BILLINGS, Mont. (AP) — Opposing sides in the bankruptcy case of a Montana power cooperative are negotiating a potential settlement after some creditors balked at a proposed reorganization plan that would keep the co-op together but repay them only a little of the money owed.
Southern Montana Electric Generation and Transmission Cooperative serves more than 11,000 customers in central and eastern Montana. It fell into bankruptcy in October 2011, after getting locked into unfavorable contracts and building a gas power plant near Great Falls that has sat idle.
The co-op reached an earlier settlement in March with the banks that funded the gas plant. That deal calls for Southern Montana to stay together — with customer power rates held at current levels — and for the banks to be repaid $22 million out of $85 million in loans for the Highwood gas plant.
PPL Energy and some other parties in the case filed objections with the court last week saying that liquidating the co-op is preferable. More than $390 million in claims from those creditors are classified as unsecured, meaning there is no collateral such as the gas plant to ensure they get repaid.
Under the proposed reorganization, the unsecured creditors together would receive a maximum of $1 million.
Harold Dye, a Missoula attorney representing the unsecured creditors, said the ongoing talks offer an opportunity to reach a more acceptable resolution.
"I've never seen a company get buried this deeply in debt," Dye said. "There were a lot of people that said just bring down the house because they thought they were getting nothing. But that's not the direction we're going now. Progress is being made."
A confirmation hearing needed for court approval of the reorganization plan was delayed from Monday to June 13 to give the negotiations a chance.
Southern Montana general manager Scott Sweeney confirmed that negotiations are taking place but declined to get into specifics.
A prior proposal from ousted bankruptcy trustee Lee Allen Freeman would have kept the co-op together for 12 years and driven up electricity rates to pay off the loans used to build Highwood.