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Final Debt-Restructuring Proposals
On May 28, 1986, ANRC and Transco Energy submitted to DOE a
formal restructuring proposal. This proposal contemplated
restructuring the DOE debt and providing $210 million of capital
infusions to fund continued project operations, contingent upon
receipt of a favorable IRS ruling that no recapture of taxable
credits or recognition of taxable gain had yet occurred.
Although Pacific did not join this formal submission, it was
aware of it and contemplated continuing participation in the
project if a restructuring agreement could be reached and the IRS
provided a favorable ruling.
By letter dated June 9, 1986, DOE rejected the May 28, 1986,
proposal. DOE insisted that any proposal must include a
“substantial cash payment” to DOE toward partial retirement of
the $1.57 billion debt, “such that the payment outweighs the tax
benefits subject to recapture if the Project is acquired by an
outside party”.
An internal Transco memorandum dated June 20, 1986, from a
lawyer in Transco’s legal office, reported communications that
day with Mr. S. Kinnie Smith, Jr., ANR’s vice chairman and legal
counsel, advising Mr. Smith that Transco did not see a
“significant reason” to pursue an appeal of the foreclosure order
and did not wish to “dilute” Transco’s appeal on gas contract
issues by “interjecting rather weak arguments relating to
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