Written by: Robert DeMarco

Optim Energy, LLC, (“Optim”) filed a voluntary petition for relief under chapter 11 of the Bankruptcy Code on February 12, 2014, in the United States Bankruptcy Court, District of Delaware [Case No. 14-10262 (BLS)]. Optim is owned by ECJV Holdings, LLC , (“ECJV”) which in turn, is owned by Cascade Investment, LLC, (“Cascade”) an investment company headquartered in Kirkland, Washington, and controlled by Bill Gates.

Optim, and its related subsidiaries (the “Debtors”), are engaged in the production of energy in Texas. The Debtors own and operate three power plants in East Texas. Two of the plants are fueled by natural gas, and the third is coal-fired. The Debtors cite to a depressed economic environment in the electric power industry – specifically, coal-fired plants – as a primary factor in the bankruptcy filing.

Optim was initially obligated to Wells Fargo in sum in excess of $712 million under a credit agreement dated June 1, 2007. Under the terms of that credit agreement, both Cascade and ECJV (collectively, the “Guarantors”) are guarantors of that obligation. In turn, the Debtors are obligated to reimburse the Guarantors for any payments made to Wells Fargo under the guarantees pursuant to a guaranty reimbursement agreement. While the Debtors are obligated to reimburse the Guarantors for any payments made to Wells Fargo under the guarantees pursuant to a guaranty reimbursement agreement, Cascade, ECJV, Wells Fargo and all the Debtors entered into a Subordination Agreement under which Cascade and ECJV, in their capacities as Guarantors under the Guarantees, agreed to subordinate all of the Guarantors’ claims against the Debtors.

Pursuant to the terms of the Guarantees, Cascade paid Wells Fargo in in full on the Petition Date. As such, the aggregate amount of the Debtors’ outstanding obligations to Cascade under the reimbursement agreement is approximately $713 million, which includes all accrued and unpaid interest and reasonable out-of-pocket charges and expenses incurred in connection with the Guarantees as of the Petition Date.

While Cascade/ECJV denied Optim any further pre-petition credit extensions, Cascade/ECJV agreed to provide limited Debtor-in-Possession financing in the hopes that Optim will be able to successfully reorganize and emerge from chapter 11.