Exhibit 2.5
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
)
In re: ) Chapter 11
)
) Case Nos. 02-40826 (CB), et al.
OGDEN NEW YORK SERVICES, INC., et al.,(1) )
) (Jointly Administered)
Debtors and Debtors In Possession. )
FIRST AMENDED SHORT-FORM DISCLOSURE STATEMENT WITH RESPECT
TO REORGANIZING DEBTORS' JOINT PLAN OF REORGANIZATION, HEBER DEBTORS'
JOINT PLAN OF REORGANIZATION, AND LIQUIDATING DEBTORS' JOINT PLAN OF
LIQUIDATION UNDER CHAPTER 11 OF THE BANKRUPTCY CODE
Dated: October 3, 2003
CLEARY, GOTTLIEB, STEEN & HAMILTON JENNER & BLOCK, LLC
Deborah M. Buell (DB 3562) Vincent E. Lazar (VL 7320)
James L. Bromley (JB 5125) Christine L. Childers (CC 0092)
One Liberty Plaza One IBM Plaza
New York, NY 10006 Chicago, IL 60611
(212) 225-2000 (312) 222-9350
Counsel to Debtors and Debtors In Possession
- ------------
(1) A complete list of the Debtors and Debtors In Possession is provided on
Exhibit K to the Disclosure Statement.
DISCLAIMER
THE INFORMATION CONTAINED IN THIS SHORT-FORM DISCLOSURE STATEMENT (THE
"SHORT-FORM DISCLOSURE STATEMENT"), DISCLOSURE STATEMENT TO WHICH IT RELATES
(THE "SHORT-FORM DISCLOSURE STATEMENT") AND APPENDICES TO THE DISCLOSURE
STATEMENT RELATES TO THE REORGANIZING DEBTORS' FIRST AMENDED JOINT PLAN OF
REORGANIZATION (AS AMENDED, THE "REORGANIZATION PLAN"), THE HEBER DEBTORS'
SECOND AMENDED JOINT PLAN OF REORGANIZATION (AS AMENDED, THE "HEBER
REORGANIZATION PLAN"), AND THE LIQUIDATING DEBTORS' FIRST AMENDED JOINT PLAN OF
LIQUIDATION (AS AMENDED, THE "LIQUIDATION PLAN," AND TOGETHER WITH THE
REORGANIZATION PLAN AND THE HEBER REORGANIZATION PLAN, THE "PLANS") AND ARE
INCLUDED HEREIN FOR PURPOSES OF SOLICITING ACCEPTANCES OF EACH OF THE
REORGANIZATION PLAN AND THE LIQUIDATION PLAN AND MAY NOT BE RELIED UPON FOR ANY
PURPOSE OTHER THAN TO DETERMINE HOW TO VOTE ON SUCH PLAN. NO PERSON MAY GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS, OTHER THAN THE INFORMATION AND
REPRESENTATIONS CONTAINED IN THIS SHORT-FORM DISCLOSURE STATEMENT OR THE
DISCLOSURE STATEMENT, REGARDING THE PLANS OR THE SOLICITATION OF ACCEPTANCES OF
THE PLANS.
ALL CREDITORS ARE ADVISED AND ENCOURAGED TO READ THIS SHORT-FORM
DISCLOSURE STATEMENT, THE DISCLOSURE STATEMENT AND THE PLANS IN THEIR ENTIRETY
BEFORE VOTING TO ACCEPT OR REJECT THE REORGANIZATION PLAN AND/OR THE LIQUIDATION
PLAN. SUMMARIES OF THE PLANS AND STATEMENTS MADE IN THIS SHORT-FORM DISCLOSURE
STATEMENT ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO THE REORGANIZATION
PLAN, THE HEBER REORGANIZATION PLAN AND/OR THE LIQUIDATION PLAN, OTHER EXHIBITS
ANNEXED OR REFERRED TO IN THE PLANS, RESPECTIVELY, THE DISCLOSURE STATEMENT, AND
THIS SHORT-FORM DISCLOSURE STATEMENT. THE STATEMENTS CONTAINED IN THIS
SHORT-FORM DISCLOSURE STATEMENT ARE MADE ONLY AS OF THE DATE HEREOF, AND THERE
CAN BE NO ASSURANCE THAT THE STATEMENTS CONTAINED HEREIN WILL BE CORRECT AT ANY
TIME AFTER THE DATE HEREOF.
THIS SHORT-FORM DISCLOSURE STATEMENT HAS BEEN PREPARED IN ACCORDANCE
WITH 11 U.S.C. ss. 1125 AND RULE 3016(c) OF THE FEDERAL RULES OF BANKRUPTCY
PROCEDURE AND NOT NECESSARILY IN ACCORDANCE WITH FEDERAL OR STATE SECURITIES
LAWS OR OTHER LAWS GOVERNING DISCLOSURE OUTSIDE THE CONTEXT OF TITLE 11 OF THE
UNITED STATES CODE ss.ss. 101-1330 (THE "BANKRUPTCY CODE"). NEITHER THE
SECURITIES TO BE DISTRIBUTED NOR THE SHORT-FORM DISCLOSURE STATEMENT HAS BEEN
APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION (THE "SEC") OR
ANY STATE SECURITIES COMMISSION, NOR HAS THE SEC APPROVED OR DISAPPROVED OF THE
ACCURACY OR ADEQUACY OF THE STATEMENTS CONTAINED HEREIN.
AS TO CONTESTED MATTERS, ADVERSARY PROCEEDINGS, AND OTHER ACTIONS OR
THREATENED ACTIONS, THIS SHORT-FORM DISCLOSURE STATEMENT, DISCLOSURE STATEMENT
AND APPENDICES TO THE DISCLOSURE STATEMENT WILL NOT CONSTITUTE OR BE CONSTRUED
AS AN ADMISSION OF ANY FACT OR LIABILITY, STIPULATION, OR WAIVER, BUT RATHER AS
A STATEMENT MADE IN SETTLEMENT NEGOTIATIONS. THE SHORT-FORM DISCLOSURE
STATEMENT, THE DISCLOSURE STATEMENT AND THE APPENDICES TO THE DISCLOSURE
STATEMENT WILL NOT BE ADMISSIBLE IN ANY NONBANKRUPTCY PROCEEDING NOR WILL THEY
BE CONSTRUED TO BE CONCLUSIVE ADVICE ON THE TAX, SECURITIES, OR OTHER LEGAL
EFFECTS OF THE REORGANIZATION AS TO HOLDERS OF CLAIMS AGAINST, OR EQUITY
INTERESTS IN THE DEBTORS.
NO PARTY IS AUTHORIZED TO PROVIDE TO ANY OTHER PARTY ANY INFORMATION
CONCERNING THE PLANS OTHER THAN THE CONTENTS OF THIS SHORT-FORM DISCLOSURE
STATEMENT AND THE DISCLOSURE STATEMENT. THE DEBTORS HAVE NOT AUTHORIZED ANY
REPRESENTATIONS CONCERNING THE DEBTORS OR THE VALUE OF THEIR PROPERTY OTHER THAN
THOSE SET FORTH IN THIS SHORT-FORM DISCLOSURE STATEMENT AND THE DISCLOSURE
STATEMENT. HOLDERS OF CLAIMS AND EQUITY INTERESTS SHOULD NOT RELY ON ANY
INFORMATION, REPRESENTATIONS OR INDUCEMENTS MADE TO OBTAIN YOUR ACCEPTANCE OF
THE PLANS THAT ARE OTHER THAN, OR INCONSISTENT WITH, THE INFORMATION CONTAINED
HEREIN, IN THE DISCLOSURE STATEMENT AND IN THE PLANS.
ADDITIONAL INFORMATION REGARDING THE DEBTORS (AS DEFINED HEREIN) IS
CONTAINED IN PUBLIC FILINGS WITH THE SEC.
ALTHOUGH THE DEBTORS HAVE USED THEIR BEST EFFORTS TO ENSURE THE
ACCURACY OF THE FINANCIAL INFORMATION PROVIDED IN THIS SHORT-FORM DISCLOSURE
STATEMENT AND THE DISCLOSURE STATEMENT, THE FINANCIAL INFORMATION CONTAINED IN,
OR INCORPORATED BY REFERENCE INTO, THIS SHORT-FORM DISCLOSURE STATEMENT AND
DISLOSURE STATEMENT HAS NOT BEEN AUDITED, EXCEPT, TO THE EXTENT INDICATED, THE
FINANCIAL STATEMENTS INCLUDED IN COVANTA ENERGY CORPORATION'S ANNUAL REPORT ON
FORM 10-K.
THE PROJECTIONS PROVIDED IN THIS SHORT-FORM DISCLOSURE STATEMENT AND
THE DISCLOSURE STATEMENT HAVE BEEN PREPARED BY THE DEBTORS' MANAGEMENT. THESE
PROJECTIONS, WHILE PRESENTED WITH NUMERICAL SPECIFICITY, ARE NECESSARILY BASED
ON A VARIETY OF ESTIMATES AND ASSUMPTIONS WHICH, THOUGH CONSIDERED REASONABLE BY
MANAGEMENT, MAY NOT BE REALISTIC AND ARE INHERENTLY SUBJECT TO SIGNIFICANT
BUSINESS, ECONOMIC, COMPETITIVE, INDUSTRY, REGULATORY, MARKET AND FINANCIAL
UNCERTAINTIES AND CONTINGENCIES, MANY OF WHICH ARE BEYOND THE DEBTORS' CONTROL.
THE DEBTORS CAUTION THAT NO REPRESENTATIONS CAN BE MADE AS TO THE ACCURACY OF
THESE PROJECTIONS OR TO THE DEBTORS' ABILITY TO ACHIEVE THE PROJECTED RESULTS.
SOME ASSUMPTIONS INEVITABLY WILL NOT MATERIALIZE. FURTHER, EVENTS AND
CIRCUMSTANCES OCCURING SUBSEQUENT TO THE DATE ON WHICH THESE PROJECTIONS WERE
PREPARED MAY BE DIFFERENT FROM THOSE ASSUMED OR, ALTERNATIVELY, MAY HAVE BEEN
UNANTICIPATED, AND THUS THE OCCURRENCE OF THESE EVENTS MAY AFFECT FINANCIAL
RESULTS IN A MATERIALLY ADVERSE OR MATERIALLY BENEFICIAL MANNER. THE
PROJECTIONS, THEREFORE, MAY NOT BE RELIED UPON AS A GUARANTY OR OTHER ASSURANCE
OF THE ACTUAL RESULTS THAT WILL OCCUR.
SEE ARTICLE VIII OF THE DISCLOSURE STATEMENT, "RISK FACTORS," FOR A
DISCUSSION OF CERTAIN RISK FACTORS WHICH SHOULD BE CONSIDERED IN CONNECTION WITH
A DECISION BY A HOLDER OF AN IMPAIRED CLAIM OR IMPAIRED EQUITY INTEREST TO
ACCEPT THE REORGANIZATION PLAN OR LIQUIDATION PLAN.
SUMMARY OF THE PLANS
The following introduction and summary is a general overview only,
which is qualified in its entirety by, and should be read in conjunction with,
the more detailed discussions, information and financial statements and notes
thereto appearing elsewhere in this Short-Form Disclosure Statement, the
Disclosure Statement and the Plans. Copies of the Plans are annexed to the
Disclosure Statement in Exhibits A, B and C.
This Short-Form Disclosure Statement and the Disclosure Statement
contain, among other things, descriptions and summaries of provisions of the
Reorganization Plan being proposed by the Reorganizing Debtors, the Heber
Reorganization Plan being proposed by the Heber Debtors, and the Liquidation
Plan being proposed by the Liquidating Debtors (together, the "Debtors"),
respectively, as filed with the United States Bankruptcy Court for the Southern
District of New York (the "Court"). Certain provisions of the Plans, and thus
the descriptions and summaries contained herein, are the subject of continuing
negotiations among the Debtors and various parties, have not been finally agreed
upon, and may be modified.
A complete list of the Reorganizing Debtors, the Heber Debtors and the
Liquidating Debtors is attached as Exhibit K to the Disclosure Statement.
Without prejudice to the rights of the Proposed Buyers under the Heber Purchase
Agreement (each as defined herein), the Debtors have reserved their rights in
the Plans to redesignate Debtors as Reorganizing Debtors, Heber Debtors or
Liquidating Debtors at any time prior to ten (10) days prior to the applicable
Confirmation Hearing (as defined below). Holders of Claims or Equity Interests
(each as defined below) who are entitled to vote on the Plans and who are
affected by any such redesignation shall have five (5) days from the notice of
such redesignation to vote to accept or reject the applicable Plan(s). Without
prejudice to the rights of the Proposed Buyers under the Heber Purchase
Agreement, the Debtors also have reserved the right to withdraw prior to the
applicable Confirmation Hearing one or more Debtors from a Plan, and thereafter
to file a plan solely with respect to such Debtor.
The Debtors believe that the Debtors' creditors will receive
substantially greater and earlier recoveries under the Plans than those that
would be achieved in total liquidation or under an alternative plan and,
further, that any alternative to confirmation of the Plans, such as total
liquidation of the Debtors or attempts by another party in interest to file a
plan, could result in significant delays, litigation and costs.
A. Definitions
Except as otherwise provided herein, capitalized terms not otherwise
defined in this Short-Form Disclosure Statement have the meanings ascribed to
them in the Disclosure Statement or the Plans. In addition, all references in
this Short-Form Disclosure Statement to monetary figures refer to United States
currency, unless otherwise expressly provided.
B. Overview
Covanta Energy Corporation ("Covanta") and its subsidiaries
(collectively, the "Subsidiaries" and together with Covanta, the "Company")
develop, construct, own and operate for others key infrastructure for the
conversion of waste-to-energy ("WTE"), independent power production ("IPP") and
the treatment of water and wastewater in the United States and abroad. The
Company owns or operates 62 power generation facilities, 46 of which are in the
United States and 16 of which are located outside of the United States. The
Company's power generation facilities use a variety of fuels, including
municipal solid waste, water (hydroelectric), natural gas, coal, geothermal
fluid, wood waste, landfill gas, heavy fuel oil and diesel fuel. Until September
1999, and under prior management, the Company was also actively involved in the
entertainment and aviation services industries.
On April 1, 2002 (the "Initial Petition Date"), Covanta and 123 of its
domestic subsidiaries filed voluntary petitions for relief under chapter 11 of
the Bankruptcy Code in the Court. On December 16, 2002 (the "Interim Petition
Date"), and June 6, 2003 (the "Subsequent Petition Date," and with the Initial
Petition Date and the Interim Petition Date, the "Petition Dates") thirty-one
(31) additional subsidiaries filed their chapter 11 petitions for relief under
the Bankruptcy Code. In addition, four (4) subsidiaries that had filed petitions
on the Initial Petition Date have been sold as part of the Company's disposition
of non-core assets and are no longer owned by the Company, nor are they part of
the bankruptcy proceedings. The pending bankruptcy cases (the "Chapter 11
Cases") are being jointly administered under the caption "In re Ogden New York
Services, Inc., et al., Case Nos. 02-40826
(CB), et al."
Until September 1999, and under prior management, the Company was
actively involved in the entertainment and aviation services industries.
However, after extensive study and evaluation, the Company determined that most
of its earnings were generated by the energy business, that the entertainment
business was substantially over-leveraged and that the focus on the
entertainment and aviation businesses had not proven successful. Accordingly, in
September 1999, the Company adopted a restructuring strategy in which it would
concentrate on its core energy business while seeking to sell its aviation and
entertainment businesses. During 2000 and 2001, the Company divested multiple
entertainment and aviation assets and shed tens of millions of dollars of
overhead.
However, the Company required waivers of financial covenants under its
numerous credit agreements and new letter of credit facilities to be used by its
core energy business in the event of a downgrade by the credit rating agencies
below investment grade. The Company believed that, with a single master credit
agreement in place, it could seek access to the capital markets with which it
could raise equity or debt that, combined with additional cash from the sale of
its remaining entertainment and aviation assets, would meet its liquidity needs,
including the timely repayment of outstanding debentures maturing in 2002. By
the fall of 2000, the Company and its key banks reached an agreement in
principle on the terms of a new master credit facility that would include all
then-existing bank credit arrangements and a new revolving and letter of credit
facility. Due principally to intercreditor issues that were difficult to
resolve, the new Revolving Credit and Participation Agreement (the "Master
Credit Facility") was not executed until March 14, 2001, at which time the
Company paid down all outstanding bank debt. With the Master Credit Facility in
place, the Company took steps to access the equity markets and continued to
dispose of entertainment and aviation assets. However, these efforts were
thwarted in the spring of 2001 by unanticipated events. The sale of the
remaining assets from the non-core businesses took longer and yielded fewer
proceeds than anticipated. The energy crisis in California (which led to the
substantially delayed payment to the Company of approximately $75 million by two
California utilities) and the perception that the independent power sector was
overbuilt contributed to a reduction in demand for energy company securities.
The delayed payment by the two California utilities also caused the Company to
seek cash flow covenant waivers under the Master Credit Facility in June 2001.
These waivers were granted, but in consideration for the waivers the Company
lost the capacity under the Master Credit Facility to obtain letters of credit
that it had intended to provide to third parties in the event of a downgrade in
the Company's credit rating. The Company's ability to access the capital markets
was further hampered first by a sharp downturn in capital markets for energy
companies in the middle of 2001, and subsequently by the events of September 11,
2001, which dampened the capital markets generally, and the collapse of Enron,
which brought the energy sector further investor disfavor.
In December 2002, the Company publicly stated that it needed further
covenant waivers and that it was encountering difficulties in achieving access
to short-term liquidity. This resulted in a downgrade of the Company's credit
rating below investment grade. Consequently, under its contracts for two WTE
facilities the Company became obligated to provide credit support in the amount
of $50 million for each project. On March 1, 2002, the Company availed itself of
a grace period to defer for 30 days the payment of approximately $4.6 million of
interest on its $100 million principal amount 9.25% Debentures due 2022 (the
"9.25% Debentures").
In March 2002, substantial amounts of fees under the Master Credit
Facility came due, but could not be paid without violating cash maintenance
covenants under the facility. In addition, draw notices totaling approximately
$105.2 million were presented on two letters of credit issued on behalf of the
Company. Although the bank lenders honored such letters of credit, the Company
had insufficient liquidity to reimburse the bank lenders as required under the
Master Credit Facility. Furthermore, approximately $148.7 million of the 6%
Convertible Debentures and the 5.75% Convertible Debentures (collectively, the
"Convertible Debentures") were to mature in 2002.
Ultimately, the Company concluded that the commencement of the Chapter
11 Cases was in the best interest of all creditors as the best means by which to
protect the value of the Company's core business, reorganize its capital
structure and complete the disposition of its remaining non-core entertainment
and aviation assets.
Since the Initial Petition Date, the Debtors have continued their
efforts to dispose of non-core businesses. With approval of the Court, the
Debtors have sold the remaining aviation fueling assets, their interests in
Casino Iguazu ("Casino Iguazu") and La Rural Fairgrounds and Exhibition Center
("La Rural Fairgrounds," and with Casino Iguazu, the "Argentine Assets") in
Argentina. They also realized their interests in the Corel Centre in Ottawa,
Canada (the "Corel Centre") and in the Ottawa Senators Hockey Club Corporation
(the "Team") and other miscellaneous assets related to the entertainment
business. In addition, in order to enhance the value of the Company's core
business, on September 23, 2002, management announced a reduction in non-plant
personnel, closure of satellite development offices and reduction in all other
costs not directly related to maintaining operations at their current high
levels. As part of the reduction in force, WTE and domestic independent power
headquarters management were combined and numerous other structural changes were
instituted in order to improve management efficiency.
C. Events Leading to the Plans
Over the course of these proceedings, the Debtors have held discussions
with the Official Committee of Unsecured Creditors (the "Creditors Committee"),
representatives of the Debtors' prepetition bank lenders (the "Prepetition
Lenders") and DIP Lenders (together, the "Secured Bank Lenders") and the 9.25%
Debenture holders with respect to possible capital and debt structures for the
Debtors and the formulation of the Plans. A central element of these discussions
and related negotiations, described further in Section VI.C.12 of the Disclosure
Statement, was the possibility for the Debtors and their secured and unsecured
creditors to develop a plan of reorganization involving an employee stock
ownership plan or "ESOP."
After extensive negotiations, significant progress was made toward
determining that an ESOP could provide a useful framework for a plan of
reorganization. In order to better determine the viability of an ESOP, the
Debtors appointed a committee originally consisting of three of Covanta's senior
managers (the "ESOP Committee"), whose purpose was to foster the exploration of
the ESOP structure by devising a course of action pursuant to which the Company
could move forward with its inquiries regarding the ESOP alternative. It was the
ESOP Committee's belief that a more definitive determination of the viability of
an ESOP required the appointment of an independent fiduciary to represent the
ESOP and the interests of employees who would participate in the ESOP in
reviewing the terms of any proposed ESOP transaction and subsequently deciding
whether the ESOP should participate in such a transaction. In addition, the ESOP
Committee believed that an independent fiduciary's representation of the ESOP
and its participants would be essential to ensuring that any proposed ESOP
transaction be structured to comply with all of the applicable fiduciary
requirements of the Employee Retirement Income Security Act of 1974, as amended
("ERISA").
After conducting interviews with a number of potential candidates, the
ESOP Committee decided to retain U.S. Trust Company, N.A. ("U.S. Trust"),
because of its extensive experience in providing specialized management,
fiduciary and consulting services with respect to the formation of ESOPs, to act
as independent fiduciary on behalf of the ESOP. The ESOP Committee thereafter
negotiated a form of agreement with U.S. Trust for the provision of fiduciary
services in connection with a potential ESOP (the "U.S. Trust Agreement"). On
July 1, 2003, the Court entered an order (Docket No. 1719) authorizing Covanta
to engage U.S. Trust, as well as retain Duff & Phelps ("D&P") as a financial
advisor to U.S. Trust, in connection with the potential ESOP transaction.
Pursuant to this order, Covanta, the ESOP Committee and U.S. Trust, effective as
of July 1, 2003, entered into the U.S. Trust Agreement.
Pursuant to the U.S. Trust Agreement, U.S. Trust is authorized to
review the terms of the Reorganization Plan and the proposed new corporate
structure of the Reorganized Debtors. As part of this review, U.S. Trust's
responsibilities are to (i) conduct appropriate due diligence on the Company and
the proposed ESOP, (ii) negotiate on behalf of the proposed ESOP the terms
governing the contribution of Reorganized Covanta's stock to the proposed ESOP
and (iii) determine, on behalf of the proposed ESOP, whether to accept a
proposed contribution of Reorganized Covanta's stock to the proposed ESOP. In
exercising these responsibilities, U.S. Trust will rely on the opinion of its
financial advisor, D&P, that the terms and conditions of the proposed
contribution are fair and reasonable to the ESOP from a financial point of view.
The Company has agreed to indemnify U.S. Trust for any losses, claims, damages
or liabilities, including reasonable attorneys' fees, arising in any manner in
connection with the provision of services or exercise of responsibilities under
the U.S. Trust Agreement, unless such losses, claims, damages or liabilities are
finally adjudged to have resulted from U.S. Trust's bad-faith, self-dealing,
breach of fiduciary duty, negligence or willful misconduct.
The fee structure of the U.S. Trust Agreement contemplates, in addition
to the reimbursement of reasonable expenses, a flat dollar fee of $300,000,
payable to U.S. Trust regardless of whether the Reorganization Plan is
consummated. The Company has already paid to U.S. Trust $150,000 as compensation
for the services it has performed and will continue to perform in connection
with the ESOP transaction. The final installment of $150,000 will be paid to
U.S. Trust when it is prepared to make a final decision regarding whether or not
to accept, on behalf of the ESOP, the proposed contribution of Reorganized
Covanta stock. In addition, the U.S. Trust Agreement contemplates the payment to
D&P of a reasonable fee, not to exceed $175,000, and reimbursement of reasonable
expenses, not to exceed $25,000, in connection with its rendering of the
financial opinion. No portion of the fee payable to U.S. Trust is contingent in
any way upon the consummation of the Reorganization Plan or an affirmative
decision by U.S. Trust to accept the proposed contribution. The ESOP Committee
believes the fee structure is a critical component of its efforts to ensure that
the ESOP transaction complies with the fiduciary requirements of ERISA.
U.S. Trust's decision with respect to whether or not to accept the
proposed contribution of Reorganized Covanta stock is crucial to the successful
restructuring of the Debtors. The consummation of the Reorganization Plan is
predicated on U.S. Trust's acceptance of the contribution on behalf of the ESOP.
There is no guarantee that U.S. Trust will decide that the acceptance of such
contribution is in the best interests of the ESOP and its participants. The
Debtors expect that U.S. Trust will be prepared to make its decision in the near
future.
D. General Structure of the Plans
Chapter 11 is the principal business reorganization chapter of the
Bankruptcy Code. Under chapter 11, a debtor is authorized to reorganize its
business for the benefit of its creditors. Upon the filing of a petition for
relief under chapter 11, section 362 of the Bankruptcy Code provides for an
automatic stay of substantially all actions and proceedings against the debtor
and its property, including all attempts to collect claims or enforce liens that
arose prior to the commencement of its chapter 11 case.
The process of satisfying claims against and interests in the Debtors
is set forth in the Plans. Confirmation of the Plans by the Court makes the
Plans binding upon the Debtors, any issuer of securities under the Plans, any
person or entity acquiring property under the Plans and any creditor of or
equity security holder in the Debtors, whether or not such creditor or equity
security holder (i) is impaired under or has accepted the Plans or (ii) receives
or retains any property under the Plans.
Subject to certain limited exceptions and other than as provided in the
Reorganization Plan or the Heber Reorganization Plan or in the orders confirming
the Plans (the "Confirmation Order"), the confirmation of the Reorganization
Plan and the Heber Reorganization Plan discharges the Reorganizing Debtors and
Heber Debtors, respectively, from any debt that arose prior to the applicable
Effective Date, substitutes therefor the obligations specified under the
confirmed Reorganization Plan or Heber Reorganization Plan, and terminates all
rights and interests of equity security holders except to the extent expressly
provided therein. The terms of the Reorganization Plan and the Heber
Reorganization Plan are based upon, among other things, the Debtors' assessment
of their ability to achieve the goals of their Business Plan (as defined in
Section VI.C.16 of the Disclosure Statement), make the distributions
contemplated under the Reorganization Plan and Heber Reorganization Plan and pay
certain of their continuing obligations in the ordinary course of the businesses
of the Reorganizing Debtors. In accordance with section 1141(d)(3) of the
Bankruptcy Code, the confirmation of the Liquidation Plan does not discharge the
Liquidating Debtors from any Claims asserted against them.
Under the Plans, Claims against and Equity Interests in the
Reorganizing Debtors, Heber Debtors and the Liquidating Debtors, respectively,
are divided into Classes according to their relative seniority and other
criteria. Each Reorganizing Debtor, Heber Debtor and Liquidating Debtor is a
proponent of the respective Plans within the meaning of section 1129 of the
Bankruptcy Code. The Reorganizing Debtors' Estates, the Heber Debtors' Estates
and the Liquidating Debtors' Estates have been deemed consolidated solely for
purposes of administration, procedure and voting. By virtue of this deemed
consolidation, in some instances, claims against multiple Reorganizing Debtors,
Heber Debtors and Liquidating Debtors have been grouped together into single
Classes of Claims.
Except to the extent a Reorganizing Debtor, Heber Debtor or Liquidating
Debtor expressly assumes an obligation or liability of another Debtor, the Plans
will not operate to impose liability on the Reorganizing Debtors, Heber Debtors
or Liquidating Debtors for the Claims against any other Debtor or the debts and
other obligations of any other Debtor. From and after the Effective Date of the
Reorganization Plan (the "Reorganization Effective Date") or the Effective Date
of the Heber Reorganization Plan (the "Heber Effective Date"), each Reorganizing
Debtor and Heber Debtor will be separately liable for its own debts and
obligations arising on and after the applicable Effective Date. Additionally,
from and after the Effective Date of the Liquidation Plan (the "Liquidation
Effective Date"), each Liquidating Debtor will be separately liable for its own
debts and obligations arising on and after the Liquidation Effective Date,
although, as most of the Liquidating Debtors are non-operating and there is no
objective to continue or engage in the conduct of a trade or business, except to
the extent reasonably necessary to, and consistent with the liquidating purpose
of the Liquidation Plan, the Liquidating Debtors do not anticipate that they
will incur any new debts or obligations on or after the Liquidation Plan
Effective Date.
After careful review of the Debtors' current and projected operations,
estimated recoveries in a complete liquidation scenario, prospects as an ongoing
business, and the strategic Business Plan developed by management and discussed
more fully in Section VI.C.16 of the Disclosure Statement, the Debtors have
concluded that the recovery to the Debtors' creditors will be maximized by the
Reorganizing Debtors and Heber Debtors' continued operation as going concerns
and the Liquidating Debtors' dissolution in accordance with applicable law. The
Reorganizing Debtors and Heber Debtors believe that their businesses and assets
have significant value that would not be realized in a complete liquidation.
According to the liquidation valuation analyses prepared by the Reorganizing
Debtors and Heber Debtors with the assistance of their financial advisors, the
value of each of the estates of the Reorganizing Debtors and Heber Debtors,
respectively, is considerably greater as a going concern than in a liquidation.
For a complete discussion of the liquidation value of the Reorganizing Debtors
and Heber Debtors, please refer to Exhibit H attached to the Disclosure
Statement. The Debtors believe that this value is further enhanced by
segregating the Liquidating Debtors, whose assets are primarily non-core and
unrelated to the core businesses of the Reorganizing Debtors and Heber Debtors.
Accordingly, the Debtors believe that the structures of the Plans
provide the best recoveries possible for holders of Claims against the Debtors
and strongly recommend that, if you are entitled to vote, you vote to ACCEPT the
Reorganization Plan or the Liquidation Plan, as applicable. Because all
non-insider classes of claims under the Heber Reorganization Plan are
unimpaired, the Heber Debtors are not soliciting votes in respect of the Heber
Plan. The Debtors believe that any alternative to confirmation of the Plans,
such as complete liquidation or attempts by another party in interest to file a
plan, could result in significant delays, litigation and costs, as well as
significantly reduced recovery by creditors.
E. Restructuring of the Debtors
The Debtors filed with the Court (i) the Reorganization Plan (which was
filed jointly by the Reorganizing Debtors and the Heber Debtors) and the
Liquidation Plan on September 8, 2003, (ii) the First Amended Heber
Reorganization Plan on September 24, 2003, and (iii) the First Amended
Reorganization Plan, the Second Amended Heber Reorganization Plan and the First
Amended Liquidation Plan on September 28, 2003. The Debtors expect to file with
the Court slightly revised versions of the Plans on or about October 13, 2003.
The Reorganization Plan is premised upon the economic benefits to be derived
from a framework for a restructuring of the Debtors built around the
establishment and implementation of an ESOP. By establishing an ESOP to which
Reorganized Covanta will contribute all of its stock, the employees of the
Reorganized Debtors, as participants in the ESOP, will receive an equity
interest in Reorganized Covanta that provides employees an opportunity to profit
from the value of Reorganized Covanta Common Stock. In addition, the
implementation of the ESOP and Reorganization Plan (which includes Reorganized
Covanta electing S corporation status for federal income tax purposes) is
intended to result in the Debtors realizing a significant increase in available
after-tax cash flow through a substantial reduction in federal income tax
liabilities that will permit the Debtors to pay down their Allowable Claims,
thereby permitting the Reorganizing Debtors to emerge from bankruptcy and
permitting the Reorganizing Debtors to benefit the employees participating in
the ESOP. Furthermore, the feasibility of the Reorganization Plan is further
premised upon an ability to implement the Business Plan for the Reorganizing
Debtors. The Business Plan (as defined in Section VI.C.16 of the Disclosure
Statement) and accompanying financial projections through December 31, 2007,
which include the preliminary estimated effects of the required adoption of
"fresh start" accounting (the "Projections"), are described in detail in Section
VI.C.16 of the Disclosure Statement. While the Company believes that the
Business Plan and Projections are reasonable and appropriate, they include a
number of assumptions that may differ from actual results and are subject to a
number of risk factors. See Article VIII of the Disclosure Statement for a
discussion of such factors.
The Debtors expect to sell their interests in certain geothermal energy
projects (each project, a "Geothermal Project") in Heber, California (the
"Geothermal Business")(2) either pursuant to section 363 of the Bankruptcy Code
or the Heber Reorganization Plan, as contemplated by that certain Amended and
Restated Ownership Interest Purchase Agreement, by and among Covanta Heber Field
Energy, Inc., Heber Field Energy II, Inc., ERC Energy, Inc., ERC Energy II, Inc.
Heber Loan Partners, Covanta Power Pacific, Inc. and Covanta Energy Americas,
Inc. (collectively, the "Sellers") and Covanta and Caithness Heber Field I, LLC,
Caithness Heber Field II, LLC, Caithness Heber Geothermal I, LLC, Caithness
Heber Geothermal II, LLC, Caithness Mammoth, LLC, Caithness SIGC GP, LLC and
Caithness SIGC LP, LLC (collectively, the "Proposed Buyers") dated as of
September 25, 2003 (Docket No. 2214) (as such agreement may be amended, modified
or terminated pursuant to the terms thereof, the "Heber Purchase Agreement").
Pursuant to the Heber Purchase Agreement, the Sellers, in consultation with the
Proposed Buyers, shall determine whether to accomplish the resolution of the
Chapter 11 Cases of the Heber Debtors though a sale pursuant to section 363 of
the Bankruptcy Code or through the Heber Reorganization Plan. On September 8,
2003 the Debtors filed a motion (Docket No. 2057) (the "Heber Sale Motion"),
seeking, among other things, (i) entry of an Order establishing competitive
bidding and auction procedures for the Geothermal Business; (ii) approval of the
sale (without prejudice to the Proposed Buyers' rights under the Heber Purchase
Agreement, the "Geothermal Sale") of the Geothermal Business to the Proposed
Buyers pursuant to the Heber Purchase Agreement, subject to higher or better
offers under the Court-approved bidding and auction procedures, pursuant to
either the Heber Sale Motion or the Heber Reorganization Plan (the "Heber
Alternative Transaction"); (iii) and the dismissal of the Heber Debtors' Chapter
11 Cases as contemplated by the Heber Sale Motion or the Heber Alternative
Transaction, as applicable (the "Heber Debtor Dismissal"). On the same day, the
Heber Debtors filed their original proposed plan of reorganization, which was
subsequently amended as provided in the Heber Reorganization Plan. On September
29, 2003, the Court entered an order (Docket No. 2222) (the "Heber Bidding
Procedures Order"), approving the bidding procedures and establishing November
19, 2003 as the date of the Auction (as defined in the Heber Bidding Procedures
Order) and the hearing to consider approval of the Geothermal Sale, either
pursuant to the Heber Sale Motion or the Heber Reorganization Plan (the
"Approval Hearing"). If the Court confirms the Heber Reorganization Plan at the
Approval Hearing the Debtors will withdraw the request for the Heber Debtor
Dismissal as provided in the Heber Sale Motion.
The Reorganization Plan and the Heber Reorganization Plan are premised
on the consummation of the Geothermal Sale, as the proceeds of the Geothermal
Sale will provide the Reorganized Debtors and the Heber Debtors with funds
necessary to emerge from their respective Chapter 11 Cases.
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(2) Non-debtor affiliates of the Debtors also expect to sell their interest in
certain geothermal energy projects operated by Mammoth Pacific, L.P., also
a non-debtor.
The Liquidation Plan provides for the complete liquidation of the
Liquidating Debtors. Apart from the disposition of businesses associated with
the Arrowhead Pond of Anaheim arena in Anaheim, California ("Arrowhead Pond"),
substantially all of the Liquidation Assets of the Liquidating Debtors have
already been sold. The Debtors have proposed that the Secured Bank Lenders and
9.25% Debenture Holders contribute their Distributions, to which they would
otherwise be entitled under the Liquidation Plan (consisting of (i) the proceeds
of certain postpetition asset sales and (ii) certain other Claims of the
Liquidating Debtors upon which the Secured Bank Lenders and 9.25% Debenture
Holders have a first priority secured lien) to Reorganized Covanta. The Debtors
further propose that up to $3,000,000 of the Cash subject to the transfers
described in the previous sentence be transferred to the Operating Reserve and
the Administrative Expense Claims Reserve, which shall be used by the
Liquidating Trustee to fund the implementation of the Liquidation Plan. The
transfers to Reorganized Covanta described above will assist the Reorganized
Debtors in their reorganization. Furthermore, to the extent that there are
Liquidation Assets that have not already been sold and/or transferred to
Reorganized Covanta (the "Residual Liquidation Assets"), the Liquidation Plan
provides for the complete liquidation and monetization (or abandonment, as the
case may be) of such Residual Liquidation Assets and the complete dissolution of
the Liquidating Debtors pursuant to applicable state law.
F. Compromises and Settlements Incorporated into the Plans
Under the Plans, Claims and Equity Interests are divided into Classes.
The Distributions provided for under the Plans are based upon the relative
priorities and rights of members of those respective Classes.
The Plans also embody the proposed compromise and settlement of claims
and causes of action among the creditors in certain Classes. The obligations of
borrowers (including Covanta and certain of its subsidiaries under Tranche B of
the DIP Financing Facility) under the Master Credit Facility (the "Prepetition
Borrowers") are expected to aggregate $400 million (excluding undrawn letters of
credit) together with approximately $34 million in accrued and unpaid fees and
interest. These obligations were secured by a first priority lien on
substantially all of the Prepetition Borrowers' assets, to the extent permitted,
and by a pledge of 100% of the shares of most of Covanta's existing and future
domestic subsidiaries, and 65% of the shares of substantially all of Covanta's
foreign subsidiaries (the "Prepetition Collateral"). Pursuant to the order of
the Court authorizing the DIP Financing Facility (as defined below), the Debtors
stipulated, among other things, as to the priority, validity and enforceability
of the liens and security interests that had been granted to the Prepetition
Lenders prior to the commencement of the Chapter 11 Cases. Accordingly, the
Prepetition Lenders are entitled to payment in full of their Allowed Secured
Claim up to the full value of their security interest in the assets of the
Prepetition Borrowers. However, in connection with the negotiations undertaken
in development of the Plans, the Debtors have estimated the Prepetition Lenders'
aggregate Allowed Secured Claim in the amount of $434 million, including
interest and fees, which amount is subject to final allowance by the Court. In
addition, distributions to the Prepetition Lenders are subject to certain
priorities vis-a-vis each other as a result of the Intercreditor Agreement,
among the Prepetition Lenders and the Company, dated March 14, 2001 (the
"Intercreditor Agreement"). Similarly, the Debtors have estimated the 9.25%
Debenture Holders' Allowed Secured Claims in the aggregate amount of $105
million, which amount is subject to final allowance by the Court.
The proposed settlement of the Loss Sharing Litigation is also
incorporated in the Reorganization Plan and shall become effective on the
Reorganizing Debtors' emergence from Chapter 11. Under the settlement, the
current synthetic pooling arrangement (i.e., loss sharing under the
Intercreditor Agreement) will be replaced with an actual pooling of exposures
among the Canadian Loss Sharing Lenders and the Pooled Facility Lenders.(3) This
would be accomplished by the Pooled Facility Lenders purchasing a ratable share
of the funded exposures of the Canadian Loss Sharing Lenders (and receiving a
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(3) Capitalized terms in this paragraph not otherwise defined herein or in the
Reorganization Plan shall have the meaning set forth in the Master Credit
Facility.
distribution on such amounts from the Reorganizing Debtors under the
Reorganization Plan).(4) The Canadian Loss Sharing Lenders, in turn, would
purchase a like amount of participations in the Tranche B Facility of the DIP
Credit Agreement and thereby reduce the Pooled Facility Lenders' existing
exposure under that facility and any replacement thereof.
As described in more detail herein, as part of the overall negotiation
of the Plans, the Debtors have proposed that the Secured Bank Lenders and the
9.25% Debenture Holders contribute certain Distributions to Reorganized Covanta.
As further described herein, $500,000 of the Distributions or proceeds described
above will be used to fund the Operating Reserve and up to $2,500,000 will be
used to fund the Administrative Expense Claims Reserve, both of which are
established under the Liquidation Plan. The Debtors believe that the transfer to
Reorganized Covanta of such Distributions and other Liquidation Assets will
enhance the value of Reorganized Covanta and inure to the benefit of the Secured
Bank Lenders and the 9.25% Debenture Holders via their Distributions under the
Reorganization Plan.
Additionally, pursuant to the 9.25% Settlement, the holders of Parent
and Holding Company Unsecured Claims would be entitled to receive a Pro-Rata
Share of a Settlement Distribution as a result of the proposed settlement of the
9.25% Debentures Adversary Proceeding, as further described in Section VI.C.11
of the Disclosure Statement. Each holder of an Allowed 9.25% Debenture Claim
shall have the option to opt out of participation in the 9.25% Settlement (those
electing to opt out, the "Rejecting Bondholders"). In the event that there are
Rejecting Bondholders with aggregate Claims in excess of $10 million, the 9.25%
Debentures Adversary Proceeding shall continue with respect to such holders and
the distribution to such Rejecting Bondholders will be held in a Reserve Account
subject to resolution of the 9.25% Debentures Adversary Proceeding.
G. Treatment of Executory Contracts and Unexpired Leases Under the Plans
1. General Treatment
(a) Reorganizing Debtors: For Reorganizing Covanta and certain
other Reorganizing Debtors listed on Exhibit 9.1A of the Reorganization Plan
(collectively, the "Rejecting Debtors"), on the Reorganization Effective Date
all executory contracts and unexpired leases to which each of the Rejecting
Debtor is a party shall be deemed rejected, except for any executory contract or
unexpired lease of the Rejecting Debtors that (i) has been previously assumed or
rejected pursuant to a Final Order of the Court, (ii) is specifically designated
as a contract or lease on the Rejecting Debtors' Schedule of Assumed Contracts
and Leases, filed as Exhibit 9.1A(s) of the Reorganization Plan, as may be
amended, or (iii) is the subject of a separate motion to assume or reject filed
under section 365 of the Bankruptcy Code by the Reorganizing Debtors prior to
the hearing to consider the confirmation of the Reorganization Plan and related
matters (with the hearing to consider the confirmation of the Liquidation Plan
and related matters, the "Plans Confirmation Hearing"). The Rejecting Debtors
expressly reserve the right to add or remove executory contracts and unexpired
leases to or from the Rejecting Debtors' Schedule of Assumed Contracts and
Leases at any time prior to the Reorganization Effective Date. The listing of a
document on the Rejecting Debtors' Schedule of Assumed Contracts and Leases
shall not constitute an admission that such document is an executory contract or
unexpired lease or that the Reorganizing Debtors have any liability thereunder.
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(4) Based upon current projections, the Pooled Facility Lenders will purchase
approximately [US]$14 million of the Canadian Loss Sharing Lenders' funded
debt. After giving effect to the purchase (and all prior loss sharing
payments), the remaining Tranche C Commitments (anticipated to be
approximately US$16 million at such time) will be terminated.
For Reorganizing Debtors listed on Exhibit 9.1B of the
Reorganization Plan (collectively, the "Assuming Debtors"), on the
Reorganization Effective Date all executory contracts and unexpired leases to
which each of the Assuming Debtors is a party shall be deemed assumed, except
for any executory contract or unexpired lease of the Assuming Debtors that (i)
has been previously assumed or rejected pursuant to a Final Order of the Court,
(ii) is specifically designated as a contract or lease on the Assuming Debtors'
Schedule of Rejected Contracts and Leases, filed as Exhibit 9.1B(s) of the
Reorganization Plan, as may be amended, or (iii) is the subject of a separate
motion to assume or reject filed under section 365 of the Bankruptcy Code by the
Reorganizing Debtors at or prior to the Plans Confirmation Hearing. The Assuming
Debtors expressly reserve the right to add or remove executory contracts and
unexpired leases to or from the Assuming Debtors' Schedule of Rejected Contracts
and Leases at any time prior to the Reorganization Effective Date. The listing
of a document on the Assuming Debtors' Schedule of Assumed Contracts and Leases
shall not constitute an admission that such document is an executory contract or
unexpired lease or that the Reorganizing Debtors have any liability thereunder.
Each executory contract and unexpired lease listed or to be
listed on the Rejecting Debtors' Schedule of Assumed Contracts and Leases or the
Assuming Debtors' Schedule of Rejected Contracts and Leases (collectively, the
"Contract Schedules") shall include modifications, amendments, supplements,
restatements or other agreements, including guarantees thereof, made directly or
indirectly by any Reorganizing Debtor in any agreement, instrument or other
document that in any manner affects such executory contract or unexpired lease,
without regard to whether such agreement, instrument or other document is listed
on the Contract Schedules. The mere listing of a document on the Contract
Schedules shall not constitute an admission by the Reorganizing Debtors or Heber
Debtors that such document is an executory contract or unexpired lease or that
the Reorganizing Debtors and Heber Debtors have any liability thereunder.
(b) Heber Debtors: For the Heber Debtors, upon the Heber
Effective Date, all Heber Debtor Contracts, including the Heber Debtor Contracts
identified on Exhibit B of the Heber Reorganization Plan and the mineral rights
leases and related agreements identified on Exhibit C of the Heber
Reorganization Plan, shall be deemed assumed by the Heber Debtor that is a party
to such Heber Debtor Contract; except for any contract or lease that (a) has
been previously assumed or rejected pursuant to a Final Order of the Court, (b)
is specifically designated as a contract or lease on the Heber Debtors' Schedule
of Rejected Contracts and Leases, or (c) is the subject of a separate motion to
assume or reject filed under section 365 of the Bankruptcy Code by one of the
Heber Debtors at or prior to the hearing to consider the confirmation of the
Heber Reorganization Plan (the "Heber Confirmation Hearing"). Any affiliate of a
Heber Debtor that is a party to a Heber Debtor Contract shall assign its rights
and obligations under such Heber Debtor Contract to Buyers at Closing, provided
that such Heber Debtor Contract is assumed pursuant to this Heber Reorganization
Plan. The Heber Debtors may amend Exhibits B and C of the Heber Reorganization
Plan to add or delete any contract or lease at or prior to the Heber
Confirmation Hearing. Additionally, upon the Heber Effective Date, the Heber
Debtor Contracts identified on Exhibit F of the Heber Reorganization Plan, which
previously have been assumed by Final Order of the Court, shall be transferred
through the transfer of Equity Interests in the Heber Debtors to the applicable
Proposed Buyers pursuant the terms of the Heber Purchase Agreement.
Certain of the Debtor Sellers (as defined in the Disclosure Statement)
and certain of the Debtor Operators (as defined in the Disclosure Statement) are
also parties, along with the Heber Debtors, to certain of the Heber Debtor
Contracts or parties to various other contracts relating to the Geothermal
Business. Such Additional Contracts are identified on Exhibit D of the Heber
Reorganization Plan. In accordance with section 365(f) of the Bankruptcy Code,
upon the Heber Effective Date, the Additional Contracts shall be assumed and
assigned to the Proposed Buyers pursuant to the terms of the Heber Purchase
Agreement or a Heber Alternative Transaction. In addition, upon the Heber
Effective Date, the Debtor Operators shall assign to the Proposed Buyers the O&M
Contracts identified on Exhibit E of the Heber Reorganization Plan. The listing
of a document on Exhibits D and E of the Heber Reorganization Plan shall not
constitute an admission that such document is an executory contract or unexpired
lease or that the Heber Debtors have any liability thereunder. The Heber Debtors
may amend Exhibits D and E of the Heber Reorganization Plan to add or delete any
contract or lease at or prior to the Heber Confirmation Hearing.
(c) Liquidating Debtors: For Liquidating Debtors, on the
Liquidation Effective Date all executory contracts and unexpired leases shall be
deemed rejected other than those executory contracts or unexpired leases that
are or have been (a) is specifically designated as a contract or lease on the
Schedule of Assumed Contracts and Leases, filed as Exhibit 5 of the Liquidation
Plan, as may be amended; (b) previously assumed or rejected pursuant to a Final
Order of the Court; or (c) subject to a separate motion to assume or reject
filed under section 365 of the Bankruptcy Code by the applicable Liquidating
Debtor prior to the Confirmation Date. On the Effective Date, each of the
executory contracts and unexpired leases listed on the Schedule of Assumed
Contracts and Leases shall be deemed to be assumed by the applicable Liquidating
Debtor and assigned to Reorganized Covanta on the Reorganization Effective Date.
The Liquidating Debtors reserve the right to ad or remove executory contracts
and unexpired leases to or from the Schedule of Assumed Contracts and Leases at
any time prior to the Liquidation Effective Date.
2. Cure of Defaults
(a) Reorganizing and Liquidating Debtors: Except to the extent
that (i) a different treatment has been agreed to by the nondebtor party or
parties to any executory contract or unexpired lease to be assumed pursuant to
Section 9.1 of the Reorganization Plan or Section 8.2 of the Liquidation Plan,
or (ii) any executory contract or unexpired lease shall have been assumed
pursuant to an order of the Court which order shall have approved the cure
amounts with respect thereto, the applicable Debtor shall, pursuant to the
provisions of sections 1123(a)(5)(G) and 1123(b)(2) of the Bankruptcy Code and
consistent with the requirements of section 365 of the Bankruptcy Code, within
thirty (30) days after the Confirmation Date, file with the Court and serve a
pleading listing the cure amounts of all executory contracts or unexpired leases
to be assumed. The parties to such executory contracts or unexpired leases to be
assumed by the applicable Debtor shall have fifteen (15) days from service of
such pleading to object to the cure amounts listed by the applicable Debtor.
Service of such pleading shall be sufficient if served on the other party to the
contract or lease at the address indicated on (i) the contract or lease, (ii)
any proof of claim filed by such other party in respect of such contract or
lease, or (iii) the Debtors' books and records, including the Schedules;
provided, however, that if a pleading served by a Debtor to one of the foregoing
addresses is promptly returned as undeliverable, the Reorganizing Debtor shall
attempt reservice of the pleading on an alternative address, if any, from the
above listed sources. If any objections are filed, the Court shall hold a
hearing. Any party failing to object to the proposed cure amount fifteen days
following service of the proposed cure amount by the Debtors shall be forever
barred from asserting, collecting, or seeking to collect any amounts in excess
of the proposed cure amount against the Reorganizing Debtors or Reorganized
Debtors. Notwithstanding the foregoing or anything in Section 9.3 of the
Reorganization Plan or Section 8.3 of the Liquidation Plan, at all times through
the date that is five (5) Business Days after the Court enters an order
resolving and fixing the amount of a disputed cure amount, the Debtors shall
have the right to reject such executory contract or unexpired lease.
(b) Heber Debtors: Exhibits B, C, D and E of the Heber
Reorganization Plan set forth the Cure Amounts necessary to cure any and all
defaults existing under each of the contracts identified thereto pursuant to
section 365(b) of the Bankruptcy Code, as determined by the Heber Debtors and
the Debtors, based upon a review of their books and records and the relevant
documents. The Cure Amounts shall be final and binding on the parties identified
on Exhibits B, C, D and E of the Heber Reorganization Plan (or their successors
and assigns) and shall not be subject to further dispute or audit based on
performance prior to the time of assumption, irrespective of whether such
assumed executory contract or unexpired lease contains an audit clause;
provided, however, that the terms of the HFC Royalty Settlement Order shall
control the Cure Amounts owed to parties to the HFC Royalty Settlement,
including Cure Amounts fixed in additional settlement agreements contemplated
and authorized by such Order. The holders of Heber Royalty Settled Claims shall
be entitled to receive both the Cure Amounts and the HFC Royalty Settlement
Payments.
Any objection to (i) assumption, assignment or rejection of the
contracts or leases pursuant to the Heber Reorganization Plan or (ii) Cure
Amounts must be in writing, shall state with particularity the reasons for the
objection or response, and shall be filed with the Court and served upon
co-counsel to the Debtors on or before seven (7) days prior to the Heber
Confirmation Hearing. Only those objections that have been timely filed and
served will be considered by the Court at the Heber Confirmation Hearing.
Objections to Cure Amounts must state with specificity the Cure Amount the
objecting party believes is required and provide appropriate documentation in
support thereof. If no objection to a particular Cure Amount is timely received,
the Cure Amount set forth on Exhibits B, C, D, and E of the Heber Reorganization
Plan shall be controlling notwithstanding anything to the contrary in any such
contract or lease, and the counterparty thereto shall be forever barred from
asserting any other claim arising prior to the assumption or assumption and
assignment against the Debtors, the Heber Debtors, the Reorganized Heber Debtors
or the Buyer as to such Cure Amounts; provided, however, that the terms of the
HFC Royalty Settlement Order shall control the Cure Amounts owed to parties to
the HFC Royalty Settlement, including Cure Amounts fixed in additional
settlement agreements contemplated and authorized by such Order. The holders of
Heber Royalty Settled Claims shall be entitled to receive both the Cure Amounts
and the HFC Royalty Settlement Payments. In the event of a dispute regarding any
Cure Amount or the ability of the Heber Debtor or other Debtors to assume and/or
assign a particular contract or lease, including providing adequate assurance of
future performance, the applicable Debtor may determine to reject such contract
or lease and otherwise will provide for payments required by section 365(b)(1)
of the Bankruptcy Code only after the entry of a Final Order resolving such
dispute
3. Approval of Assumption of Certain Executory Contracts
(a) Reorganizing and Liquidating Debtors: Subject to Sections
9.1 and 9.2 of the Reorganization Plan and Sections 8.1 and 8.2 of the
Liquidation Plan, the executory contracts and unexpired leases on the Rejecting
Debtors' Schedule of Assumed Contracts, the executory contracts and unexpired
leases of the Assuming Debtors other than those listed on the Assuming Debtors'
Schedule of Rejected Contracts and Leases, the executory contracts and unexpired
leases listed on the Liquidating Debtors' Schedule of Assumed Contracts shall be
assumed by and, as applicable, assigned to the relevant Reorganizing or
Liquidating Debtors as of the applicable Effective Date. Except as may otherwise
be ordered by the Court, the Reorganizing Debtors and Liquidating Debtors shall
have the right to cause any assumed executory contract or unexpired lease to
vest in the Reorganized Debtor designated for such purpose by the Reorganizing
Debtors and Liquidating Debtors.
(b) Heber Debtors: Subject to Sections 9.1, 9.2 and 9.3 of the
Heber Reorganization Plan, the executory contracts and unexpired leases of the
Heber Debtors listed on Exhibits B, C, D and E of the Heber Reorganization Plan
shall be assumed by and, as applicable, assigned to the relevant Heber Debtors
as of the Heber Effective Date. Except as may otherwise be ordered by the Court,
the Heber Debtors shall have the right to cause any assumed executory contract
or unexpired lease to vest in the Reorganized Heber Debtor designated for such
purpose by the Heber Debtors.
4. Approval of Rejection of Executory Contracts and Unexpired Leases
Entry of the Confirmation Order shall constitute the approval, pursuant
to section 365(a) of the Bankruptcy Code, of the rejection of any executory
contracts and unexpired leases to be rejected as and to the extent provided in
the Plans.
5. Bar Date for Filing Proofs of Claim Relating to Executory Contracts and
Unexpired Leases Rejected Pursuant to the Plans
(a) Reorganizing Debtors and Liquidating Debtors: Claims
arising out of the rejection of an executory contract or unexpired lease
pursuant to each Plan must be filed with the Court no later than the later of
(i) twenty (20) days after the Effective Date and (ii) thirty (30) days after
the entry of an order rejecting such executory contract or lease. Any Claims not
filed within such time period will be forever barred from assertion against any
of the applicable Debtors and/or their corresponding Estates.
(b) Heber Debtors: Claims arising out of the rejection of an
executory contract or unexpired lease pursuant to Section 9.1 of the Heber
Reorganization Plan must be filed with the Court no later than the later of (i)
fifteen (15) days after the Heber Effective Date, and (ii) fifteen (15) days
after entry of an order rejecting such executory contract or lease. Any Claims
not filed within such time period will be forever barred from assertion against
any of the Debtors, the Heber Debtors or the Reorganized Heber Debtors.
6. Deemed Consents of Debtors' Executory Contracts, Unexpired Leases,
Licenses or Permits
Unless a counterparty to an executory contract, unexpired lease,
license or permit objects to the applicable Debtor's assumption thereof in
writing on or before seven (7) days prior to the applicable Confirmation
Hearing, then, unless such executory contract, unexpired lease, license or
permit has been rejected by the applicable Debtor or will be rejected by
operation of the Reorganization Plan, the Heber Reorganization Plan, or the
Liquidation Plan, the Reorganized Debtors, the Reorganized Heber Debtors and
Reorganized Covanta (as assignee of all executory contracts and unexpired leases
assumed by the Liquidating Debtors), shall enjoy all the rights and benefits
under each such executory contract, unexpired lease, license and permit without
the necessity of obtaining such counterparty's written consent to assumption or
retention of such rights and benefits.
7. Reorganizing and Liquidating Debtors' Reservation of Rights Under
Insurance Policies and Bonds
The enforceability by beneficiaries of (i) any insurance policies that
may cover Claims against any Reorganizing or Liquidating Debtor, or (ii) any
bonds issued to assure the performance of any such Debtor, is not affected by
the Plans, nor shall anything contained therein constitute or be deemed to
constitute a waiver of any cause of action that the Debtors or any entity may
hold against any insurers or issuers of bonds under any such policies of
insurance or bonds. To the extent any insurance policy or bond is deemed to be
an executory contract, such insurance policy or bond shall be deemed assumed in
accordance with Article IX of the Reorganization Plan or Article VIII of the
Liquidation Plan as applicable. Notwithstanding the foregoing, the Debtors do
not assume any payment or other obligations to any insurers or issuers of bonds,
and any agreements or provisions of policies or bonds imposing payment or other
obligations upon the Debtors shall only be assumed as provided pursuant to a
separate order of the Court.
8. Survival of Reorganizing and Liquidating Debtors' Corporate Indemnities
Any obligations of any of the Reorganizing or Liquidating Debtors
pursuant to the applicable Debtor's corporate charters and bylaws or agreements
entered into any time prior to the applicable Effective Date, to indemnify the
Specified Personnel, with respect to all present and future actions, suits and
proceedings against such Debtor or such Specified Personnel, based upon any act
or omission for or on behalf of such Debtor, shall not be discharged or impaired
by confirmation of the applicable Plan. Such obligations shall be deemed and
treated as executory contracts to be assumed by the applicable Debtor pursuant
to the applicable Plan, and shall continue as obligations of the applicable
Debtor. To the extent a Debtor is entitled to assert a Claim against Specified
Personnel (whether directly or derivatively) and such Specified Personnel is
entitled to indemnification, such Claim against Specified Personnel is released,
waived and discharged.
H. Treatment of Claims and Interests under the Plans
Pursuant to the Plans, and subject to the provisions therein, certain
unclassified Claims, including Administrative Expense Claims (other than the DIP
Financing Facility Claims and Claims for compensation and reimbursement) and
Priority Tax Claims, will receive payment in Cash (i) on the later of the
applicable Distribution Date, or (ii) in installments over time (as permitted by
the Bankruptcy Code), or (iii) as agreed with the holders of such Claims. The
DIP Financing Facility Claims, including those contingent claims relating to
letters of credit still outstanding, are included as Administrative Claims and
will be paid or otherwise satisfied on the Reorganization Effective Date in
accordance with Section 2.5 of the Reorganization Plan by reinstatement of such
contingent obligations under the Reinstated L/C Facility or by replacement by
the Exit Financing Facility. While certain DIP Financing Facility Claims will
not be paid in full as a result of the reinstatement of these contingent
obligations under the Reorganization Plan, acceptance of such treatment by a
requisite majority of DIP Lenders, as provided under the DIP Financing Facility,
shall be binding on all DIP Lenders. Additionally, the Plans provide that all
entities seeking an award by the Court of compensation for services rendered or
reimbursement of expenses incurred through and including the applicable
Confirmation Date under subsections 503(b)(2), 503(b)(3), 503(b)(4) or 503(b)(5)
of the Bankruptcy Code shall file their respective final applications for
allowance of compensation for services rendered and reimbursement of expenses
incurred on or before the deadlines set forth in the Plans.
All other Claims and Equity Interests are classified separately in
various Classes in the Debtors' Chapter 11 Cases and will receive the
distributions and recoveries (if any) described in the relevant Plan. The
following tables summarize the classification and treatment under the Plans of
the Claims and Equity Interests and in each case, reflects the amount and form
of consideration that will be distributed in exchange for and in full
satisfaction, settlement, release and discharge of such Claims and Equity
Interests. The classification and treatment for all Classes are described in
more detail under Article VII of the Disclosure Statement.
The Debtors have been informed by counsel to the informal committee of
9.25% Debenture Holders (the "Informal Committee") that the Informal Committee
opposes confirmation of the Reorganization Plan and the Liquidation Plan, as
currently drafted, and believes that such Plans violate sections 1122(a),
1123(a)(4) and 1129(a)(1) of the Bankruptcy Code. The Debtors have been further
advised that the Informal Committee believes that the Reorganization Plan and
Liquidation Plan are not confirmable because (i) the 9.25% Debenture Claims
should be classified separately from the Secured Bank Claims; (ii) disparate
treatment exists among the Allowed Class 3 Claims (Reorganized Covanta Secured
Claims); and (iii) the Reorganization Plan and Liquidation Plan have not been
proposed in good faith. At the hearing to approve the Disclosure Statement and
this Short-Form Disclosure Statement, the Informal Committee preserved its
rights to object to confirmation of the Reorganization Plan and Liquidation Plan
on the foregoing and any other grounds.
Contrary to the assertions of the Informal Committee, the Debtors
believe that the Reorganization Plan and the Liquidation Plan comply with
sections 1122, 1123 and 1129, as well as any other relevant provisions of the
Bankruptcy Code. The Debtors believe and expect to provide sufficient evidence
at the Plans Confirmation Hearing to prove that the Reorganization Plan and the
Liquidation Plan have been proposed in good faith as required by section
1129(a)(3) of the Bankruptcy Code, that the classification of the 9.25%
Debenture Claims under the respective Plans is proper and that no disparate
treatment exists among the Allowed Class 3 Claims. The professionals
representing the Informal Committee and certain members of such Committee have
executed confidentiality agreements with the Debtors and have participated in
negotiations regarding the creation of the Plans and have had the opportunity to
comment on the Plans, the Disclosure Statement and this Short Form Disclosure
Statement prior to their submission. The Debtors will continue to negotiate with
the Informal Committee to attempt to resolve their concerns.
Reorganization Plan
- ------------------------------------------------------------------------------
Class Reorganization Plan
- ------------------------------------------------------------------------------
Class 1 Allowed Priority Non-Tax Claims
Treatment of Class 1 Claims is summarized on page xv
- ------------------------------------------------------------------------------
Class 2 Allowed Project Debt Claims
Treatment of Class 2 Claims is summarized on page xvi
- ------------------------------------------------------------------------------
Class 3 Subclass 3A: Allowed Secured Bank Claims
Subclass 3B: Allowed Secured 9.25% Debenture Claims
Treatment of Class 3 Claims is summarized on page xvii
- ------------------------------------------------------------------------------
Class 4 Allowed Operating Company Unsecured Claims
Treatment of Class 4 Claims is summarized on page xxi
- ------------------------------------------------------------------------------
Class 5 Allowed Parent and Holding Company Guarantee Claims
Treatment of Class 5 Claims is summarized on page xxii
- ------------------------------------------------------------------------------
Class 6 Allowed Parent and Holding Company Unsecured Claims
Treatment of Class 6 Claims is summarized on page xxiii
- ------------------------------------------------------------------------------
Class 7 Allowed Convertible Subordinated Bond Claims
Treatment of Class 7 Claims is summarized on page xxiv
- ------------------------------------------------------------------------------
Class 8 Allowed Convenience Claims
Treatment of Class 8 Claims is summarized on page xxv
- ------------------------------------------------------------------------------
Class 9 Subclass 9A: Liquidating Debtors
Intercompany Claims
Subclass 9B: Reorganizing Debtors
Intercompany Claims
Subclass 9C: Heber Debtor
Intercompany Claims
Treatment of Class 9 Claims is summarized on page xxvi
- ------------------------------------------------------------------------------
Class 10 Subordinated Claims
Treatment of Class 10 Claims is summarized on page xxvii
- ------------------------------------------------------------------------------
Class 11 Equity Interests in Subsidiary Debtors
Treatment of Class 11 Claims is summarized on page xxviii
- ------------------------------------------------------------------------------
Class 12 Equity Interests in Covanta Huntington, Covanta Onondaga
and DSS Environmental
Treatment of Class 12 Claims is summarized on page xxix
- ------------------------------------------------------------------------------
Class 13 Old Covanta Stock Equity Interests
Treatment of Class 13 Claims is summarized on page xxx
- ------------------------------------------------------------------------------
Heber Reorganization Plan
- ------------------------------------------------------------------------------
Class Heber Reorganization Plan
- ------------------------------------------------------------------------------
Class 1 Allowed Priority Non-Tax Claims
Treatment of Class 1 Claims is summarized on page xxxi
- ------------------------------------------------------------------------------
Class 2H Subclass 2H-A: Allowed GECC Secured SIGC Claims
Subclass 2H-B: Allowed GECC Secured HGC/HFC Claims
Treatment of Class 2H Claims is summarized on page xxxii
- ------------------------------------------------------------------------------
Class 3H Allowed Heber Secured Claims
Treatment of Class 3H Claims is summarized on page xxxiii
- ------------------------------------------------------------------------------
Class 4 N/A
- ------------------------------------------------------------------------------
Class 5 N/A
- ------------------------------------------------------------------------------
Class 6 N/A
- ------------------------------------------------------------------------------
Class 7 Allowed Unsecured Claims
Treatment of Class 7 Claims is summarized on page xxxiv
- ------------------------------------------------------------------------------
Class 8 Allowed Heber Intercompany Claims
Treatment of Class 8 Claims is summarized on page xxxv
- ------------------------------------------------------------------------------
Class 9 Intercompany Claims
Treatment of Class 9 Claims is summarized on page xxxvi
- ------------------------------------------------------------------------------
Class 10 N/A
- ------------------------------------------------------------------------------
Class 11 N/A
- ------------------------------------------------------------------------------
Class 12 N/A
- ------------------------------------------------------------------------------
Class 13 N/A
- ------------------------------------------------------------------------------
Class 14 Equity Interests in the Heber Debtors
Treatment of Class 14 Claims is summarized on page xxxvii
- ------------------------------------------------------------------------------
Liquidation Plan
- ------------------------------------------------------------------------------
Class Liquidation Plan
- ------------------------------------------------------------------------------
Class 1 Allowed Priority Non-Tax Claims
Treatment of Class 1 Claims is summarized on page xxxviii
- ------------------------------------------------------------------------------
Class 2 N/A
- ------------------------------------------------------------------------------
Class 3 Class 3A: Allowed Liquidation Secured Claims
Class 3B: Allowed Secured CSFB Claim
Class 3C: Allowed Covanta Tulsa Secured Claims
Treatment of Class 3 Claims is summarized on page xxxix
- ------------------------------------------------------------------------------
Class 4 N/A
- ------------------------------------------------------------------------------
Class 5 N/A
- ------------------------------------------------------------------------------
Class 6 N/A
- ------------------------------------------------------------------------------
Class 7 Allowed Unsecured Liquidation Claims and Allowed Insurance
Claims Treatment of Class 7 Claims is summarized on page xli
- ------------------------------------------------------------------------------
Class 8 N/A
- ------------------------------------------------------------------------------
Class 9 Intercompany Claims
Treatment of Class 9 Claims is summarized on page xlii
- ------------------------------------------------------------------------------
Class 10 N/A
- ------------------------------------------------------------------------------
Class 11 Equity Interests in Liquidating Debtors
Treatment of Class 11 Claims is summarized on page xliii
- ------------------------------------------------------------------------------
Class 12 N/A
- ------------------------------------------------------------------------------
Class 13 N/A
- ------------------------------------------------------------------------------
REORGANIZATION PLAN SUMMARY OF CLASS TREATMENT
Class Description Treatment Under Reorganization Plan
Class 1: Estimated Allowed Claims: $0 to $200,000
Allowed Priority Non-Tax
Claims
Each holder of an Allowed Class 1
Claim shall receive, in full
settlement, release and discharge of
its Class 1 Claim, either (i) Cash, on
the Distribution Date, in an amount
equal to such Allowed Claim, or (ii)
on such other less favorable terms as
the Reorganizing Debtors and
Reorganized Debtors and the holder of
an Allowed Priority Non-Tax Claim
agree.
Class 1 Claims are Unimpaired, and the
holders of Allowed Class 1 Claims are
not entitled to vote to accept or
reject the Reorganization Plan.
Estimated Percentage Recovery: 100%
Class Description Treatment Under Reorganization Plan
Class 2: Estimated Allowed Claims: $300,000 to
$1 million
Allowed Project Debt
Claims
On the Reorganization Effective Date,
the legal, equitable and contractual
rights of the holders of Allowed Class
2 Claims will be reinstated in full
satisfaction, release and discharge of
their respective Class 2 Claims and
will remain unaltered under the
Reorganization Plan, except as the
Reorganizing Debtors and the holders
of Allowed Class 2 Claims may
otherwise agree or as such holders may
otherwise consent. To the extent that
defaults exist in connection with any
Allowed Project Debt Claims, the
Reorganized Debtors shall comply with
section 1124(2) of the Bankruptcy Code
on or before the Reorganization
Effective Date. Without limiting the
generality of the foregoing, the
Reorganizing Debtors shall pay in Cash
thirty (30) days after the
Reorganization Confirmation Date any
Secured Project Fees and Expenses,
which are defined as those reasonable
fees, costs or charges that (i) are
incurred by a trustee acting on behalf
of a bondholder, bond insurer or owner
participant under any indenture that
relates to an Allowed Project Debt
Claim, (ii) represent fees, costs or
charges incurred after the Petition
Date, (iii) are properly payable under
the applicable indenture, and (iv)
have been approved by order of the
Court; provided, however, that to the
extent that any Secured Project Fees
and Expenses may have been paid by
third parties, then such third parties
may only seek reimbursement from the
Reorganizing Debtors for payment of
such Secured Project Fees and
Expenses, if and to the extent
permitted by the relevant prepetition
transaction documents and the
Bankruptcy Code. Notwithstanding the
foregoing, no contractual provisions
or applicable law that would entitle
the holder of an Allowed Class 2 Claim
to demand or receive payment of such
Claim prior to the stated maturity of
such Claim, terminate any contractual
relationship or take such other
enforcement action (as may be
applicable) from and after the
occurrence of a default that occurred
prior to the Reorganization Effective
Date shall be enforceable against the
Reorganized Debtors.
Class 2 Claims are Unimpaired, and the
holders of Allowed Class 2 Claims are
not entitled to vote to accept or
reject the Reorganization Plan.
Estimated Percentage Recovery: 100%
Class Description Treatment Under Reorganization Plan
Class 3:
Under the Reorganization Plan, Class 3 is
Allowed Reorganized divided into two Subclasses for Distribution
Covanta Secured Claims purposes: Subclass 3A consists of the Allowed
Secured Bank Claims and Subclass 3B consists of
Allowed Secured 9.25% Debenture Claims.
Estimated Allowed Claims: $418.7 million to
$448.6 million
Subclass 3A: Holders of Allowed Subclass 3A Claims shall
receive the Subclass 3A Recovery in full
Allowed Reorganized settlement, release and discharge of their
Covanta Secured Claims-- aggregate Allowed Subclass 3A Claims. The
Secured Bank Claims Subclass 3A Recovery shall be distributed among
holders of Allowed Subclass 3A Claims as
follows:
First, in full settlement, release and
discharge of the Allowed Priority Bank
Claims, the Priority Bank Lenders shall
receive first, to the extent available as
part of the Subclass 3A Recovery, Excess
Distributable Cash in an amount equal to
the amount of such Allowed Priority Bank
Claims and thereafter New High Yield
Secured Notes in a principal amount equal
to the remaining amount of such Allowed
Priority Bank Claims;
Second, immediately after making the
Distribution on account of the Allowed
Priority Bank Claims, in full settlement,
release and discharge of Non-Priority
Subclass 3A Claims, the holders of Allowed
Non-Priority Subclass 3A Claims shall
receive a Pro Rata Subclass Share of the
remaining Subclass 3A Recovery; provided,
however, that with respect to the
Distribution of the remaining Subclass 3A
Recovery, (i) the New Facility Lenders in
Subclass 3A shall receive their Secured
Value Distribution first, to the extent
available, in the form of Distributable
Cash and thereafter in the form of New
High Yield Secured Notes, and (ii) the
Additional New Lenders in Subclass 3A
shall receive their Secured Value
Distribution first in the form of New
Lender Warrants and thereafter solely in
the form of New High Yield Secured Notes;
and further, provided, that
Non-Participating Lenders in Subclass 3A
shall receive their Secured Value
Distribution solely in the form of New
High Yield Secured Notes and shall not
receive any Distribution of Distributable
Cash or New Lender Warrants.
Immediately prior to any Distribution to
holders of Subclass 3A Claims, the
settlement of the Loss Sharing Litigation
as described on Exhibit 6 to the
Reorganization Plan shall be deemed
effective and implemented for purposes of
Distributions under the Reorganization
Plan.
Class 3 Claims are Impaired, and the holders of
Allowed Claims in such Class are entitled to
vote to accept or reject the Reorganization
Plan. The members of Subclasses 3A and 3B shall
vote together as a single Class for purposes of
accepting or rejecting this Reorganization
Plan; provided, however that the Ballots
distributed to holders of Subclass 3B Secured
Claims shall permit each such holder the
opportunity to elect treatment as a Rejecting
Bondholder, it being understood that any such
holder who does not expressly make such
election by properly marking the Ballot shall
be deemed an Accepting Bondholder.
Estimated Percentage Recovery: 63.0% to
70.5%
Subclass 3B:
Estimated Allowed Claims: $105 million
Allowed Reorganized
Covanta Secured
Claims--9.25% Debenture
Claims
On the Distribution Date, holders of Allowed
Subclass 3B Claims shall receive the Subclass
3B Recovery in full settlement, release and
discharge of their respective Allowed Subclass
3B Claims. The Subclass 3B Recovery shall be
distributed among holders of Allowed Subclass
3B Claims as follows:
First, the Subclass 3B Secured Claim shall
be deemed an Allowed Secured Claim in an
amount equal to the Allowed Subclass 3B
Settlement Amount and in full settlement,
release and discharge of the Allowed
Secured Claims of the Accepting
Bondholders, each holder of an Allowed
Subclass 3B Claim that is an Accepting
Bondholder shall, subject to payment of
its pro-rata share of the Settlement
Distribution, receive its Pro Rata
Subclass Share of Distributions of the
Subclass 3B Accepting Bondholder Recovery;
provided, however, that with respect to
the Subclass 3B Accepting Bondholder
Recovery, (i) the New Facility Lenders in
Subclass 3B that are Accepting
Bondholders, if any, shall receive their
Secured Value Distribution first, to the
extent available, in the form of
Distributable Cash and thereafter in the
form of New High Yield Secured Notes; and
(ii) the Additional New Lenders in
Subclass 3B that are Accepting
Bondholders, if any, shall receive their
Secured Value Distribution solely in the
form of New High Yield Secured Notes plus
a Pro Rata Subclass Share of the New
Lender Warrants; and provided further that
the Non-Participating Lenders in Subclass
3B that are Accepting Bondholders shall
not receive any Distributable Cash or any
Distribution of New Lender Warrants as
part of the Secured Value Distribution.
Distributions made to each Accepting
Bondholder of such holder's Allowed
Subclass 3B Claim shall be subject to
adjustment and modification in accordance
with the provisions of the 9.25%
Settlement , including the waiver of the
9.25% Deficiency Claims and any
subordination benefits with respect to the
Convertible Subordinated Bonds, and
payment of such holder's pro-rata share of
the Settlement Distribution to the holders
of Allowed Class 6 Claims as provided
under the Reorganization Plan.
Second, in the event that the aggregate
amount of Subclass 3B Claims held by
Rejecting Bondholders is equal to or
greater than $10 million, the Subclass 3B
Claim of each Rejecting Bondholder shall
be deemed a Disputed Secured Claim,
allowance thereof shall be subject to
determination pursuant to the 9.25%
Debentures Adversary Proceeding, and on
the Effective Date, the Reorganizing
Debtors shall deliver the Subclass 3B
Rejecting Bondholder Recovery into a
Reserve Account in accordance with Section
8.4 of the Reorganization Plan and be held
subject to Distribution pursuant to
Section 8.6 of the Reorganization Plan.
Third, in the event that the aggregate
amount of Subclass 3B Claims held by
Rejecting Bondholders is less than $10
million, the Subclass 3B Claim of each
Rejecting Bondholder shall be deemed an
Allowed Secured Claim in its full amount
and in full settlement, release and
discharge of the Allowed Secured Claims of
the Rejecting Bondholders, on the
Reorganization Effective Date, each holder
of an Allowed Subclass 3B Claim that is a
Rejecting Bondholder shall receive its Pro
Rata Subclass Share of Distributions of
the Subclass 3B Rejecting Bondholder
Recovery; provided, however, that with
respect to the Subclass 3B Rejecting
Bondholder Recovery, (i) the New Facility
Lenders in Subclass 3B that are Rejecting
Bondholders, if any, shall receive their
Secured Value Distribution first, to the
extent available, in the form of
Distributable Cash and thereafter in the
form of New High Yield Secured Notes; and
(ii) the Additional New Lenders in
Subclass 3B that are Rejecting
Bondholders, if any, shall receive their
Secured Value Distribution solely in the
form of New High Yield Secured Notes plus
a Pro Rata Subclass Share of the New
Lender Warrants; and provided further that
the Non-Participating Lenders in Subclass
3B that are Rejecting Bondholders shall
not receive any Distributable Cash or any
Distribution of New Lender Warrants as
part of the Secured Value Distribution. In
the event that the aggregate amount of
Subclass 3B Claims held by Rejecting
Bondholders is less than $10 million, the
Distributions made to each Rejecting
Bondholder of such holder's Allowed
Subclass 3B Claim shall not be subject to
adjustment and modification in accordance
with the provisions of the 9.25%
Settlement, nor shall they receive a
release of claims asserted in the 9.25%
Debentures Adversary Proceeding (remaining
subject to liability to the holders of
Class 6 Claims for the Settlement
Distribution.
Class 3 Claims are Impaired, and the holders of
Allowed Claims in such Class are entitled to
vote to accept or reject the Reorganization
Plan. The members of Subclasses 3A and 3B shall
vote together as a single Class for purposes of
accepting or rejecting this Reorganization
Plan; provided, however that the Ballots
distributed to holders of Subclass 3B Secured
Claims shall permit each such holder the
opportunity to elect treatment as a Rejecting
Bondholder, it being understood that any such
holder who does not expressly make such
election by properly marking the Ballot shall
be deemed an Accepting Bondholder
Estimated Percentage Recovery before
giving effect to the 9.25% Settlement
Distribution: 63.0% to 70.5%
Estimated Percentage Recovery for
Accepting Bondholders after giving
effect to the 9.25% Settlement
Distribution: 55.2% to 61.7%
Estimated Percentage Recovery for
Rejecting Bondholders who are
unsuccessful in the 9.25% Debentures
Adversary Proceeding: 1.6% to 6.5%
(treatment as holders of Class 6 Claims)
IF HOLDERS OF SUBCLASS 3B CLAIMS IN
EXCESS OF $10 MILLION ELECT TO BECOME
REJECTING BONDHOLDERS, THEN ALL
DISTRIBUTIONS TO REJECTING BONDHOLDERS
WILL BE HELD IN A DISPUTED RESERVE
ACCOUNT SUBJECT TO RESOLUTION OF THE
9.25% DEBENTURES ADVERSARY PROCEEDING.
Class Description Treatment Under Reorganization Plan
Class 4: Estimated Allowed Claims: $30 million to
$35 million
Allowed Operating
Company Unsecured Claims
(Note: A list of On the Distribution Date, each holder of an
Operating Company Allowed Class 4 Claim shall receive, in full
Debtors is attached at settlement, release and discharge of its Class
Exhibit K) 4 Claim, a Distribution of Reorganization Plan
Unsecured Notes in the aggregate principal
amount equal to the amount of its Allowed Class
4 Claim. With respect to Allowed Class 4 Claims
for and to the extent which insurance is
available, such Class 4 Claims shall be paid in
the ordinary course of the Reorganizing
Debtors' business to the extent of such
insurance, when any such Claim becomes an
Allowed Claim and such insurance proceeds
become available; provided, however, that to
the extent insurance is not available or is
insufficient, treatment of such Allowed Class 4
Claims shall be as otherwise provided in
Section 4.4 of the Reorganization Plan.
Class 4 Claims are Impaired, and the holders of
Allowed Class 4 Claims are entitled to vote to
accept or reject the Reorganization Plan.
Estimated Percentage Recovery: 100%
Class Description Treatment Under Reorganization Plan
Class 5: Estimated Allowed Claims: $0
Allowed Parent and
Holding Company
Guarantee Claims
On the Reorganization Effective Date, the
legal, equitable and contractual rights of the
holders of Allowed Class 5 Claims will be
reinstated in full satisfaction, release and
discharge of their respective Class 5 Claims
and will remain unaltered under the
Reorganization Plan, except as the Reorganizing
Debtors and the holders of Allowed Class 5
Claims may otherwise agree or as such holders
may otherwise consent. Notwithstanding the
foregoing, no contractual provisions or
applicable law that would entitle the holder of
an Allowed Class 5 Claim to demand or receive
payment of such Claim prior to the stated
maturity of such Claim, terminate any
contractual relationship or take such other
enforcement action (as may be applicable) from
and after the occurrence of a default that
occurred prior to the Reorganization Effective
Date shall be enforceable against the
Reorganized Debtors.
Class 5 Claims are Unimpaired, and the holders
of Allowed Class 5 Claims are not entitled to
vote to accept or reject the Reorganization
Plan.
Estimated Percentage Recovery: 100%
Class Description Treatment Under Reorganization Plan
Class 6: Estimated Allowed Claims: $125 million to
$500 million
Allowed Parent and
Holding Company
Unsecured Claims
In consideration of the agreement by the
holders of Class 6 Claims to waive any claims,
including all alleged avoidance actions, that
might be brought against the holders of
Subclass 3A Claims and to settle the 9.25%
Debentures Adversary Proceeding in accordance
with the terms of the 9.25% Settlement, and to
secure the support of the holders of Allowed
Class 6 Claims for confirmation of this
Reorganization Plan, the holders of Allowed
Class 3 Claims have agreed to provide the
holders of Allowed Class 6 Claims from the
value that would otherwise have been
distributable to the holders of Allowed Class 3
Claims under this Reorganization Plan, so that
on the Distribution Date each holder of an
Allowed Class 6 Claim shall receive, in full
satisfaction, release and discharge of its
Class 6 Claim, Distributions consisting of (i)
such holder's Pro Rata Class Share of Class 6
Warrants, (ii) such holder's Pro Rata Class
Share of Class 6 CPIH Preferred Stock, (iii)
such holder's Pro Rata Class Share of the CPIH
Participation Interest, and (iv) such holders
Pro Rata Class Share of the proceeds, if any,
with respect to the Class 6 Litigation Claims.
Additionally, each holder of an Allowed Class 6
Claim (a) shall receive from each Accepting
Bondholder, in full satisfaction, release and
discharge of its rights with respect to the
9.25% Debentures Adversary Proceeding against
each Accepting Bondholder, a Distribution
consisting of such holder's Pro Rata Share of
the Settlement Distribution and (b) may receive
a further Distribution with respect to the
Subclass 3B Rejecting Bondholder Recovery,
subject to the resolution of the 9.25%
Debentures Adversary Proceeding, in accordance
with Section 8.6(b) of the Reorganization Plan.
With respect to the Distribution to holders of
Allowed Class 6 Claims (including any
Distribution with respect to the Settlement
Distribution), the Reorganizing Debtors shall
have the option to make all or any portion of
the Distribution either directly to the holder
of such Allowed Class 6 Claim or through a
depository or trust arrangement that provides
holders of Allowed Class 6 Claims with the
equivalent economic benefits they would have
received through a direct Distribution;
provided, however, that the costs of
implementing and maintaining any such
depository or trust arrangement shall be paid
for from the proceeds of the Distribution to
holders of Allowed Class 6 Claims. With respect
to Allowed Class 6 Claims for and to the extent
which insurance is available, such Class 6
Claims shall be paid in the ordinary course of
the Reorganizing Debtors' business to the
extent of such insurance, when any such Claim
becomes an Allowed Claim and such insurance
proceeds become available; provided, however,
that to the extent insurance is not available
or is insufficient, treatment of such Allowed
Class 6 Claims shall be as otherwise provided
in Section 4.7 of the Reorganization Plan.
Estimated Percentage Recovery before giving
effect to 9.25% Settlement Distribution:
1.6% to 6.5%
Class Description Treatment Under Reorganization Plan
Class 7: Estimated Allowed Claims: $154.5 million
Allowed Convertible
Subordinated Bond Claims
On the Distribution Date, each holder of an
Allowed Class 7 Claim shall not receive any
Distributions from the Reorganizing Debtors or
retain any property under the Reorganization
Plan in respect of Class 7 Claims, on account
of its Class 7 Claim.
Class 7 Claims are Impaired, and the holders of
Allowed Class 7 Claims are conclusively
presumed to reject the Reorganization Plan. The
votes of holders of Allowed Class 7 Claims will
not be solicited.
Estimated Percentage Recovery: 0%
Class Description Treatment Under Reorganization Plan
Class 8: Estimated Allowed Claims: $2.1 million
Allowed Convenience
Claims
On the Distribution Date, each holder of an
Allowed Class 8 Claim shall receive, in full
satisfaction, release and discharge of its
Class 8 Claim, a payment in Cash, in an amount
equal to seventy-five (75%) of the Allowed
amount of such Class 8 Claim.
Class 8 Claims are Impaired, and the holders of
Allowed Class 8 Claims are entitled to vote to
accept or reject the Reorganization Plan.
Estimated Percentage Recovery: 75%
Class Description Treatment Under Reorganization Plan
Class 9: Class 9 consists of all Intercompany Claims.
Class 9 is subdivided into two Subclasses for
Intercompany Claims Distribution purposes: Subclass 9A consists of
the Liquidating Debtors Intercompany Claims;
Subclass 9B consists of the Reorganized Debtors
Intercompany Claims.
Subclass 9A: In full satisfaction, release and discharge of
each Liquidating Debtors Intercompany Claim,
Liquidating Debtors each such Liquidating Debtors Intercompany
Intercompany Claims Claim shall be deemed cancelled or waived in
exchange for the Reorganizing Debtors'
contribution of the Operating Reserve
Deficiency Amount, if any, to the Operating
Reserve.
Subclass 9B: In the sole discretion of the applicable
Reorganizing Debtor or Reorganized Debtor,
Reorganizing Debtors shall be either: (a) preserved and reinstated,
Intercompany Claims (b) released, waived and discharged, (c)
contributed to the capital of the obligee
corporation, or (d) distributed to the obligee
corporation.
Subclass 9C: On the Reorganization Effective Date, all
Subclass 9C Claims shall be deemed cancelled or
Heber Debtors waived in exchange for the Reorganizing
Intercompany Claims Debtors' undertaking certain obligations in
connection with the Heber Reorganization Plan.
Class Description Treatment Under Reorganization Plan
Class 10: Estimated Allowed Claims: $100,000 to $500,000
Subordinated Claims
As of the Reorganized Plan Effective Date,
holders of Class 10 Claims shall not receive
any Distributions or retain any property under
the Reorganization Plan in respect of Class 10
Claims, on account of such Claims.
Class 10 Claims are Impaired and holders of
Allowed Class 10 Claims in are conclusively
presumed to reject the Reorganization Plan. The
votes of holders of Allowed Class 10 Claims
will not be solicited.
Estimated Percentage Recovery: 0%
Class Description Treatment Under Reorganization Plan
Class 11: As of the Reorganization Effective Date, all
Equity Interests in Subsidiary Debtors shall be
Equity Interests in reinstated in full satisfaction, release and
Subsidiary Debtors discharge of any Allowed Class 11 Claims and
such Equity Interests shall be evidenced by the
existing capital stock, partnership and/or
membership interests.
Class 11 Equity Interests are Unimpaired and
the holders of Allowed Class 11 Equity
Interests in such Class are conclusively
presumed to accept the Reorganization Plan. The
votes of holders of Class 11 Equity Interests
will not be solicited.
Class Description Treatment Under Reorganization Plan
Class 12: As of the Reorganization Effective Date, Equity
Interests in Covanta Huntington, Covanta
Onondaga and DSS Environmental shall be
reinstated, in full satisfaction, release, and
Equity Interests in discharge of any Allowed Class 12 Equity
Covanta Huntington, Interests, and such reinstated Equity Interests
Covanta Onondaga and DSS shall be evidenced by the existing capital
Environmental(5) stock, partnership and/or membership interests.
Class 12 Equity Interests are Unimpaired and
the holders of Allowed Class 12 Equity
Interests are not entitled to vote to accept or
reject the Reorganization Plan.
Estimated Percentage Recovery: 100%
- ------------------
(5) The treatment of Onondaga Equity Interests is subject to finalization and
implementation of the compromise with Onondaga County Resource Recovery
Agency described herein.
Class Description Treatment Under Reorganization Plan
Class 13: Holders of Allowed Class 13 Equity Interests
shall not receive any Distribution or retain
Old Covanta Stock Equity any property under the Reorganization Plan in
Interests respect of Class 13 Equity Interests. All Class
13 Equity Interests shall be cancelled,
annulled and extinguished.
Class 13 Equity Interests are Impaired, and the
holders of Allowed Class 13 Equity Interests
are conclusively presumed to reject the
Reorganization Plan.
Estimated Percentage Recovery: 0%
HEBER REORGANIZATION PLAN SUMMARY OF CLASS TREATMENT
Class Description Treatment Under Heber Reorganization Plan
Class 1: Estimated Allowed Claims: $0
Allowed Priority Non-Tax
Claims
Each holder of an Allowed Class 1 Claim shall
receive, in full settlement, release and
discharge of its Class 1 Claim, either (i)
Cash, on the Distribution Date, in an amount
equal to such Allowed Claim, or (ii) on such
other less favorable terms as Covanta and the
holder of an Allowed Priority Non-Tax Claim
agree, provided, however, that no such
agreement shall impose any obligation upon the
Reorganized Heber Debtors beyond the payment of
amounts calculated in accordance with the
Working Capital Adjustment.
Class 1 Claims are Unimpaired, and the holders
of Allowed Class 1 Claims are not entitled to
vote to accept or reject the Reorganization
Plan.
Estimated Percentage Recovery: 100%
Class Description Treatment Under Heber Reorganization Plan
Class 2H: Under the Heber Reorganization Plan, Class 2H
is divided into two subclasses for distribution
Allowed GECC purposes: Subclass 2H-A consists of the Allowed
Secured Claims GECC Secured SIGC Claims, and Subclass 2H-B
consists of all Allowed GECC Secured HGC/HFC
Claims.
Subclass 2H-A: The holder of the Allowed Subclass 2H-A Claims
shall retain, unaltered, the legal, equitable
Allowed GECC and contractual rights, including, without
Secured SIGC Claims limitation, any valid and perfected Liens that
secure such Allowed Claim, provided, however,
that the assets of the Heber Debtors subject to
the GECC Liens may be sold, subject to such
GECC Liens, as part of the Geothermal Sale
contemplated by the Heber Reorganization Plan.
Subclass 2H-B: Covanta shall pay to each holder of an Allowed
Subclass 2H-B Claim, in full settlement,
Allowed GECC release and discharge of its Subclass 2H-B
Secured HGC/HFC Claims Claim, either (i) Cash, on the Heber Effective
Date, in an amount equal to such Allowed
Subclass 2H-B Claim, or (ii) such other less
favorable terms as Covanta and the holder of an
Allowed GECC Secured HGC/HFC Claim agree,
provided, however, that no such agreement shall
impose any obligation upon the Reorganized
Heber Debtors beyond the payments of amounts
calculated in accordance with the Working
Capital Adjustment.
Class 2H Claims are Unimpaired, and the holder
of the Allowed Class 2H Claims is not entitled
to vote to accept or reject the Heber
Reorganization Plan.
Estimated Percentage Recovery: 100%
Class Description Treatment Under Heber Reorganization Plan
Class 3H: Estimated Allowed Claims: $0
Allowed Heber On the Heber Reorganization Effective Date, the
Secured Claims, legal, equitable and contractual rights of the
other than Allowed holders of Allowed Class 3H Claims will be
GECC Allowed reinstated in full satisfaction, release and
Secured Claims discharge of their respective Class 3H Claims
and will remain unaltered, except as the
applicable Heber Debtor (or, on and after the
Heber Effective Date, the applicable
Reorganized Heber Debtor) and the holders of
Allowed Class 3H Claims may otherwise agree or
as such holders may otherwise consent.
Notwithstanding the foregoing, no contractual
provisions or applicable law that would entitle
the holder of an Allowed Class 3H Claim to
demand or receive payment of such Claim prior
to the stated maturity of such Claim, terminate
any contractual relationship or take such other
enforcement action (as may be applicable) from
and after the occurrence of a default that
occurred prior to the Heber Effective Date
shall be enforceable against the Reorganized
Heber Debtors. In the lieu of the foregoing,
any Heber Debtor (or, on and after the Heber
Effective Date, any Reorganized Heber Debtor)
may, at its election, make a Cash payment to
the holder of an Allowed Class 3H Claim equal
to the full amount of the holder's Allowed
Class 3H Claim, together with interest at the
legal rate to the extent required by law, in
full settlement, release and discharge of such
Class 3H Claim.
Class 3H Claims are Unimpaired, and the holders
of Allowed Class 3H Claims are not entitled to
vote to accept or reject the Heber
Reorganization Plan.
Estimated Percentage Recovery: 100%
Class Description Treatment Under Heber Reorganization Plan
Class 7: Estimated Allowed Claims: $4 million to
$6 million
Allowed Unsecured Claims
On the Distribution Date, each holder of an
Allowed Class 7 Claim shall receive, in full
settlement, release and discharge of its Class
7 Claim, a Cash payment equal to the full
amount of its Allowed Class 7 Claim, together
with interest at the legal rate to the extent
required by law.
Class 7 Claims are Unimpaired, and the holders
Allowed Class 7 Claims are not entitled to vote
to accept or reject the Heber Reorganization
Plan.
Estimated Percentage Recovery: 100%
Class Description Treatment Under Heber Reorganization Plan
Class 8: The legal, equitable and contractual rights of
holders of Heber Intercompany Claims in respect
Heber Intercompany Claims of such claim shall not be affected, altered or
Impaired under the Heber Reorganization Plan.
Class 8 Claims are Unimpaired, and the holders
Allowed Class 8 Claims are not entitled to vote
to accept or reject the Heber Reorganization
Plan.
Estimated Percentage Recovery: 100%
Class Description Treatment Under Heber Reorganization Plan
Class 9: On the Heber Effective Date, all Intercompany
Claims shall be cancelled, annulled and
Intercompany Claims extinguished. Holders of such Claims shall
receive no Distributions in respect of Class 9
Claims.
Class 9 Claims are Impaired, and the holders of
Allowed Class 9 Claims are conclusively
presumed to reject the Heber Reorganization
Plan.
Estimated Percentage Recovery: 0%
Class Description Treatment Under Heber Reorganization Plan
Class 14: Holders of Allowed Class 14 Equity Interests
shall not receive any Distribution under the
Equity Interests in the Heber Reorganization Plan in respect of Class
Heber Debtors 14 Equity Interests, except any such Equity
Interests shall continue to be held by the
Heber Debtor or Reorganized Heber Debtor that
originally held such Equity Interests, which
Equity Interests shall continue to be evidenced
by the existing capital stock, partnership
interests or membership interests.
Class 14 Equity Interests are Impaired, and the
holders of Class 14 Equity Interests are
conclusively presumed to reject the Heber
Reorganization Plan.
Estimated Percentage Recovery: 0%
LIQUIDATION PLAN SUMMARY OF CLASS TREATMENT
Class Description Treatment Under Liquidation Plan
Class 1: Estimated Allowed Claims: $0 to $130,000
Allowed Priority Non-Tax Each holder of an Allowed Class 1 Claim shall
Claims receive, in full settlement, release and
discharge of its Class 1 Claim, Cash in an
amount equal to such Allowed Class 1 Claim on
the Initial Liquidation Distribution Date.
Class 1 Claims are Unimpaired, and holders of
Allowed Class 1 Claims are not entitled to vote
to accept or reject the Liquidation Plan.
Estimated Percentage Recovery: 100%
Class Description Treatment Under Liquidation Plan
Class 3: Under the Liquidation Plan, Class 3 is divided
into two Subclasses for Distribution purposes:
Allowed Reorganized Subclass 3A consists of the Allowed Secured
Covanta Secured Claims Bank Claims and the Allowed 9.25% Debenture
Claims and Subclass 3B consists of the Allowed
CSFB Claim.
Subclass 3A: In full settlement, release and discharge of
its Class 3A Claim, (I) (a) each holder of an
Allowed Liquidation Allowed Liquidation Secured Claim would be
Secured Claims--Secured entitled, absent the Secured Creditor
Bank Claims and 9.25% Direction, to receive on any Liquidation
Debenture Claims Distribution Date, such holder's Pro Rata Share
of the sum of any Net Liquidation Proceeds and
Liquidation Assets of the Liquidating Pledgor
Debtors existing, but not yet distributed on
such Liquidation Distribution Date and (b) on
the Liquidation Effective Date, (i) such holder
of a Class 3A Allowed Liquidation Secured Claim
shall be deemed to have received, on account of
its Subclass 3A Allowed Liquidation Secured
Claim, the Distribution it receives as a holder
of a Subclass 3A or Subclass 3B Claim under the
Reorganization Plan, as applicable, in full
satisfaction of its Subclass 3A Claim under the
Liquidation Plan, and (ii) the Liquidating
Trustee and the Liquidating Debtors will
implement the Secured Creditor Direction, and
(II) each holder of an Allowed Liquidation
Secured Claim shall be entitled to receive on
any Liquidation Distribution Date, such
holder's Pro Rata Share of any Net Liquidation
Proceeds of any Liquidating Pledgor Debtor's
Residual Liquidation Assets.
Subclass 3A Claims are Impaired and the holders
of Claims in such subclass are entitled to vote
to accept or reject the Liquidation Plan.
Subclass 3B: On the Liquidation Effective Date, or as soon
thereafter as practicable, Ogden FMCA shall
Allowed Liquidation cause to be transferred, pursuant to Section
Secured Claims-- 6.1(b) of the Liquidation Plan, to CSFB, in its
the CSFB Claim capacity as holder of the Allowed Secured CSFB
Claim, the Bank Agreement Ogden FMCA
Collateral, in full settlement, release and
discharge of its Class 3B Claim.
The Class 3B Claim is Impaired and the holder
of the Claim in such subclass is entitled to
vote to accept or reject the Liquidation Plan.
Subclass 3C: On the Liquidation Effective Date, or as soon
thereafter as practicable, Covanta Tulsa shall
Allowed Liquidation cause to be transferred, pursuant to Section
Secured Claims-Covanta 6.1(c) of the Liquidation Plan, to the Covanta
Tulsa Secured Claims Tulsa Secured Parties as holders of the Allowed
Covanta Tulsa Secured Claims, the Covanta Tulsa
Collateral in full settlement, release and
discharge of the Class 3C Claims.
The Class 3C Claims are Impaired and the holder
of the Claims in such subclass are entitled to
vote to accept or reject the Liquidation Plan.
Class Description Treatment Under Liquidation Plan
Class 7: Allowed Estimated Allowed Claims: $10 million to
Unsecured Liquidation $600 million
Claims and Allowed
Insured Claims
The holders of Class 7 Claims shall not be
entitled to receive any Distribution under the
(Note: A list of Liquidation Plan. Class 7 Claims are Impaired
Liquidating Debtors is and the holders of Allowed Claims in Class 7
attached at Exhibit K) are conclusively presumed to reject the
Liquidation Plan. The votes of holders of Clas
7 Claims will not be solicited, provided,
however, that with respect to Allowed Class 7
Claims for and to the extent that insurance is
available, such Allowed Class 7 Claims shall b
paid in the ordinary course of the Liquidating
Debtors' business to the extent of such
insurance, when any such Claims become Alloweds
Claims and such insurance proceeds become
available; provided, further, that to the
extent that insurance is not available or is
insufficient, treatment of such Allowed Class e
Claim shall be as otherwise provided in the
Liquidation Plan.
Class 7 Claims are Impaired and the holders of
Allowed Claims in such Class are conclusively
presumed to reject the Liquidation Plan. The
votes of holders of Class 7 Claims will not be
solicited.
Estimated Percentage Recovery: 0%
Class Description Treatment Under Liquidation Plan
Class 9: On the Liquidation Effective Date, all
Intercompany Claims shall be cancelled,
Intercompany Claims annulled and extinguished. Holders of such
claims shall receive no distributions in
respect of Class 9 Claims.
Class 9 Claims are impaired and holders of
Allowed Class 9 Claims are conclusively
presumed to reject the Liquidation Plan. The
votes of the holders of Allowed Class 9 Claims
will not be solicited.
Estimated Percentage Recovery: 0%
Class Description Treatment Under Liquidation Plan
Class 11: On the Liquidation Effective Date, all Equity
Interests in the Liquidating Debtors shall not
Equity Interests in be entitled to receive any Distributions under
Liquidating Debtors the Liquidation Plan. Such Equity Interests
shall be cancelled, annulled and extinguished.
Class 11 Equity Interests are Impaired and the
holders of Equity Interests in such Class are
conclusively presumed to reject the Liquidation
Plan. The votes of holders of Equity Interests
in such Class will not be solicited.
Estimated Percentage Recovery: 0%
I. Bar Dates and Schedules
On June 26, 2002, the Court entered an order (Docket No. 597) (the
"General Bar Date Order") establishing August 9, 2002 as the General Bar Date
(as defined therein) by which certain entities holding claims against Covanta
and the 123 subsidiaries that filed bankruptcy petitions on April 1, 2002 (the
"Original Debtors") arising prior to the Initial Petition Date must file proofs
of claim. The General Bar Date Order also established September 30, 2002 as the
last date by which governmental units (as defined in 11 U.S.C. ss. 101(27)) may
file proofs of claim. In addition to serving notice of the General Bar Date
Order on all scheduled creditors, the Debtors published notice of the General
Bar Date in THE WALL STREET JOURNAL and USA TODAY. On August 16, 2002, the Court
entered a stipulated order (Docket No. 738) (the "Bank of America Bar Date
Order") that, among other things, extended the bar date by which Bank of
America, N.A. must file proofs of claim against the Original Debtors to
September 30, 2002 (the "Bank of America Bar Date"). On September 5, 2002, the
Court entered a stipulated order (Docket No. 854) (the "IRS Bar Date Order")
that, among other things, extended the bar date by which the Internal Revenue
Service must file proofs of claim against the Original Debtors to December 31,
2002 (the "IRS Bar Date").
On September 20, 2002, the Court entered an order (Docket No. 938) (the
"Employee Bar Date Order") establishing November 15, 2002 (the "Employee Bar
Date") as the last date for filing claims against the Original Debtors by
current or former employees in respect of wages, salaries, commissions, vacation
pay, severance pay, sick leave pay, or benefits. Employees were provided notice
of the Employee Bar Date by mail.
On May 19, 2003, the Court entered an order (Docket No. 1535) (the
"Covanta Concerts Bar Date Order") establishing June 27, 2003 as the last date
for filing proofs of claims against Covanta Concerts Holdings, Inc. (the
"Covanta Concerts Bar Date"). The Debtors sent notice of the Covanta Concerts
Bar Date to all scheduled creditors of Covanta Concerts Holdings, Inc. The same
order established June 27, 2003 as the last date for holders of Convertible
Debentures to file proofs of claim against Covanta (the "Convertible Debentures
Bar Date"). The Debtors sent notice of the Convertible Debentures Bar Date to
all registered holders and other known holders of the Convertible Bonds and
published a notice of the same in the FINANCIAL TIMES of London and the
LUXEMBURGER WORT.
On June 30, 2003, the Court entered an order (Docket No. 1717) (the
"New Debtors Bar Date Order") establishing August 14, 2003 as the last date for
filing proofs of claim against the New Debtors (as defined herein) (such date,
the "New Debtors Bar Date"). Because the Court was closed on August 14 and
August 15, 2003 as a result of the blackout that affected the Northeast region
of the United States, the New Debtors' Bar Date was changed to August 18, 2003.
The New Debtors Bar Date Order also established December 5, 2003 as the last
date by which governmental units (as defined in 11 U.S.C. ss. 101(27)) may file
proofs of claim against the New Debtors. The Debtors sent notice of the New
Debtors' Bar Date to all known creditors of the New Debtors and published notice
of the same in THE WALL STREET JOURNAL and USA TODAY.
In accordance with the General Bar Date Order, which granted the
Debtors authority to amend the Original Debtors' schedules that were originally
filed on or about June 14, 2002 (Docket No. 590) (the "Original Schedules"), the
Debtors have filed several amendments to the Original Schedules. On November 22,
2002, the Original Debtors filed their first amendment to the Original Schedules
(Docket No. 1107) (the "First Amended Schedules"). The last date for filing
proofs of claim in respect of claims for the first time scheduled as contingent,
unliquidated or disputed on the First Amended Schedules was December 27, 2002
(the "First Amended Bar Date"). On December 11, 2002, the Original Debtors filed
their second amendment to the Original Schedules (Docket No. 1146) (the "Second
Amended Schedules"). The last date for filing proofs of claim in respect of
claims for the first time scheduled as contingent, unliquidated or disputed on
the Second Amended Schedules was January 13, 2003 (the "Second Amended Bar
Date"). On August 24 and 25, 2003, the Original Debtors filed the third
amendments to their Original Schedules (Docket Nos. 1886-2006 and 2186) (the
"Third Amended Schedules"). The last date for filing proofs of claim in respect
of claims scheduled as contingent, unliquidated or disputed on the Third Amended
Schedules is October 6, 2003 (the "Third Amended Bar Date"). Finally, on June
22, 2003, the New Debtors filed schedules (the "New Debtor Schedules"). August
18, 2003 was the New Debtors Bar Date and December 5, 2003 is the New Debtors
Government Bar Date, as defined in the New Debtors Bar Date Order.
A chart describing the various bar dates follows:
-----------------------------------------------------------------------
Description of Bar Date Applicable Bar Date
-----------------------------------------------------------------------
General Bar Date August 9, 2002
-----------------------------------------------------------------------
Government Bar Date September 30, 2002
-----------------------------------------------------------------------
Bank of America Bar Date September 30, 2002
-----------------------------------------------------------------------
Employee Bar Date November 15, 2002
-----------------------------------------------------------------------
First Amended Bar Date December 27, 2002
-----------------------------------------------------------------------
IRS Bar Date December 31, 2002
-----------------------------------------------------------------------
Second Amended Bar Date January 13, 2003
-----------------------------------------------------------------------
Covanta Concerts Bar Date June 27, 2003
-----------------------------------------------------------------------
Convertible Debentures Bar Date June 27, 2003
-----------------------------------------------------------------------
New Debtors Bar Date August 18, 2003
-----------------------------------------------------------------------
Third Amended Bar Date October 6, 2003
-----------------------------------------------------------------------
New Debtors Government Bar Date December 5, 2003
-----------------------------------------------------------------------
In total, approximately 4,500 proofs of claim in the aggregate amount
of approximately $13 billion were filed. The Debtors believe that many of the
proofs of claim are invalid, duplicative, untimely, inaccurate or otherwise
objectionable. The Debtors are in the process of reviewing such claims, and have
filed or are preparing omnibus objections to many of the proofs of claim.
Pursuant to the General Bar Date Order, and consistent with 11 U.S.C. ss.
502(b)(9), any proofs of claim filed after the applicable bar date shall be
disallowed as untimely unless and until such proofs of claim are deemed timely
filed by the Court after notice and hearing.
Dated: October 3, 2003
COVANTA ENERGY CORPORATION AND ITS SUBSIDIARIES
THAT ARE ALSO DEBTORS AND DEBTORS IN POSSESSION
IN THE CHAPTER 11 CASES
Debtors and Debtors in Possession
By: /s/ Scott G. Mackin
---------------------------------------------
President and Chief Executive Officer Covanta
Energy Corporation and President of Ogden New
York Services, Inc. and authorized signatory
for each of the other Debtors