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[Just filed. Developing story.] August 11, 2023 – Condor Inversiones SpA and two affiliated debtors (together, the “Inversiones Debtors” or the “Debtors”) filed for Chapter 11 protection with the U.S. Bankruptcy Court in the Southern District of Texas, lead case No. 23-90761 (Judge David R. Jones). The Debtors, holding companies for Chilean wind and solar projects, are represented by Matthew D. Cavenaugh of Jackson Walker LLP. Further Board authorized appointments include Kroll as claims agent.
The Debtors’ lead petition notes between 1 and 50 creditors; estimated assets between $100.0mn and $500.0mn; and estimated liabilities between $100.0mn and $500.0mn. The Debtors do not list any unsecured creditors.
Goals of the Chapter 11 Filings
The Carr Declaration (defined below) provides: "The Debtors are filing these cases now because they need to stop Mainstream's ongoing actions directed at these assets [ie the Cóndor and Huemul Projects]. Although Mainstream is the Inversiones Debtors' indirect parent and, thus, structurally subordinate to the Inversiones Debtors' creditors, Mainstream has used its previous control of the Inversiones Debtors—while Mainstream knew that the borrower owed over $300 million of debt, which the Inversiones Debtors guarantee, was under payment default—to attempt to take or render worthless the Inversiones Debtors' assets for Mainstream's own benefit.
Among other things, Mainstream installed itself as administrator (a Chilean analog to LLC managers) of the Inversiones Debtors and their direct subsidiaries. Mainstream then purported to agree with itself—ostensibly wearing the hats of both the Inversiones Debtors and their direct subsidiaries—that: (a) despite the fact that the Debtors already held 100% of the Cóndor and Huemul OpCo Borrowers' equity, all of the Inversiones Debtors' intercompany debt claims against their direct subsidiaries would be converted to additional equity shares in the Cóndor and Huemul OpCo Borrowers (increasing the number of shares cannot increase the aggregate value of all outstanding shares); (b) those subsidiaries would be pre-authorized to issue trillions of new shares that would render the Inversiones Debtors' shares in those subsidiaries worthless through massive dilution; (c) the Inversiones Debtors would waive their preemptive rights to purchase those new shares; and (d) several Mainstream employees were authorized to enter into one or more subscription agreements for the new shares on behalf of the Cóndor and Huemul Opco Borrowers. Although Mainstream no longer has control of the Inversiones Debtors as a result of the appointment of me and two other new Administrators, Mainstream is continuing to take actions directed at the Inversiones Debtors' assets. These actions need to stop so the Inversiones Debtors can fulfill their obligations to their own creditors to maximize the value of their estates.”
Events Leading to the Chapter 11 Filing
In a declaration in support of first day filings (the “Carr Declaration"), Alan J. Carr, the Debtors' recently appointed Administrator, comments: “By April 2021, the Cóndor and Huemul Projects were experiencing delays and liquidity issues. As conditions worsened at those two Projects, I understand that various events of default occurred under the Cóndor OpCo and Huemul OpCo Credit Agreements, resulting in a cross-default under the Holdco Credit Agreement. The events of default were addressed through amendments to the Cóndor OpCo and Huemul OpCo Credit Agreements, and the corresponding cross-default was waived under the terms of the Holdco Credit Agreement.
Less than two years later, I understand that additional events of default occurred under the Cóndor OpCo and Huemul OpCo Credit Agreements. On information and belief, the Cóndor OpCo and Huemul OpCo Borrowers stopped making required interest payments under the Cóndor OpCo and Huemul OpCo Credit Agreements in or around May 15, 2023 [Carr continues an exhaustive list of events/actions resulting in defaults and cross defaults].
On July 12, 2023, and as discussed in greater detail below, Mainstream caused DENEF [the Debtors' indirect parent, see structure chart below] to amend the bylaws of the Inversiones Debtors to eliminate their boards and install Mainstream as administrator. The Holdco Credit Agreement includes a negative covenant prohibiting an Obligor from 'chang[ing] its legal form, materially amend[ing] its articles of association, by-laws or any other organizational document' in any manner that would 'be materially adverse to the interests of the Lenders.'
….on July 17, 2023, Mainstream used its status as Administrator to amend the bylaws of the Cóndor OpCo Borrower and Huemul OpCo Borrower to equitize the intercompany loans that the Cóndor OpCo Borrower and Huemul OpCo Borrower owed to the Inversiones Debtors due, in significant part, to the downstreaming of the Proceeds from the Holdco Credit Agreement…..Because the Inversiones Debtors already owned 100% of the equity of the Cóndor OpCo and Huemul OpCo Borrowers, the new shares received in exchange for their intercompany debt claims did not provide any new value to the Inversiones Debtors. Regardless of the number of shares that the Inversiones Debtors held, the aggregate value of 100% of those shares is the same.
….On July 12, 2023, Wilmington, as collateral agent acting at the direction of the Ares Lenders, filed an enforcement proceeding (the 'Chilean Enforcement Proceeding'). A copy of the complaint initiating the Chilean Enforcement Proceeding and a machine translation are attached as Exhibits 5A and 5B. The same day, on July 12, 2023, unbeknownst to Wilmington or the Ares Lenders, Mainstream caused DENEF to exercise its political rights [ie voting rights] attendant to the Inversiones Debtors' shares and to amend the Inversiones Debtors' bylaws to (a) eliminate the Inversiones Debtors' boards altogether, (b) provide that the Inversiones Debtors would instead be managed by one or more Administrators, and (c) appoint Mainstream as the Inversiones Debtors' Administrator….Mainstream immediately used that power to make similar changes to bylaws of the Inversiones Debtors' direct subsidiaries—Cóndor OpCo Borrower and Huemul OpCo Borrower—appointing itself as administrator of those subsidiaries….Then, on July 17, 2023, Mainstream used its new status as Administrator of the Inversiones Debtors, Cóndor OpCo Borrower and Huemul OpCo Borrower to take steps to (i) eliminate the Inversiones Debtors' ability to exercise control over the Cóndor and Huemul OpCo Borrowers and (ii) exchange large intercompany receivables belonging to the Inversiones Debtors for worthless equity.
Mainstream caused the Inversiones Debtors to amend the Cóndor OpCo Borrower and Huemul OpCo Borrower's bylaws to cause the Inversiones Debtors to equitize the $252,511,496.00 and $363,572,787.00 of intercompany loans that the Cóndor OpCo Borrower and Huemul OpCo Borrower respectively owed to
the Inversiones Debtors due, in significant part, to the downstreaming of the Proceeds from the Holdco Credit Agreement.
Immediately thereafter through a second amendment of the bylaws, Mainstream caused the Cóndor OpCo Borrower and Huemul OpCo Borrower to pre-authorize the issuance of trillions of new shares (the 'OpCo Capital Increases') that when issued will dilute the Inversiones Debtors' (pro forma) equity interest to 0.01%, which would render such interest worthless. In the second amendments to the bylaws, Mainstream also caused the Inversiones Debtors to,
among other things: (a) waive their preemptive rights to subscribe to any new shares issued by the Cóndor OpCo Borrower and Huemul OpCo Borrower; (b) set the minimum placement price for the trillions of new shares at $0.0000309 per share for Huemul and $0.000011 per share for Cóndor; and (c) authorize various
individuals, many of whom are Mainstream employees according to their Linkedin.com accounts, to represent the Cóndor OpCo Borrower and Huemul OpCo Borrower to enter into one or more subscription agreements with third parties for the new shares. None of these actions were disclosed to the Inversiones
The Carr Declaration provides: "Each of the Chilean Projects were financed, in part, with secured loans to the relevant operating company parent [yellow boxes and the box in the same row in the chart below] that were guaranteed by their respective subsidiaries (the "Project Level Debt"; NB: Other than providing limited recourse equity pledges, the Inversiones Debtors have no obligations under the Project Level Debt):
- Cóndor OpCo Borrower borrowed up to $551,958,857 to construct and operate the Cóndor Projects pursuant to that certain Amended and Restated Credit and Guarantee Agreement, dated as of November 4, 2019, among Cóndor OpCo Borrower, as borrower, AR Tchamma SpA, AR Alena SpA, AR Cerro Tigre SpA and AR Escondido SpA, as guarantors, Natixis, New York Branch, as administrative agent, and the other parties set forth therein (the "Cóndor OpCo Credit Agreement");
- Huemul OpCo Borrower borrowed up to $541,923,192 to construct and operate the Huemul Projects pursuant to that certain Amended and Restated Credit and Guarantee Agreement, dated as of August 31, 2020, among Huemul OpCo Borrower, as borrower, AR Alto Loa SpA, AR Pampa SpA, AR Valle Escondido
SpA, AR Llanos del Viento SpA and AR Puelche Sur SpA, as guarantors, DNB Bank ASA, as administrative agent, and the other parties set forth therein (the "Huemul OpCo Credit Agreement"); and
- Copihue Energía SpA ("Copihue OpCo Borrower") borrowed up to $162,117,228 to construct and operate the Copihue Project pursuant to that
certain Credit and Guarantee Agreement, dated as of June 31, 2021, among Copihue OpCo Borrower, as borrower, AR Caman SpA, as guarantor, DNB
Bank ASA, as administrative agent, and the other parties set forth therein (the "Copihue OpCo Credit Agreement").
In addition to the Project Level Debt, the operations and the construction of the Chilean Projects were financed with significant mezzanine debt. Specifically, Mainstream Renewable Power Mezzanine Finance DAC (the 'Holdco Borrower') had access to over $285.0mn under that certain Credit and Guarantee Agreement, dated as of September 17, 2020, among the Holdco Borrower, as borrower, DENEF and the Inversiones Debtors, as guarantors (collectively with the Holdco Borrower, the "Holdco Obligors"), Copihue Inversiones SpA, as guarantor, certain Ares Management, LLC affiliates (the "Ares Lenders"), as lenders, and Wilmington Trust, N.A. ("Wilmington"), as administrative and collateral agent (as amended, restated, amended and restated, supplemented or otherwise modified from time to time in accordance with its terms, the "Holdco Credit Agreement").
The Holdco Credit Agreement made available to the Holdco Borrower over $285.0mn to be drawn in three tranches for each of the three Chilean Projects: (a) $35.62mn for the Copihue Project; (b) $120.0mn for the Cóndor Projects; and (c) $130.0mn for the Huemul Projects. As of the Petition date, the total indebtedness, including unpaid principal and accrued interest on the Commitments (as defined in the Holdco Credit Agreement) under the Holdco Credit Agreement was in excess of $315.0mn.
To secure the Commitments under the Holdco Credit Agreement, Holdco Borrower's direct parent, International Mainstream Renewable Power Limited, pledged the shares of DENEF in favor of Wilmington on behalf of the Ares Lenders pursuant to that certain Deed of Pledge over Quotes, dated as of September 17, 2020, between International Mainstream Renewable Power Limited, as pledgor, DENEF, as pledged company, Wilmington, as agent, and the Ares Lenders, as lenders (the
'Spanish Share Pledge'). In addition, DENEF pledged the shares of the Inversiones Debtors and Copihue Inversiones SpA in favor of Wilmington on behalf of the Ares Lenders pursuant to three separate Pledges Without Conveyances of Shares from DENEF to Wilmington, dated September 17, 2020, September 30, 2020 and August 26, 2021 (respectively, the 'Cóndor Pledge,' the 'Huemul Pledge' and the 'Copihue Pledge').
In order to move the proceeds of the loans under the Holdco Credit Agreement (the "Proceeds") from the Holdco Borrower to the Chilean Projects, the Holdco Borrower moved the Proceeds to various affiliates, often in exchange for intercompany receivables. While the Debtors do not have perfect clarity on exactly how the Proceeds and other funds were moved throughout the Mainstream corporate structure, it appears that through various intercompany transactions, Huemul Inversiones ultimately came to hold over $350 million in intercompany receivables from the Huemul OpCo Borrower and Cóndor Inversiones came to hold over $250 million in intercompany receivables from the Cóndor OpCo Borrower—prior to the purported equitization by Mainstream."
About the Debtors
According to the Carr Declaration: "The Inversiones Debtors are two intermediate holding companies that own the corresponding holding operating companies—Cóndor Energía SpA ('Cóndor OpCo Borrower') and Huemul Energía SpA ('Huemul OpCo Borrower')—for the Cóndor and Huemul Projects…which consist of wind and solar generation facilities.
The Andes Renovables platform is among Mainstream's many renewable energy platforms. Located in Chile, the Andes Renovables platform consists of ten projects (seven wind and three solar). The platform is being constructed under three portfolios: Cóndor, Huemul and Copihue. The Cóndor portfolio is the first phase of the Andes Renovables platform and consists of 571 MW of power at three wind farms (Tchamma, Cerro Tigre and Alena) and one solar asset (Rio Escondido) (collectively, the 'Cóndor Projects'). The Huemul portfolio is the second phase of the Andes Renovables platform and consists of 630 MW of power at three wind farms (Ckhúri, Lllanos del Viento and Puelche Sur) and two solar assets (Pampa Tigre and Valle Escondido) (collectively, the 'Huemul Projects'). The Copihue portfolio consists of one wind farm (Caman) (the 'Copihue Project' and, collectively with the Cóndor Projects and the Huemul Projects, the 'Chilean Projects')."
According to the Carr Declaration: "Mainstream is a pure-play renewable energy company with wind and solar assets across global markets, including Europe, Latin America, Africa and Asia. Mainstream is wholly owned by Mainstream Renewable Holding AS, which, in turn, is wholly owned by Aker Mainstream Renewables AS ("Aker Mainstream"). Aker Mainstream is a Norwegian holding company that is co-owned by Aker Horizons ASA ('Aker'), Mitsui & Co. Ltd ('Mitsui') and minority stakeholders. A March 24, 2022, Mainstream press release reported that Aker would own 54.4% of Aker Mainstream, that Mitsui would own 27.5% of Aker Mainstream and Irish retail investors would own the remaining 18.1% as of April 2022."
Corporate Structure Chart
Debtors Cóndor Inversiones and Huemul Inversiones are the direct owners of the Cóndor OpCo Borrower and the Huemul OpCo Borrower, respectively.
The Inversiones Debtors are two intermediate holding companies that own the holding operating companies for the Cóndor and Huemul portfolios. The Inversiones Debtors are wholly owned by DENEF Investment, S.L.U. ("DENEF"), which is wholly owned by International Mainstream Renewable Power Limited, which, in turn, is wholly owned by Mainstream. The Inversiones Debtors each own 50% of debtor Condor II, which is member-managed….relevant portions of the corporate structure are as follows, with the Debtors in green, other obligors on the loan that the Inversiones Debtors guarantee in light green. Two of the Inversiones Debtors' direct subsidiaries are in yellow, both of which are in Chilean insolvency proceedings:
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