Mobile Energy Services generates electricity and provides steam to both Kimberly-Clark and Sappi Fine Paper North Americ.
Mobile Energy Services' plan will whittle down the company's bond debt in exchange for giving ownership in the company to the bondholders. When the company filed for bankruptcy, it had more than $320 million in bonds outstanding, according to an article with the Mobile Register.
David Gallaspy, president of Mobile Energy Services, said the company could exit bankruptcy in three to six months. Mobile Energy Services filed for bankruptcy after K-C announced plans to close the 59-year-old mill in 1998. The paper maker said it could get better, cheaper pulp from South America. The shutdown took away Mobile Energy Services' major customer, as well as the source of 85 percent of the wood waste it was burning for fuel.
Mobile Energy Services dragged Kimberly-Clark into court, saying the paper maker hadn't made a reasonable effort to sell the mill. A sale would have allowed Mobile Energy Services to keep operating at its previous level. That argument was settled in January, with Kimberly-Clark paying $53 million to terminate its contract and giving Mobile Energy Services an option to buy the mill. In return, the energy company promised to sell electricity and steam to Kimberly-Clark at market rates, cheaper than under the old deal. Southern Co. also promised to build a new cogeneration plant at the site.
Gallaspy said the debt cut will allow his company to escape from bankruptcy using current revenues from Kimberly-Clark and Sappi. He said the company is making enough money to reorganize without selling the pulp mill and before the startup of the cogeneration plant.
He said Southern Co. would lose all of its ownership stake in Mobile Energy Services under the reorganization plan to the bondholders, who could hold onto their new shares or sell the company. Gallaspy also said it is likely that Southern no longer will operate the energy company's facilities.

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