of the Petition Date, the amounts owing to ExGen under the Secured Sponsor Agreements (exclusive of any interest, fees or expenses that accrued before the Petition Date or that will accrue after the Petition Date) are estimated to be not less than $13,300, (the Estimated Sponsor Claim ); provided, however, that between the date of entry of the Proposed Interim Order and the date of the Final Hearing, the Debtors, the 11 RLF v.1

12 Case BLS Doc 10 Filed 11/07/17 Page 12 of 133 Local Rule Concise Statement Location Sponsor and the Ad Hoc Committee will work in good faith to reconcile the actual amount of the Estimated Sponsor Claim, which amount will be included in the Proposed Final Order. As of the Petition Date, (x) the Secured Commodity Hedge Agreement has not been terminated, (y) no amounts are currently owed by the Debtors to the Commodity Hedge Counterparty pursuant to the Secured Commodity Hedge Agreement and (z) no amounts are owed to any of the Debtors by the Commodity Hedge Counterparty pursuant to the Secured Commodity Hedge Agreement. Effect of Stipulations, Waivers and Releases Local Rule (a)(i)(B) Section 506(c) Waiver The Proposed Interim Order also provides for the release of certain claims against the Secured Party Releasees with respect to the Prepetition Documents. The Secured Party Releasees include Bank of America, N.A. (in various capacities, including Secured Agent, Issuing Lender and Secured Financial Hedge Counterparty), the Secured Lenders, the Secured Commodity Hedge Counterparty, the Depositary Agent, and certain related persons and entities of the foregoing (each in their respective capacities as such). The stipulations contained in the Proposed Interim Order, including the Debtors release of certain claims, are immediately binding upon the Debtors upon the Court s entry of such order. The stipulations contained in the Proposed Interim Order will be binding upon each other party in interest, including any Committee, unless such Committee or any other party in interest other than the Debtors obtains the authority to commence a Claim or Defense and thereafter commences such Claim or Defense, or if the chapter 11 cases are converted to cases under chapter 7 prior to the expiration of the Challenge Period (as defined below), the chapter 7 trustee in such Successor Case commences a Claim or Defense, (i) solely with respect to the Committee, on or before sixty (60) days after the date of formation of such Committee but in no event later than seventyfive (75) days after the date of entry of the Proposed Interim Order or (b) with respect to all other parties in interest (including the chapter 7 trustee in any Successor Case but excluding the Debtors), on or before seventy five (75) days after the date of entry of the Proposed Interim Order (such time period shall be referred to as the Challenge Period ). Subject only to entry of the Proposed Final Order, no costs or expenses of administration of the chapter 11 cases or any 8 11 RLF v.1 12

13 Case BLS Doc 10 Filed 11/07/17 Page 13 of 133 Local Rule Concise Statement Location Local Rule (a)(i)(C) Liens on Chapter 5 Avoidance Causes of Action Local Rule (a)(i)(D) Provisions Deeming Prepetition Debt to be Postpetition Debt Local Rule (a)(i)(E) Disparate Treatment of Professionals Under Carve Out Local Rule (a)(i)(F) Successor Case shall be charged against or recovered from or against any or all of the Secured Agent, the Secured Lenders, the Commodity Hedge Counterparty, the Collateral, the Prepetition Collateral, or the Cash Collateral pursuant to section 506(c) of the Bankruptcy Code or otherwise, without the prior written consent of the Secured Agent (acting at the direction of Secured Lenders constituting Required Lenders in their sole discretion) and the Commodity Hedge Counterparty. Subject only to entry of the Proposed Final Order, the Collateral shall include the proceeds of Avoidance Actions. The Proposed Interim Order does not deem prepetition secured debt to be postpetition debt or use postpetition loans from a prepetition secured creditor to pay part or all of that secured creditor s prepetition debt. The Proposed Interim Order provides for disparate treatment for professionals retained by the Committee from those retained by the Debtors under the Carve-Out in two ways. First, the Debtors professionals allowed fees and expenses that may accrue prior to the Trigger Date are included in the Carve- Out, subject only to the Approved Budget. While the Committee s allowed professionals fees and expenses (including the allowed expenses incurred by the Committee Members) are included in the Carve-Out, such amounts are subject to both the Approved Budget and the Committee Professionals Carve-Out Cap. Second, the Debtors professionals allowed fees and expenses that may accrue on and after the Trigger Date are included in the Carve-Out, subject to the Approved Budget and the Debtors Professionals Carve-Out Cap. In contrast, none of the fees and expenses of the Committee s professionals (including the expenses incurred by the Committee Members) that may accrue on and after the Trigger Date are included in the Carve-Out. 4(a) N/A 9(a) Non-Consensual Priming Liens Local Rule (a)(i)(G) Pursuant to section 364(d)(1) of the Bankruptcy Code, a valid, binding, continuing, enforceable, fully-perfected priming lien and security interest in all Prepetition Collateral, which lien and security interest shall be (x) senior in all respects to (1) the Credit Facility Liens (other than Credit Facility Liens securing the Revolving Facility) and (2) the Adequate Protection 5(b) RLF v.1 13

14 Case BLS Doc 10 Filed 11/07/17 Page 14 of 133 Local Rule Concise Statement Location Section 552(b)(1) Waiver Local Rule (a)(i)(H) Replacement Liens (other than the Adequate Protection Replacement Liens securing the Revolving Facility) and (y) subordinate only to (1) the Credit Facility Liens and Adequate Protection Replacement Liens securing the Revolving Facility and (2) Permitted Liens. Here, the Consenting Secured Parties have expressly consented to the granting of such priming liens, and the Consenting Secured Parties may amend the Intercreditor Agreement so that such liens may be granted without the consent of all other Secured Parties. Subject only to entry of the Proposed Final Order, the equities of the case exception under section 552(b) of the Bankruptcy Code shall not apply. The Amended Hedge Agreement As is customary in the Debtors industry, in the ordinary course of business, Debtor ExGen Texas Power, LLC ( EGTP ) enters into hedging positions to hedge the Debtors exposure to commodity price risks. Pursuant to that certain 2002 ISDA Master Agreement, dated as of September 14, 2014 (as amended, restated, supplemented or otherwise modified from time to time prior to the Petition Date, the Secured Commodity Hedge Agreement ), EGTP has certain commodity hedge confirmations (each, a Hedging Position ) in place with the Commodity Hedge Counterparty. 11. The Secured Commodity Hedge Agreement is comprised of an International Swap Dealers Association Master Agreement (an ISDA Master ) and a schedule attached to the ISDA Master. The ISDA Master is attached hereto as Exhibit B. The ISDA Master is a standard form of contract that sets forth the non-economic terms of all of the Hedging Positions it governs. The parties to an ISDA Master make certain elections and may also modify the standard form by agreeing upon overriding terms that are set forth in the schedule. RLF v.1 14

15 Case BLS Doc 10 Filed 11/07/17 Page 15 of The Hedging Positions are important to the success of the Debtors businesses. They are directly tied to the Debtors anticipated energy production, and directly affect the Debtors ability to generate stable cash flows and manage liquidity. Due, in large part, to the recent downturn in the energy sector, the Hedging Positions have provided the Debtors with a significant source of revenue in the months prior to the Petition Date. 13. The Hedging Positions are also important to the Debtors ability to manage the financial risks inherent in the Debtors businesses, including fluctuations in ERCOT power prices and natural gas prices. Through the Hedging Positions, the Debtors are able to hedge against power and natural gas price fluctuations, provide long-term cash flow predictability, and thereby protect the economic value of their operations. 14. As part of the pre-petition negotiations leading up to the commencement of the Debtors chapter 11 cases, certain of the Secured Lenders informed the Debtors that leaving the Secured Commodity Hedge Agreement in place was a critical element of any proposed restructuring. To that end, under the terms of the Proposed Plan, one of the conditions precedent to the effective date of such plan is that the Secured Commodity Hedge Agreement be in full force and effect. However, under the terms of the Secured Commodity Hedge Agreement, the filing for bankruptcy by any of the Debtors is an event of default under such agreement (the Bankruptcy EOD ) and, pursuant to section 556 of the Bankruptcy Code, 5 the Commodity Hedge Counterparty may terminate such agreement as a result of such default notwithstanding the automatic stay. 15. As a result, prior to the Petition Date, the Debtors, certain of the Secured Lenders and the Commodity Hedge Counterparty engaged in lengthy, arms length discussions and 5 Section 556 of the Bankruptcy Code allows hedge counterparties to liquidate, terminate or accelerate forward and commodity contracts notwithstanding the automatic stay if they have the contractual right to do so. 11 U.S.C RLF v.1 15

16 Case BLS Doc 10 Filed 11/07/17 Page 16 of 133 negotiations regarding leaving the Secured Commodity Hedge Agreement in place during the Debtors chapter 11 cases and after the effective date of the Proposed Plan. Following those negotiations and discussions, the parties agreed to amend the Secured Commodity Hedge Agreement (as amended, the Amended Hedge Agreement ) to include the following key terms, among others: The Amended Hedge Agreement will include modifications to, among other things, remove the Bankruptcy EOD and provide the Debtors with additional flexibility in connection with asset sales. The Commodity Hedge Counterparty will be granted, pursuant sections 364(c)(2), 364(c)(3) and 364(d)(1) of the Bankruptcy Code, the Postpetition Hedge Liens (see Proposed Interim Order 5(b)) and, pursuant to section 364(c)(1) of the Bankruptcy Code, the Postpetition Hedge Super-Priority Claims (see Proposed Interim Order 5(a)), in each case, on the terms set forth in the Proposed Interim Order. The Proposed Interim Order will authorize the Debtors to perform their obligations under the Amended Hedge Agreement, including, subject to the terms of the Proposed Interim Order and the Amended Hedge Agreement, to, subject to the terms of the Amended Hedge Agreement, pay all reasonable and documented out-of-pocket expenses incurred by the Commodity Hedge Counterparty. Subject to the entry of the Proposed Final Order, the Debtors will assume the Amended Hedge Agreement pursuant to section 365 of the Bankruptcy Code and the Debtors will waive any right that they may have to reject or assign such agreement (other than in accordance with its terms). 16. For the convenience of the Court and all parties in interest, a summary chart identifying certain material changes made to the Secured Commodity Hedge Agreement and incorporated into the Amended Hedge Agreement is attached hereto as Exhibit C. The Debtors Prepetition Secured Indebtedness 17. EGTP, as borrower, ExGen Texas Power Holdings, LLC, as parent guarantor, and the remaining Debtors, each as a subsidiary guarantor, entered into that certain Credit Agreement (as amended, restated, supplemented, or otherwise modified from time to time, the Secured Credit Agreement ), dated as of September 18, 2014, with Bank of America, N.A., as, among RLF v.1 16

17 Case BLS Doc 10 Filed 11/07/17 Page 17 of 133 other things, collateral agent and administrative agent (the Secured Agent ), Wilmington Trust, National Association, as depositary agent (the Depositary Agent ), and the lenders thereto from time to time (the Secured Lenders ). 18. The Secured Credit Agreement contemplated the advance of term loans in the aggregate principal amount of $675 million pursuant to the term facility (the Term Loans ) and the issuance of up to $20 million in letters of credit and the advance of revolving loans in connection with draws on letters of credit pursuant to the revolving facility (the Revolving Loans ). As of the Petition Date, there is approximately $660 million in aggregate principal amount (excluding any accrued and unpaid interest, fees and costs) of Term Loans owed to the Secured Lenders outstanding under the Credit Agreement. Prior to the Petition Date, on October 31, 2017, the Revolving Loans were repaid in full and terminated. Therefore, as of the Petition Date, there are no Revolving Loans outstanding. 19. To satisfy the requirements of the Secured Credit Agreement, EGTP executed the Secured Financial Hedge Agreement, which is an interest rate hedge agreement, with Bank of America, N.A. in its capacity as the Secured Financial Hedge Counterparty. Such agreement expires by its terms on September 30, The notional amount of the agreements varies, starting at $504,984,375 on December 31, 2014, and ending at $481,179,563 on June 30, In addition, and as noted above, EGTP is also a party to the Commodity Hedge Agreement with the Commodity Hedge Counterparty. 20. Each of the Debtors pledged its assets, including their equity interests in the other Debtors and the Non-Debtor Service Companies, as collateral for their obligations under the Secured Credit Agreement. The Intercreditor Agreement sets forth the relative rights of the Secured Parties and relative priorities of the Secured Obligations, in each case, with respect to RLF v.1 17

18 Case BLS Doc 10 Filed 11/07/17 Page 18 of 133 the Secured Parties shared collateral. Generally, but subject in all respect to the Intercreditor Agreement, the relative payment priorities upon a disposition of such collateral is as follows: first, to the payment of all fees, costs, expenses, reimbursements and like amounts owed to the Secured Agent, the Depositary Agent, the Administrative Agent and the Issuing Banks (each in the respective capacities as such); second, to the payment of all principal, interest and other amounts owed with respect to the Revolving Loans in an amount not to exceed $22 million (all such amounts have been repaid in full and terminated as of October 31, 2017); third, to the payment of (i) all principal, interest and other amounts owed in respect of the Secured Obligations not included in the second priority above, including any such amounts owing under the Term Loans (but excluding any Second Lien Secured Obligations (of which there are none)), (ii) all periodic payments, settlement payments, termination amounts and other Secured Obligations owing under the Financing and Hedge Documents and (iii) amounts owing to ExGen under the Secured Sponsor Agreements, subject to a $75 million cap; fourth, to the payment of all Secured Obligations owing to ExGen under the Secured Sponsor Agreements in excess of the $75 million cap (of which there are none); fifth, to the payment of all Second Lien Secured Obligations (of which there are none); and last, the balance, if any, after all Secured Obligations have been paid in full in cash, to the Debtors or as is otherwise required by applicable law. 21. The Intercreditor Agreement also permits the Secured Agent, acting at the direction of the Required Lenders, to consent to the use of Cash Collateral on behalf of all of the Secured Parties. As set forth in the Proposed Interim Order, certain Secured Lenders (including, without limitation, the Ad Hoc Committee) constituting Required Lenders, the Secured Agent, the Commodity Hedge Counterparty, the Secured Financial Hedge Counterparty and ExGen (collectively, the Consenting Secured Parties ), have consented to the use of certain of the Cash Collateral on the terms set forth in the Proposed Interim Order. Moreover, the Consenting Secured Parties have consented to the granting of the Postpetition Hedge Liens, including the RLF v.1 18

19 Case BLS Doc 10 Filed 11/07/17 Page 19 of 133 priming Postpetition Hedge Liens, and may amend the Intercreditor Agreement so that such liens may be granted without the consent of all other Secured Parties. The Debtors Need to Use Cash Collateral 22. The Debtors do not have available sources of working capital and financing sufficient to carry on the operation of their businesses without the use of Cash Collateral. The Debtors must have access to Cash Collateral to operate their businesses in chapter 11 in a manner consistent with their ordinary course practices. Cash Collateral will be used by the Debtors to, among other things, make payments in respect of labor costs owing under the O&M Agreements incurred thereunder after the Petition Date, pay their vendors and satisfy other ordinary costs of operation, including taxes and fees. Absent authority to use Cash Collateral, even for a limited period of time, the continued operation of the Debtors businesses would suffer, causing immediate and irreparable harm to the Debtors, their respective estates, and their creditors. Accordingly, the use of Cash Collateral is critical to preserve and maintain the going concern value of the Debtors. The Proposed Use of Cash Collateral 23. Recognizing the importance of their ability to use Cash Collateral, the Debtors approached the Consenting Secured Parties prior to the commencement of these chapter 11 cases to discuss the terms upon which they would consent to the Debtors use of Cash Collateral. After extensive arm s-length negotiations, the parties agreed on the form of the Proposed Interim Order, which authorizes the Debtors to use certain of the Cash Collateral in accordance with the Approved Budget (subject to the Permitted Variance) and will allow the Debtors to continue to operate their businesses in the ordinary course during the chapter 11 cases. 6 Pursuant to the 6 Specifically, pursuant to the Proposed Interim Order, the Consenting Secured Parties have consented to the Debtors use of Cash Collateral arising from the ordinary course of the Debtors businesses, including any Cash RLF v.1 19

20 Case BLS Doc 10 Filed 11/07/17 Page 20 of 133 Proposed Interim Order, the Debtors right to use Cash Collateral commences on the Petition Date and remains in effect through and including the Cash Collateral Termination Date. 24. The Debtors, with the assistance of their advisors, formulated the Approved Budget, which sets forth, among other things, all projected cash receipts and cash disbursements on a weekly basis over a 13-week period. The Consenting Secured Lenders, which constitute the requisite Required Lenders under the Intercreditor Agreement, have approved the Approved Budget in form and substance. The Approved Budget includes all reasonable, necessary, and foreseeable expenses to be incurred in connection with the operation of the Debtors and the administration of these chapter 11 cases for the applicable period, and is designed to provide the Debtors with adequate liquidity over such period. Proposed Adequate Protection for Secured Parties 25. As part of the arm s length negotiations between the parties, the Consenting Secured Parties have requested, and the Debtors have agreed to provide, the adequate protection package set forth in the Proposed Interim Order. Pursuant to paragraph 4 of the Proposed Interim Order, such adequate protection package consists of: (i) to the extent of any Diminution in Value, Adequate Protection Replacement Liens in the Collateral, (ii) to the extent of any Diminution in Value, Adequate Protection Super-Priority Claims, (iii) the payment of any Fees and Expenses (as defined below) and (iv) certain reporting obligations to the Secured Lenders and the Secured Agent on terms set forth in the Proposed Interim Order. Collateral in the Debtors bank accounts as of the Petition Date, but have not consented to the Debtors use of any Cash Collateral arising from asset dispositions or other transactions outside of the ordinary course of the Debtors businesses. Moreover, subject to the entry of the Proposed Final Order, the proceeds of any such dispositions or transactions shall, within two (2) business days after the Debtors receive any such proceeds, be paid to the Secured Agent for application in accordance with the terms of the Proposed Interim Order and the Intercreditor Agreement. RLF v.1 20

21 Case BLS Doc 10 Filed 11/07/17 Page 21 of The Adequate Protection Replacement Liens are comprised of security interests and liens pursuant to sections 361 and 363 of the Bankruptcy Code in the form of first priority replacement liens on, and security interests in, all property of any kind or nature whatsoever, whether now owned or hereafter acquired or existing, and wherever located, of the Debtors estates (as created pursuant to section 541(a) of the Bankruptcy Code). The Adequate Protection Replacement Liens (other than the Adequate Protection Replacement Liens securing the Revolving Facility) shall be subject and subordinate only to (i) the Postpetition Hedge Liens, (ii) the Credit Facility Liens and Adequate Protection Replacement Liens securing the Revolving Facility, (iii) Permitted Liens, (iv) any security interest or lien granted pursuant to sections 364(c)(2), 364(c)(3) and/or 364(d)(1) of the Bankruptcy Code in connection with any DIP Financing and (v) the Carve-Out. 27. To the extent of Diminution in Value, the Secured Parties are granted under the Proposed Interim Order allowed Adequate Protection Super-Priority Claims pursuant to section 507(b) of the Bankruptcy Code, with priority over any and all claims against the Debtors, now existing or hereafter arising, of any kind whatsoever, including, without limitation, all administrative expenses of the kind specified in sections 503(b) and 507(b) of the Bankruptcy Code and any and all administrative expenses or other claims arising under sections 105, 326, 328, 330, 331, 365, 503(b), 506(c) (subject to entry of the Final Order), 507(a), 507(b), 726, 1113 or 1114 of the Bankruptcy Code. The Adequate Protection Super-Priority Claims are subject and subordinate only to (i) the Postpetition Hedge Super-Priority Claims; provided that the Adequate Protection Super-Priority Claims granted on account of the Revolving Facility shall be pari passu to the Postpetition Hedge Super-Priority Claims, (ii) any super-priority RLF v.1 21

22 Case BLS Doc 10 Filed 11/07/17 Page 22 of 133 administrative claims granted pursuant to Section 364(c)(1) of the Bankruptcy Code in connection with any DIP Financing and (iii) the Carve-Out. 28. As further adequate protection, the Debtors have agreed to timely pay in cash all reasonable out-of-pocket fees, costs and expenses (including, without limitation, fees, costs and expenses incurred prior to the date of entry of the Proposed Interim Order, to the extent not previously paid) (collectively, the Fees and Expenses ) of (a) the Secured Agent and its counsel, Norton Rose Fulbright US LLP, (b) Wachtell, Lipton, Rosen & Katz and RPA Advisors, LLC, as advisors to certain of the Consenting Secured Lenders, and (c) any regulatory or local counsel retained, as applicable, by the Secured Agent and the Consenting Secured Lenders in each case, on a regular monthly basis during the Cases, without further notice, motion or application to, order of, or hearing before, the Court. Basis for Relief Requested A. The Debtors Use of Cash Collateral. 29. A debtor s use of property of the estate, including cash collateral, is governed by Bankruptcy Code section 363. Pursuant to section 363(c)(2), a debtor may use cash collateral if (A) each entity that has an interest in such cash collateral consents; or (B) the court, after notice and a hearing, authorizes such use, sale, or lease in accordance with the provisions of [section 363]. 11 U.S.C. 363(c)(2). Here, the Secured Parties are the only parties with an interest in the Cash Collateral. Such parties have either expressly consented to use of Cash Collateral or, under the terms of the Intrercreditor Agreement, are deemed to have consented to the use of Cash Collateral. Therefore, section 363(c)(2)(A) is satisfied and the Debtors may use Cash Collateral pursuant to such section in accordance with the terms of the Proposed Interim Order. RLF v.1 22

23 Case BLS Doc 10 Filed 11/07/17 Page 23 of Moreover, section 363(e) of the Bankruptcy Code further provides that on request of an entity that has an interest in property... to be used, sold or leased, by the trustee, the court... shall prohibit or condition such use, sale or lease as in necessary to provide adequate protection of such interest. 11 U.S.C. 363(e). 31. The Bankruptcy Code does not expressly define adequate protection. Section 361 of the Bankruptcy Code, however, provides a non-exhaustive list of examples of adequate protection, including replacement liens and administrative priority claims. See 11 U.S.C Generally, courts decide what constitutes adequate protection on a case-by-case basis. See Resolution Trust Corp. v. Swedeland Dev. Group, Inc. (In re Swedeland Dev. Group, Inc.), 16 F.3d 552, 564 (3d Cir. 1994) ( [A] determination of whether there is adequate protection is made on a case by case basis. ); In re N.J. Affordable Homes Corp., No , 2006 WL , at *14 (Bankr. D. Del. Feb. 18, 1992) (emphasizing that the varying analyses and results contained in the... slew of cases demonstrate that what interest is entitled to adequate protection and what constitutes adequate protection must be decided on a case-by-case basis ); see also In re Dynaco Corp., 162 B.R. 389, 394 (Bankr. D.N.H. 1993) (citing 2 Collier on Bankruptcy [1] at (15th ed. 1993) (explaining that adequate protection can take many forms and must be determined based upon equitable considerations arising from the particular facts of each proceeding ). 32. In Swedeland, the Third Circuit observed that the purpose of adequate protection is to insure that the creditor receives the value for which he bargained prebankruptcy. Swedeland, 16 F.3d at 564; see also Shaw Indus., Inc. v. First Nat l Bank of PA (In re Shaw Indus., Inc.), 300 B.R. 861, 865 (Bankr. W.D. Pa. 2004) ( The purposes of providing adequate RLF v.1 23