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The Southern Montana Electric Generation and Transmission Cooperative and its noteholders have reached an agreement to settle disputes in the co-op’s long and complicated bankruptcy.

In a report to the court filed late afternoon Monday, Southern’s attorney, Malcolm Goodrich of Billings, said Southern and its noteholders, including Prudential Insurance Company of America and several other lenders, have “mediated to agreement their various disputes and matters.”

Terms of the agreement remain confidential until it is signed, a task that could be finished by the end of the week, Goodrich said.

The parties “continue to refine their agreement in writing, the terms of which are complex and which have required substantial reflection and further discussion by all parties to ensure that they are completed accurately and appropriately,” Goodrich said in his report.

Once the agreement is approved by parties, it will go before the court and other parties for review, he said.

Southern “believes that this agreement will allow this case to move forward to a conclusion in a reasonably prompt fashion,” Goodrich said.

Negotiations with two other creditors, PPL Energy Plus and Energy West, have been deferred until mediation with the noteholders is complete, he added.

Southern, its member rural cooperatives and its noteholders have been working with a mediator since January to try to settle the dispute. Southern is a wholesale power co-op that supplies electricity to about 11,300 members of four rural co-ops in central and southeastern Montana. The rural co-ops include Beartooth, Fergus, Mid-Yellowstone and Tongue River.

The Billings-based Southern co-op filed for bankruptcy reorganization in October 2011 after it contracted for more power than it would use and had to sell excess power at a loss in the market.

In addition, Southern had borrowed $85 million to build the first phase of the Highwood Generating Station, a seldom used, 46-megawatt natural gas powered plant outside of Great Falls.

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Prudential and other lenders are Southern’s biggest secured creditors and have objected to members’ liquidation plan. The noteholders also filed their own competing plan to reorganize Southern.

In a related Southern matter on Tuesday, U.S. Bankruptcy Judge Ralph Kirscher heard testimony in Billings in a dispute regarding paying the final fees and costs to Southern’s former trustee, Lee Freeman, and his counsel, the firm of Horowitz and Burnett of Denver.

The Unsecured Creditors Committee has objected to the fees incurred after Freeman reached a settlement with the noteholders alleging that the he acted as advocate for the noteholders rather than working to bring all parties into an agreement. Freeman and his counsel denied the allegation.

Kirscher took the testimony under advisement and did not rule immediately.

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Federal Court, Yellowtone County Reporter

Federal court and county reporter for The Billings Gazette.