(Bloomberg) -- Talen Energy Corp. received a loan from a group led by GoldenTree Asset Management and a division of Silver Point Capital that will provide it with much-needed liquidity after it breached a term on its existing debt.
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The $788 million first-lien facility maturing in September 2024 will repay $238 million of borrowings on its revolving credit facility and provide working capital to help address soaring winter power prices, according to a statement Thursday. Its bonds plunged after the announcement.
Riverstone Holdings-backed Talen told investors in a private presentation reporting third-quarter results that it breached its net leverage covenant on its existing credit facility during the quarter and is seeking a waiver from those lenders, according to people with knowledge of the matter who asked not to be identified discussing confidential information.
It also intends to repay its $114 million bond maturing Dec. 15 after it resolves the covenant breach and finalizes its new loan, the people said.
Representatives for Talen and GoldenTree declined to comment, while spokespeople for Riverstone and Silver Point didn't immediately respond to a request for comment.
The power producer had been negotiating with investors over potential new financing, Bloomberg previously reported. Talen's new loan will have an interest rate around 8% and GoldenTree and Silver Point will hold at least 80% of the debt, according to one of the people. The loan needs to be approved by a majority of lenders under its existing revolving credit facility, according to the statement. Talen is seeking to reach a deal by mid-December.
The new financing comes as Talen reported adjusted earnings of $149 million for the quarter, down from $174 million for the same period a year earlier, the people said. Its realized energy margin was $154 million, down year-over-year from $237 million due to higher power prices on the East Coast, according to the people.
The company had $404 million of unrestricted cash and $385 million of restricted cash, and liquidity is expected to be $102 million by the end of 2022, according to the presentation, the people said. It also reported capital expenditure of $104 million for the quarter.
Talen saw collateral requirements for its hedging reach as high as roughly $400 million in October, but it's now around $200 million, according to the presentation.
The company's bonds led high-yield market declines on Thursday, with its 10.5% unsecured notes due 2026 plunging as much as 7 cents on the dollar to 57 cents. Its 7.25% secured bonds due 2027 fell 2 cents on the dollar to 92 cents.
Talen's hunt for fresh capital comes after it lined up $175 million from Orion Energy Partners in September to help build a data center and cryptocurrency mining operation. The company, which owns a mix of natural gas, coal, nuclear and solar plants, has been seeking to pivot its focus to renewable energy.
(Updates throughout with additional details on new loan and third quarter earnings.)
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