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Meet the lenders

01 December 2002

Distressed asset funds are the latest players to circle the US power industry. But will a new aggressive breed of debt buyers be prepared to let banks complete their restructuring plans? By Tom Nelthorpe.

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Distressed asset funds, or vulture funds to their enemies, will have a significant role in the restructuring of the overleveraged US electricity industry. Indeed, they have been factored into a number of scenarios by which banks forced into taking the keys to power stations can get out of the power sector. But there are signs that some of the more aggressive players are looking at taking debt positions in troubled generating facilities, and potentially dashing hopes of a tidy restructuring. The background is one now familiar to lenders - sponsors without access to capital markets and with near-worthless credit ratings have been unable to inject promised equity into large construction ventures. The two most high-profile examples are NRG Energy and PG&E's National Energy Group (NEG). NRG is in talks with banks regarding a series of defaults on debt and equity obligations, including $1 billion to round out a construction revolving credit...

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