Upper Midwest combination utility NorthWestern Corp. reached an agreement with the creditors committee of its former communications services subsidiary Netexit Inc., formerly Expanets, on a bankruptcy liquidation plan that will provide NorthWestern with an initial payment of $20 million and will set aside another $35.9 million to pay creditors with any remainder going to Northwestern.
Netexit, which essentially is the proceeds from the 2003 sale of Expanets to Avaya Inc., filed for Chapter 11 protection with the U.S. Bankruptcy Court for the District of Delaware on May 4, 2004. Its parent company emerged from bankruptcy last November, but an agreement was still pending on distribution of Netexit's funds.
Based on the terms of the settlement, NorthWestern now expects to recognize an additional pre-tax loss on discontinued operations of $8 million during the second quarter of 2005. After distributions are made to allowed unsecured, administrative and priority claims, any remaining Netexit estate funds will be paid to NorthWestern at the filing of a motion to close the bankruptcy proceeding.
"We expect the final resolution of Netexit's claims will lead to significant cash distribution to NorthWestern within the next six to nine months," said NorthWestern CEO Michael J. Hanson.
Northwestern said its amended and restated plan of reorganization and disclosure statement will be finalized and filed with the U.S. Bankruptcy Court for the District of Delaware in the next several weeks incorporating the terms of the settlement reached during the mediation.
According to the agreement in principle, Netexit's creditors committee will support the amended and restated plan and disclosure statement in a solicitation letter urging approval of the plan by Netexit's creditors. If approved, cash distributions could be made to all unsecured creditors sometime in the fourth quarter of 2005.
NorthWestern Energy serves more than 617,000 utility customers in Montana, South Dakota and Nebraska, including 368,200 electric and 248,900 natural gas customers.
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