Alto Maipo files Chapter 11 bankruptcy, cites changing energy market

By Sarah Lizee

Olympia, Wash., Nov. 17 – Alto Maipo Delaware LLC filed Chapter 11 bankruptcy Wednesday in the U.S. Bankruptcy Court for the District of Delaware to implement a prearranged financial restructuring agreement reached with its creditors, according to a press release.

Alto Maipo’s primary business purpose is the construction and eventual operation of a large run-of-river hydroelectric project in the Andes Mountains. Construction of the project is currently expected to reach commercial operation in the first half of 2022.

“Unfortunately, the energy market that Alto Maipo will enter into next year is not the same energy market that Alto Maipo projected would exist upon its initial commercial operation date when construction began in 2013,” Javier Dib, board president and chief restructuring officer of Alto Maipo, said in a declaration filed with the court.

“Since that time, there have been significant shifts both on the supply and demand side that have rendered Alto Maipo’s existing capital structure unsustainable.”

Additionally, the cost of construction for the project has increased by roughly 70% from Alto Maipo’s initial projections, due to unexpectedly difficult geological conditions as well as delays caused by some of Alto Maipo’s contractors, Dib said.

The increased construction costs necessitated two prior restructurings that significantly increased the amount of debt owed by Alto Maipo to its creditors.

“These prior restructurings, however, were based on revenue projections that did not take into account the worsening hydrology and market conditions that have become apparent in the years since,” Dib said. “As a result, the capital structure created through these prior restructurings is no longer sustainable.”

In order to right-size their capital structure to meet these market challenges, the debtors engaged in constructive negotiations with their creditors and, having reached agreement on terms for a pre-arranged restructuring with creditors holding a majority of the debtors’ senior secured debt, began the Chapter 11 cases to ensure that they can complete construction of the project.

Restructuring terms

On the plan effective date, the company will issue $1.05 billion of new senior first-lien debt through a combination of notes and project finance style loans and $995.31 million of new second-lien debt.

According to the term sheet, DIP claims will be exchanged for the new secured exit financing facility.

Administrative claims, priority tax claims and other priority claims will be paid in full.

Holders of Alto Maipo obligations will receive their pro rata share of the new first-lien secured obligations and new second-lien secured loan.

Holders of general unsecured claims will have their claims canceled without any distribution.

Voith Hydro will have its allowed claims under a lump sum, turnkey, engineering, procurement and construction contract dated Aug. 10, 2012 assumed as amended.

Intercompany claims will be reinstated, or canceled, released and extinguished with no distribution.

Existing equity interests will be canceled, released and discharged without any distribution, provided that AES Andes will receive 100% of the new common equity, subject to the conversion of the new second-lien secured loan and a shared services loan, if applicable.

DIP financing

The company is seeking court approval to enter into a $50 million debtor-in-possession facility with AES Andes as lender. Alto Maipo has asked for interim access to $20 million of the loan.

The facility will bear interest at 4% per annum, payable in kind. There is a 1% upfront fee and a 0.75% unused commitment fee.

The facility is set to mature in one year.

The company is also seeking court approval to use the cash collateral of its pre-petition lenders.

Other details

The company listed $1 billion to $10 billion in both estimated assets and estimated liabilities.

Its largest unsecured creditors are Strabag SpA, based in Vitacura, Chile, with a $3.43 million operational vendor claim, Voith Hydro SA, based in Las Condes, Chile, with a $1.48 million operational vendor claim, and Seguros Generales Suramericana SA, based in Providencia, Chile, with a $1.15 million insurance claim.

The Santiago, Chile-based renewable energy company filed bankruptcy under Chapter 11 case number 21-11507.

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