Utilities providers to Westinghouse Electric Co LLC say they are concerned the nuclear power products and services firm may run out of cash during its bankruptcy and want assurance that their bills will be paid.
Seven utilities said in a Tuesday court filing that Westinghouse’s rapid cash burn and special arrangements to protect its lawyers’ fees against a default raised suspicions about the company’s ability to pay its bills in bankruptcy.
The utilities are represented by Meyer Suozzi English & Klein of New York the Law Firm of Russell R. Johnson III of Virginia.
Westinghouse declined to comment.
Westinghouse filed for Chapter 11 bankruptcy in March in the U.S. Bankruptcy Court in Manhattan, undermined by billions of dollars of cost overruns at four unfinished nuclear reactors it is constructing in Georgia and South Carolina.
The company has asked for court approval to borrow up to $800 million to allow it to continue to operate. Westinghouse has said the money will benefit its thousands of creditors by shoring up the value of the company and preventing its liquidity crisis from spreading to its profitable units such as nuclear plant maintenance business.
The utilities questioned if the money will be enough.
The loan request comes on the heels of an emergency infusion of $900 million from Westinghouse’s parent company, Toshiba Corp of Japan, in February.
In addition, the utilities pointed to the bankruptcy loan agreement which ensures payment of up to $8 million for legal fees if Westinghouse defaults on its bankruptcy loan.
“If debtors’ counsel, who have in-depth knowledge of the debtors’ finances, felt the need to obtain such an extensive carve-out for payment of their fees and expenses, the debtors’ claims that they will have sufficient liquidity to pay their post-petition expenses, including utility expenses, as they come due is suspect at best,” said the objection by the utilities.
Judge Michael Wiles allowed Westinghouse to borrow an initial $350 million last month, and will hear arguments for the remainder of the proposed loan on April 26.
At the same hearing, Westinghouse will ask Wiles to prohibit telecommunications, gas, water and electric utilities from severing service. In return, Westinghouse will set aside two weeks of estimated utility payments, or about $1.1 million, in a segregated bank account.
The utilities, including Commonwealth Edison Co of Illinois and Pennsylvania Power Co, said in Tuesday’s filing Westinghouse should set aside payments for two months. That would cover the service they have to provide before they can cut off a customer for lack of payment under state regulations, according to court documents.
The case is In re Westinghouse Electric Co LLC, U.S. Bankruptcy Court for the Southern District of New York, No. 17-10751.
For Westinghouse: Gary Holtzer, Robert Lemons, Garrett Fail and David Griffiths of Weil Gotshal & Manges