Exclusive: Baupost expected to make quick profit in Westinghouse bankruptcy - sources

(Reuters) - Hedge funds led by the Baupost Group LLC are poised to score a $170 million profit in less than three months from a bet tied to Toshiba Corp's bankrupt nuclear unit Westinghouse Electric Corp, according to three people familiar with the matter.
 
Baupost and GSO Capital Partners LP, the credit arm of private equity firm Blackstone Group LP, in September bought at a discount claims South Carolina utilities had against Toshiba stemming from nuclear projects Westinghouse failed to finish. The funds expected to be repaid over five years.
 
But Toshiba on Tuesday secured roughly $5 billion in financing, which the Japanese company has said it will use to immediately repay settlements with utilities in South Carolina and Georgia that are stuck with unfinished nuclear power plants.
 
The shortened time frame for the repayments will boost the expected returns of the group of hedge funds, the sources said. All told, the funds will reap roughly $170 million from the repayment, a roughly 9 percent gain, the sources said.
 
The funds had bought the $2.2 billion in claims from the South Carolina utilities, SCANA Corp and state-owned Santee Cooper, for 91.5 cents on the dollar.
 
Reuters reported in October that the Baupost Group had acquired the biggest portion of the settlement, with GSO participating. It could not be determined how much each fund would reap.
 
GSO, Baupost and Westinghouse declined to comment.
 
For Baupost, the windfall comes as welcome news for the $31 billion hedge fund at the tail end of a year where its returns are in the low single digits.
 
With the deal in place, Toshiba, which has been rocked by accounting scandals as well as the financial demise of Westinghouse, is looking to further sever ties with its subsidiary, now up for sale in bankruptcy.
 
It plans to demand reimbursement from Westinghouse for the payments to the utilities, and then sell the right to be repaid by the nuclear business.
 
 
 
UTILITIES' EXPENSE
 
By buying the settlement this fall, the hedge funds had bet that Toshiba would stay solvent until it completed the payments in 2022.
 
The funds' profits come at the expense of SCANA and Santee Cooper, the utilities that own the failed V.C. Summer project in South Carolina, which lost the $170 million by selling the claims at a discount.
 
"It will be an issue with the regulators in terms of the prudence of their decision," said Todd Shipman, a credit analyst at Standard & Poor's Global Ratings, of SCANA. "It will be up to (SCANA) to lay out their case (about) why they did what they did and when."
 
The utilities have said they sold the settlement to mitigate the risk the Japanese company would not complete the payments.
 
Along with a parallel Westinghouse nuclear plant in Georgia, the two projects were hailed as the start of U.S. nuclear renaissance.
 
But after years of delays and billions of dollars of cost overruns at V.C. Summer and the Vogtle project in Georgia, Westinghouse filed for Chapter 11.
 
After spending $9 billion on construction, SCANA and Santee Cooper abandoned the South Carolina project in July, saying it no longer made economic sense.
 
A SCANA spokeswoman said the company was not privy to Toshiba's business discussions when it sold the settlement, and the company wanted to ensure it had funds for the benefit of its customers.
 
Georgia Power, a unit of Southern Co that is leading the Vogtle project, held onto its settlement. On Tuesday, it said that Toshiba would pay the remainder of its $3.68 billion guarantee settlement by Dec. 15. Those payments were originally agreed to run through 2021.
 
Georgia Power has said it intends to complete the Vogtle project.
 
Shoot

Trending News

Naspers and CPPIB back Byju's, valuation jumps to $3.6 billion

Small sellers on Amazon, Flipkart seek PMO help to safeguard their interests

RBI seeks opinion of Indian govt & NPCI on WhatsApp's payment approval delay

Google+ to now shut down in April after finding a new privacy bug that affected 52.5M users

Indian govt likely to meet FY19 digital payments target

Obopay partners with Federal Bank & Mastercard to launch its own prepaid card for corporates

UrbanClap facilitates ESOP sale for upto Rs 18 crore

Walmart to tap Flipkart's tech expertise

Snapdeal claims to have added 50,000 sellers in last 12 months

Amazon targets airports for checkout-free store expansion

PayU India’s valuation estimated at $2.5 billion: Citi report

Amazon India & Flipkart are on similar run rate of $11.2B: Barclays

Tencent Music presses play on $1.2 billion U.S. IPO

Instagram Shopping may launch in India in 2019: Report

PhonePe users can now directly book IRCTC train tickets on the app

Facebook opens monetisation features for Indian content creators

UrbanClap raises $50M from Steadview Capital & Vy Capital

Xiaomi India nears Rs 23,000 cr in revenue within 4 years of operations

Paytm's unlisted owner One97 tops ₹1 lakh crore in valuation

Amazon may buy out Kishore Biyani's Future Group in new business deal

With $1.8B, Bessemer looks to make bets across fintech, healthcare technology & SaaS

Agritech startups Sabziwala and LivLush merge their business under new entity Kamatan

Avail Finance lands $17.2M from Matrix Partners & Ola, Freecharge and Flipkart founders

RBI suggests tax sops, self-regulation to build fintech space

Swiggy hires new CEO for its Access Service, gets new CFO

Logistics company Delhivery registers 44% increase in FY17 revenues

WeWork to acquire one of the oldest social networks, Meetup

Qualcomm rejects Broadcom's $103 billion offer

EasyRewardz gets $2 million Series-A funding

'Anemic' iPhone 8 demand drags Apple shares lower

Lending platform Lenden Club gets Rs 3.5cr in Equity Investment

On festive sales, Flipkart says 65% clients from Tier-II cities