A bankruptcy judge said that Longview Power, LLC, a private-equity-backed West Virginia power plant that filed for chapter 11 protection Friday, can use its lenders' cash to fund its bankruptcy case, setting up showdown between the company and a group of contractors over disputed letters of credit, according to a Dow Jones newswire report yesterday. Judge Brendan Linehan Shannon said Tuesday at a hearing in U.S. Bankruptcy Court in Wilmington, Del., that he'd give Longview interim approval to use its lenders' cash to pay its employees and vendors over objections from a trio of contractors about the company's intention to draw on $59 million in disputed letters of credit. Contractors Siemens Energy Inc., a unit of Siemens AG, the North American arm of Norwegian construction firm Kvaerner ASA, and German engineering firm Foster Wheeler AG claim that the letters of credit were assigned to them, and that Longview is trying to circumvent the arbitration proceedings by finding a safe haven in bankruptcy court. Lawyers for Longview said that the company would likely breach cash-balance covenants with its lenders if it is unable to draw on the letters of credit. Judge Shannon said that he would approve an order that bars Longview Power from drawing down on the letters of credit absent an order of the court, and scheduled a hearing on matter for Oct. 7.
