SIOUX FALLS, S.D., Sept. 15, 2003 — NorthWestern Corp. has filed a voluntary petition for relief seeking to reorganize under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware to facilitate a financial restructuring of the company.
NorthWestern’s subsidiaries including its principal nonutility businesses Blue Dot Services Inc. and Expanets, Inc. were not included in the Chapter 11 filing.
NorthWestern’s communications services subsidiary, Expanets Inc., has signed an agreement to sell substantially all of its assets to Cerberus Capital Management, L.P., and TenX Capital Management, Inc.
Under the terms of the transaction, substantially all of the assets of Expanets will be sold for $107.5 million in cash, less the amount of debt and capitalized leases assumed, plus a contingent note that, depending on operating results after the closing, will pay up to an additional $27.5 million in principal amount.
The cash amount is subject to an adjustment based on the net current assets of Expanets transferred at closing. The transaction is structured to permit a 45-day auction to be administered by Bear, Stearns & Co. under which NorthWestern may seek topping bids using defined auction procedures.
Expanets was not included in NorthWestern’s Chapter 11 reorganization filing on Sept. 14, 2003, and the sale agreement was entered into prior to the Chapter 11 filing. Expanets will continue operations in the ordinary course of business until the transaction is closed, which is anticipated to occur in the fourth quarter of 2003. The agreement is subject to customary closing conditions, including regulatory approvals.
Blue Dot Services Inc., a heating, ventilation and air conditioning (HVAC) and plumbing company, has completed the sale of six business locations during the third quarter of 2003 and has reduced the balance under its existing credit facility from $20 million to less than $10 million. The company also reported that it extended through Oct. 31, 2003, a forbearance agreement with its bank and continues to work to further reduce the outstanding balance under its credit facility.
NorthWestern said that the Chapter 11 financial reorganization process should help it to significantly reduce debt, improve its capital structure and ensure the long-term financial health of its core utility operations. The company’s current financial challenges result primarily from the implementation of a diversification strategy and the significant amount of debt incurred as part of that strategy.
For the past several months, NorthWestern has been working to effectuate an out-of-court restructuring. The company said it was unable to accomplish all the initiatives required to implement a restructuring outside the Chapter 11 process. These initiatives included obtaining additional financing, selling its nonutility businesses and gaining shareholder support to change the company’s Certificate of Incorporation which would have allowed the issuance of additional equity to restructure debt.
“Our Board of Directors and the new management team worked very hard to effectuate a restructuring outside of the court, and we are disappointed that we were unable to do so,” said Gary G. Drook, NorthWestern’s President and Chief Operating Officer. “However, we believe that reorganization under Chapter 11 will enable us to address our financial challenges while we continue to operate normally in serving our utility customers.”
DIP Financing Commitment Arranged
In conjunction with its filing, the company has arranged a commitment for $100 million of debtor-in-possession (“DIP”) financing from Bank One, N.A. Combined with unrestricted cash of approximately $20 million as of Sept. 12, 2003, and normal cash flow, the DIP financing will provide additional liquidity to continue normal operations, including the procurement of energy supplies, as the company restructures.
“The objective of our reorganization is to emerge as a financially stable, investment grade energy company,” said Drook. “We have a solid utility operation and I am confident that by providing us with access to new financing and an orderly process to work with our creditors and restructure our debt, Chapter 11 reorganization will enable NorthWestern to become a stronger service provider, better business partner and preferred employer going forward.”
Senior Noteholders Express Support for Reorganization
A representative of the unofficial committee of NorthWestern’s Senior Noteholders provided the company with the following statement, “The unofficial committee of Senior Noteholders of NorthWestern, the members of which collectively hold beneficially more than 50 percent of the company’s Senior Notes, supports the company in its restructuring efforts, including its filing of a voluntary Chapter 11 petition. The Unofficial Committee agrees with the company that a substantial deleveraging of the company’s balance sheet, through a conversion of substantially all of the company’s unsecured debt into virtually all of the company’s equity, is critical to allowing the company to emerge successfully from Chapter 11 as an investment grade entity and to better serve the needs of its creditors, customers and the community.”
Drook commented, “We believe that obtaining the support of our senior unsecured creditors is an important step in expediting our reorganization process.”
Utility Services Continue to Operate Normally
NorthWestern does not anticipate any significant operational changes, workforce reductions or changes in compensation and benefits as a result of the Chapter 11 reorganization filing. NorthWestern will pay post-petition vendors in the normal course of business.
Drook said, “Serving our customers remains our most important business mission, and this filing does not change our commitment to continue delivering reliable energy services. In fact, we strongly believe that NorthWestern’s reorganization will ultimately benefit our customers as it will improve our financial condition and restore our credit ratings, enabling greater flexibility in procuring energy which will lead to more stable rates in the long-term.”
Common Stock, Trust Preferreds Expected to Be Delisted from the NYSE NorthWestern stated that it has been advised by the New York Stock Exchange (NYSE) that trading of the company’s common stock and all series of its trust preferred securities will be suspended and the NYSE will thereafter proceed to delist them. The company will not oppose the NYSE’s action and expects its common stock and trust preferred securities to be delisted upon approval by the Securities and Exchange Commission.
NorthWestern had previously stated in its public filings that if the company filed for protection under the U.S. Bankruptcy Code, its common stockholders could lose their entire investment. As a result of the bankruptcy filing, NorthWestern said it believes there is no value in the company’s common stock.
NorthWestern has retained Lazard Freres & Co. LLC as financial advisors. Paul, Hastings, Janofsky & Walker LLP is the company’s primary restructuring counsel.
NorthWestern Corporation is one of the largest providers of electricity and natural gas in the Upper Midwest and Northwest, serving more than 598,000 customers in Montana, South Dakota and Nebraska. NorthWestern also has investments in Expanets, Inc., a nationwide provider of networked communications and data solutions to small and mid-sized businesses; and Blue Dot Services Inc., a provider of heating, ventilation and air conditioning services to residential and commercial customers.