Morgan Stanley Scores Lead For Orion N.Y. Acquisition Loan


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This article appears courtesy of Institutional Investor
Source: Power Finance & Risk
Mark DeCambre

Morgan Stanley has won the lead slot to arrange the non-recourse debt bankrolling Madison Dearborn and US Power Generating's $975 million bid to purchase Orion Power New York from Reliant Resources. Morgan could aim to structure loans in the neighborhood of $600-800 million, sources say, but the size and exact character of the package is still to be hammered out. News of the duo's winning bid for the assets was first revealed Sept. 30 on PFR's Web site (

Pending New York state as well as federal regulatory approval, syndication of the debt most likely will kick off sometime in the first quarter prior to the expected finalization of the transfer, says one official close to the deal.

Morgan Stanley scored the lead nod because it inked a PPA with the purchasers, which has it buying about 1.1 GW of capacity over the next two years. Additional details about the PPA could not be learned.

An official at Morgan Stanley declined to comment or be identified. Jacob Worenklien, ceo at US Power Generating in New York, also declined comment. Calls to officials at Reliant were not returned.

Other banks expected to be included as co-arrangers in the deal are BNP Paribas, Goldman Sachs and Merrill Lynch. The roles are still being worked out. Early in auction, each of those firms separately offered to bankroll the entire deal, one official notes, a fact that gave them an edge when US Power Gen and Madison was selecting, one observer says.

Although still in its formative stages, the debt package is expected to take on a two-lien structure, says one official. The total size of the debt could also fluctuate as the investors determine precisely how much equity should be put in play. One tracker of the deal speculated that US Power Gen and Madison might aim to bag as much as $900 million in bank funding, but an official, who has spoken with execs at the buying entities suggests the parties do not want to over-lever the assets.

Reliant paid down a $350 million loan related in its Orion Power New York facilities, in the summer.

The generation fleet in New York includes the 1.2 GW Astoria complex as well as a 281 MW gas-fired plant in Narrows and a 549 MW facility in Gowanus.