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previously indicated, these were the contractual premises for
termination of participation.
Although the partners terminated participation in the
project, the partnership continued its legal existence. No
partner withdrew from the partnership. The partnership’s
liabilities were unaffected. It was understood, however, that
the partners’ termination of participation would lead to an event
of default by the partnership under the loan guarantee agreement,
allowing DOE to assume control over the project.
The Partnership Defaults on the FFB Loan
After the partners declined to contribute further equity to
the partnership with respect to the DOE-guaranteed financing, the
partnership was unable to make the deferred principal, interest,
and guarantee fee payments due on August 1, 1985, under the
standstill agreement. The partnership’s failure to make these
payments constituted an event of default under the loan guarantee
agreement and the mortgage.
In August and September 1985, pursuant to the loan
guarantee agreement, DOE made payments to FFB totaling
approximately $1.57 billion. This sum represented the entire
amount of principal and interest that the partnership owed FFB
under the credit agreement and that correspondingly became due
from DOE under the loan guarantee agreement. Upon paying these
amounts due under the loan guarantee obligations, DOE became
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