FALLS SHORT PPS consultations on bankruptcy flawed Paducah Power System says it is not a candidate for Chapter 9 bankruptcy. It says it plans to adopt a resolution to that effect at its next board meeting. The troubled local utility made the announcement in a three-paragraph news release it sent out several days ago. The release said the board reached the conclusion after consulting with financial and legal experts with Chapter 9 bankruptcy experience. The news release did not identify the parties the board consulted. But it has since been learned that that the financial advisor is Louisville-based Hilliard Lyons, and that the consultations took place in Hilliard Lyons Louisville corporate offices. The American Public Power Association, a power industry trade group formerly headed by PPS Interim General Manager Mark Crisson, provided the legal advisors the PPS board spoke with. That telephone conference also occurred in Hilliard Lyons offices. For Paducah Power System to present this as an objective exercise is a stretch. Hilliard Lyons was the lead manager on the sale of many of the very bonds that would be compromised by a PPS bankruptcy filing. According to a June 2010 article in Louisville Business First, the placement of a $184 million bond issue that year as part of the financing of Paducah Powers interest in the Prairie State Energy Campus was one of the largest public financing placements in the history of Hilliard Lyons. The firm was also the bookrunner on the deal, which means it controlled the allocation of the bonds to other investment banks that participated in the placement. In most deals, the bookrunner retains the majority of the bonds for its own inventory and markets those bonds to its retail customers. The notion of the board going to the entity that sold PPS bonds, in what was one of the firms most important deals ever, and asking, Gee, do you think we should declare bankruptcy and default on these bonds, is somewhat comical. Its just not a serious exercise. Likewise, we have concerns about the board getting advice from attorneys supplied by an industry trade group that is by and large concerned with promoting a positive image for community-owned public power systems, and thats what APPA does. It just seems that the answer to the question of should we file bankruptcy is preordained in this context. The PPS board made a commitment to the public that it was going to seriously explore all options for rate relief, including bankruptcy. We dont think the exercise in Louisville quite measures up. Certainly we as a newspaper are not pounding the table for a bankruptcy filing. We dont know if it is a viable option, now or in the future, and we retain an open mind. However, we continue to think PPS would do well to hire independent restructuring advisors to explore all options for reducing debt and providing rate relief. Such advisors might recommend an array of choices, and bankruptcy may or may not be among them. For now, the appearance is that PPS sought out advisors who would give it the answer it wanted so it could dismiss one of the hard choices and proceed with its recovery plan. We dont think thats what the ratepayers were promised. We understand the pressure PPS is under from bondholders, ratings agencies and even Mayor Gayle Kaler to renounce bankruptcy. But the PPS board shouldnt be beholden to them. Their duty is to the ratepayers, some of whom are sitting in cold houses in overcoats right now because they cant afford the heating bill. PPS has a duty to seriously explore all options for rate relief, and the recent exercise in Louisville just doesnt measure up.
Posted on: Fri, 05 Dec 2014 11:20:03 +0000
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