Hero or villain of Plant Vogtle could be billionaire pioneer of high risk junk bonds

By David Pendered

The hero or villain of the effort to save Plant Vogtle could prove to be the head of a private equity firm who pioneered junk bonds and was nearly scuttled in 1990. Georgia Power protested terms of the loan deal, but a New York judge provided some protection and last week ordered that the entire $800 million in loan funds should flow.

Leon Black

Leon Black got his start with Michael Milken, the junk bond wizard at the famed but failed Drexel Burnham Lambert. Black survived the 1990 downfall and formed a firm with an affiliate now providing $800 million to Westinghouse to keep it open while the bankruptcy involving Plant Vogtle is resolved. Credit: Reuters via nytimes.com

The drama stems from the bankruptcy filing of Westinghouse Electrical. The company was building the power plant when Westinghouse buckled under cost overruns at Vogle and a plant in South Carolina.

Enter Leon Black and Apollo Global Management.

Black founded the company with two colleagues from the famed Drexel Burnham Lambert. DBL was forced into bankruptcy in 1990 when the high yield “junk bonds” it pioneered collapsed, according to a report in nytimes.com.

Black remains a high flier in the worlds of finance, art and philanthropy. Forbes.com reports Black’s net worth at $5.9 billion.

In 2016, cnbc.com reported Black was the buyer of a statue by Pablo Picasso, priced at $106 million, that was embroiled in an ownership controversy. The value of his art collection is estimated at $2 billion as of Wednesday, according to forbes.com. Forbes also reported that Black and his wife, a melanoma survivor, have donated millions of dollars to the Melanoma Research Center.

Elton John performed at Black’s 60th birthday party in 2011 at Black’s oceanfront home on Long Island’s Southhampton. According to the report by nytimes.com:

picasso

Picasso’s ‘Bust of a Woman,’ 1931, was purchased by Leon Black in 2016 at a price of $106 million, according to cnbc.com. Credit: 2016 Estate of Pablo Picasso/Artists Rights Society, New York via cnbc.com

  • “After a buffet dinner featuring a seared foie gras station, some 200 guests took in a show by Elton John. The pop music legend, who closed with ‘Crocodile Rock,’ was paid at least $1 million for the hour-and-a-half performance.”

AGM is not directly linked to the $800 million loan to Westinghouse. The money is to keep the company’s door open while the bankruptcy process unfolds.

The loan is being provided by Apollo Investment Corp. and its affiliates, according to court filings. The company reported in its annual 10-K report to the Securities and Exchange Commission that it is an affiliate of AGM.

The term that prickled Georgia Power involved its intellectual property related to Plant Vogtle. The information relates to construction and operation of what was to be the world’s most advanced commercial nuclear power plant, according to Westinghouse’s description of the technology.

This technology was included as collateral for the loan, according to an objection Georgia Power filed in U.S. Bankruptcy Court in New York’s Southern District:

Westinghouse Electric Co. describes the AP 1000 being built at Plant Vogtle as the, “safest and most economical nuclear power plant available in the worldwide commercial marketplace.” File/Credit: theconstrutionindex.co.uk

Georgia Power objected that its intellectual property, the technology regarding the nuclear plant, could be sold to any buyer by Apollo, leaving the company with no recourse or ownership interest of what had been propriety information:

  • “[T]he Owners must continue to have access to the Intellectual Property, both to complete construction and safely operate the nuclear plant. Assuring that access is beneficial to these estates because it will minimize the risk of a shutdown of the Project, thereby minimizing the potential incurrence of wind down costs by the Debtors. If, however, the (lenders) are granted liens on the Intellectual Property, the possibility would exist that the (lenders) would later foreclose on the Intellectual Property, which could seriously disrupt or even potentially halt construction of the Project.”

The judge’s May 26 ruling clears the way for Westinghouse to access the entire $800 million from Apollo Investment Corp. and its affiliates. Apollo Investment Corp. had a market cap Wednesday of $1.39 billion, according to a report Wednesday on quotes.wsj.com.

Judge Michael Wiles

Judge Michael Wiles

Bankruptcy Judge Michael Wiles resolved the issue with an order stipulating that Georgia Power and its partners cannot license any Vogtle-related intellectual property without the lender’s permission. Likewise, the lender is to provide access and rights to the Vogtle intellectual property:

  • Lenders, “will provide the Vogtle Parties, on commercially reasonable terms and subject to the Vogtle Parties’ agreement to be bound by commercially reasonable confidentiality obligations, rights to such of the Vogtle IP as may be necessary and appropriate to construct and operate the Vogtle Project or to safely wind-down the Vogtle Project; and (3) hold such Vogtle IP in a manner such that it is commercially accessible by the Vogtle Parties….”

Wiles order was dated May 26. It was posted on the court’s docket on Wednesday.

 

David Pendered, Managing Editor, is an Atlanta journalist with more than 30 years experience reporting on the region’s urban affairs, from Atlanta City Hall to the state Capitol. Since 2008, he has written for print and digital publications, and advised on media and governmental affairs. Previously, he spent more than 26 years with The Atlanta Journal-Constitution and won awards for his coverage of schools and urban development. David graduated from North Carolina State University and was a Western Knight Center Fellow. David was born in Pennsylvania, grew up in North Carolina and is married to a fifth-generation Atlantan.

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