0000922423-05-000342.txt : 20120725
0000922423-05-000342.hdr.sgml : 20120725
20050215192542
ACCESSION NUMBER: 0000922423-05-000342
CONFORMED SUBMISSION TYPE: SC 13D/A
PUBLIC DOCUMENT COUNT: 1
FILED AS OF DATE: 20050216
DATE AS OF CHANGE: 20050215
SUBJECT COMPANY:
COMPANY DATA:
COMPANY CONFORMED NAME: NORTHWESTERN CORP
CENTRAL INDEX KEY: 0000073088
STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931]
IRS NUMBER: 460172280
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: SC 13D/A
SEC ACT: 1934 Act
SEC FILE NUMBER: 005-36015
FILM NUMBER: 05618779
BUSINESS ADDRESS:
STREET 1: 125 S DAKOTA AVENUE
STREET 2: SUITE 1100
CITY: SIOUX
STATE: SD
ZIP: 57104
BUSINESS PHONE: 6059782908
MAIL ADDRESS:
STREET 1: 125 S DAKOTA AVENUE
STREET 2: SUITE 1100
CITY: SIOUX
STATE: SD
ZIP: 57104
FORMER COMPANY:
FORMER CONFORMED NAME: NORTHWESTERN PUBLIC SERVICE CO
DATE OF NAME CHANGE: 19920703
FILED BY:
COMPANY DATA:
COMPANY CONFORMED NAME: HARBERT DISTRESSED INVESTMENT MASTER FUND LTD
CENTRAL INDEX KEY: 0001233563
IRS NUMBER: 000000000
FILING VALUES:
FORM TYPE: SC 13D/A
BUSINESS ADDRESS:
STREET 1: C/O INTERNATIONAL FUND SERVICES
STREET 2: THIRD FL BISHOP SQUARE REDMONDS HILL
CITY: DUBLIN IRELAND
STATE: L2
ZIP: 00000
BUSINESS PHONE: 2125216972
MAIL ADDRESS:
STREET 1: C/O INTERNATIONAL FUND SERVICES
STREET 2: THIRD FL BISHOP SQUARE REDMONDS HILL
CITY: DUBLIN IRELAND
STATE: L2
ZIP: 00000
SC 13D/A
1
kl02103_sc13da2.txt
SCHEDULE 13D AMENDMENT NO.1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
----------------
SCHEDULE 13D
(Rule 13d-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT
TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO
RULE 13d-2(a)
(Amendment No. 1)
NorthWestern Corporation
----------------------------------------------------------------------
(Name of Issuer)
Common Stock, par value $0.001 per Share
----------------------------------------------------------------------
(Title of Class of Securities)
668074305
----------------------------------------------------------------------
(CUSIP Number)
Joel Piassick
555 Madison Avenue, 16th Floor
New York, New York 10022
----------------------------------------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
February 15, 2005
----------------------------------------------------------------------
(Date of Event which Requires Filing of This Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition that is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box
[ ].
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SCHEDULE 13D
AMENDMENT NO. 1
This Amendment amends the Schedule 13D filed by Harbert Distressed
Investment Master Fund, Ltd. (the "Master Fund"), HMC Distressed Investment
Offshore Manager, L.L.C., HMC Investors, L.L.C., Philip Falcone, Raymond J.
Harbert, and Michael D. Luce ( the "Reporting Persons"), dated November 12,
2004, with respect to the common stock, par value $0.001 per share, of
NorthWestern Corporation (the "Issuer"). Capitalized terms used in this
Amendment without definition have the meanings assigned in the original Schedule
13D filing.
Item 4. Purpose of Transaction.
----------------------
Item 4 of the Schedule 13D is amended by adding the following
disclosure:
On February 15, 2005, Master Fund sent a letter to the board of
directors of the Issuer, a copy of which is filed with this Amendment as Exhibit
B. Master Fund sent the letter because, as described in the letter, it believes
that the Issuer has taken actions that violate the terms of the Issuer's
bankruptcy plan of reorganization and that are prejudicial to the interests of
holders of claims against the estate of the Issuer's predecessor in bankruptcy
generally and Master Fund in particular. Master Fund also issued a press release
with the text of the letter, a copy of which is filed with this Amendment as
Exhibit C.
While sending the letter to protect their interests under the
bankruptcy plan, the Reporting Persons continue to hold the Shares for
investment purposes only.
Item 7. Material to be Filed as Exhibits.
--------------------------------
Item 7 of the Schedule 13D is amended by adding the following
exhibit.
Exhibit B: Letter, dated February 15, 2005, from Master Fund to the board of
directors of the Issuer.
Exhibit C: Press release issued by Master Fund, dated February 15, 2005
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief,
I certify that the information set forth in this statement is true, complete and
correct.
Dated: February 15, 2005
Harbert Distressed Investment Master Fund, Ltd.
By: HMC Distressed Investment Offshore Manager, L.L.C.
By: HMC Investors, L.L.C., Managing Member
By: /s/ Joel B. Piassick
----------------
Joel B. Piassick
HMC Distressed Investment Offshore Manager, L.L.C.
By: HMC Investors, L.L.C., Managing Member
By: /s/ Joel B. Piassick
--------------------
Joel B. Piassick
HMC Investors, L.L.C.
By: /s/ Joel B. Piassick
--------------------
Joel B. Piassick
/s/ Philip Falcone
--------------
Philip Falcone
/s/ Raymond J. Harbert
------------------
Raymond J. Harbert
/s/ Michael D. Luce
---------------
Michael D. Luce
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EXHIBIT B
---------
THE HARBERT DISTRESSED INVESTMENT MASTER FUND, LTD.
555 Madison Avenue, 16th Floor
New York, NY 10022
February 15, 2005
VIA FACSIMILE
-------------
Members of the Board of Directors
of NorthWestern Corporation
c/o Dr. Ernest Linn Draper, Jr.
Chairman of the Board
NorthWestern Corporation
125 S. Dakota Avenue
Sioux Falls, SD 57104-6403
Re: Failure to Adhere to the Plan of Reorganization and Objection to
Flawed Settlement with Magten Asset Management Corporation and Law
Debenture Trust Company of New York
-----------------------------------
Gentlemen:
Harbert Distressed Investment Master Fund, Ltd. ("Harbert") holds
approximately 20% of the Class 7 prepetition claims against NorthWestern
Corporation ("NorthWestern" or the "Company"), as well as approximately 20% of
the common stock and approximately 33% of the warrants of reorganized
NorthWestern. We received the latter securities by operation of the Second
Amended and Restated Plan of Reorganization (the "Plan") in exchange for
previously contracted bona fide debt of NorthWestern. We have been told by
representatives of holders of what we believe are a majority of both the Class 7
prepetition claims and the new common stock that they share the concerns
described in this letter.
In an effort to protect the interests of Class 7 creditors such as
Harbert, as well as shareholders, warrant-holders and other stakeholders in
NorthWestern as they were negotiated by the participants to the bankruptcy
proceeding and set forth in the Plan, I am writing to express Harbert's strong
objection to (i) the excessive consideration proposed to be paid in the
settlement agreement in principle that NorthWestern management, on February 9,
2005, announced it had reached with Magten Asset Management Corporation
("Magten") and Law Debenture Trust Company of New York LLC ("Law Debenture");
(ii) management's and NorthWestern's outside counsel's continued objections to
our repeated requests to add creditors to the Plan Committee created to review
settlements proposed by management, notwithstanding the lack of a role of the
Company under the Plan in constituting the Plan Committee and the ongoing
attempts by Harbert in good faith to accommodate the Company's concerns; and
(iii) the failure by the Company, after requests by Harbert first made in
December, to distribute over 375,000 common shares with a current value of more
than $10 million to their proper owners in Classes 7 and 9, and to cancel more
than 700,000 highly dilutive warrants, both of which are required by the Plan.
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We have been actively raising concerns with management and
NorthWestern's outside counsel since December regarding compliance with the
Plan. After the Company announced the settlement last week, we raised these
concerns directly with the Board Chairman in an effort to resolve them before
more events transpired. Yesterday our counsel received a letter from Paul
Hastings, the Company's outside counsel, acknowledging our concerns and agreeing
to further discuss them, and representing that no further action will be taken
until we meet again. However, even this letter of yesterday raises yet another
new objection to our serving on the Plan Committee, which we have considered and
is without merit. Given the previous assurances we have received from Paul
Hastings and the actions taken by management contrary to those assurances, and
management's recent announcement of the Magten settlement without properly
consulting with the Board or the Plan Committee, we believe a clearer statement
of the position of the Board itself on these issues, which lie at the heart of
implementing the Plan as approved by the Bankruptcy Court, is merited without
further delay.
As discussed below, we believe that the proposed settlement violates
the plain terms of NorthWestern's confirmed Plan, is contrary to the interests
of NorthWestern and its shareholders, and is the product of a negotiation and
approval process that appears to have been impaired by the existence of
conflicts of interest on the part of management and Paul Hastings and a
premature announcement only because of an unauthorized "leak" by management. We
ask that the Board (i) promptly announce its disapproval of the proposed
settlement; (ii) instruct management to comply promptly with the Company's
obligations under the Plan with respect to distributing or canceling certain of
the common stock and warrants proposed to be distributed in connection with this
settlement; and (iii) take steps to protect against the potential future
recurrence of the procedural flaws that appear to have contributed to
management's execution and announcement of this proposed settlement without
appropriate Board consultation and while raising unwarranted objections to our
role on the Plan Committee.
The proposed settlement appears to be contrary to the interests of NorthWestern
and its shareholders, and its negotiation and approval appear to have been
tainted by conflicts of interest.
-------------------------------------------------------------------------
Harbert was active in the reorganization proceedings of NorthWestern
and in negotiating for rights and value under the Plan that will be impaired by
the Company's actions to date which are the subject of this letter. As of
October 2004, Harbert was in a position to assess the low likelihood of a
recovery by Magten under its litigation. We understand that little has changed
regarding the facts of that litigation since the Company's Plan was confirmed in
October. Moreover, we received assurances in December from Gary Drook, the
Company's CEO, and in December and January from Paul Hastings that the
litigation continues to be without merit. While we understand the desire to end
the distraction and legal fees associated with litigation, the amount of
consideration proposed in this settlement cannot be justified.
As described in NorthWestern's February 9, 2005 press release, the
proposed settlement calls for NorthWestern to distribute to Law Debenture, on
behalf of Magten and the other non-accepting Class 8(b) QUIPS holders, (i)
approximately 870,000 shares of NorthWestern common stock that under the Plan's
express terms were set aside in reserves established for Class 9 pending
litigation claims, which the press release inaccurately characterizes as "worth
$17.4 million" and which in fact are worth more than $24 million, and (ii)
382,732 shares of NorthWestern common stock and 710,449 warrants not distributed
to Class 8(b) claimants because those holders had elected to litigate rather
than settle.
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The proposed settlement appears, on its face, to be contrary to the
interests of NorthWestern, its shareholders, warrant-holders, and pre-petition
creditors. As noted above, the settlement calls for NorthWestern to distribute
to Law Debenture approximately 1.25 million shares of NorthWestern common stock,
as well as more than 710,000 warrants. Using yesterday's closing price of
$28.05, the common stock to be distributed has a total value of approximately
$35 million. In addition, the value of the warrants to be distributed using
yesterday's closing price of about $5 is in excess of $3.5 million, for a total
settlement value of more than $38 million. By contrast, Magten is seeking to
recover only approximately $50 million -- i.e., the full amount of the
pre-petition debt (plus accrued interest) held by Magten and the other rejecting
plaintiffs. In other words, the proposed settlement would pay Magten and the
other plaintiffs a 75% recovery on their claim. A payment of this magnitude
appears to be grossly excessive, particularly in light of what we understand to
be Magten's very low chance of prevailing in its litigation. NorthWestern's
chief executive officer, Gary Drook, informed me, during a December 21, 2004
meeting, that he understands Magten's chances of prevailing to be very low, a
view that Paul Hastings confirmed with us last month. Furthermore, neither Mr.
Drook nor Paul Hastings communicated any reason to believe a settlement was
required on an expedited basis. Indeed, this lack of urgency in negotiating a
settlement was the principal reason Harbert did not press the Company more
forcefully until now on adding the appropriate members to the Plan Committee
established to review settlements.
Finally, the disparity between the high amount of the settlement and
the lack of merit of the litigation, as communicated by comments by the Company
in public disclosure and by the creditors in bankruptcy court, will make it more
difficult for the Company to negotiate reasonable settlements with the other
litigation claimants that remain. The signal sent by this settlement, if not
promptly rejected by the Board, is that the Company is willing to settle
litigation at almost any cost.
Why did management announce a proposed settlement that appears to be
so excessive in amount before properly vetting it with the Board and Plan
Committee? We are concerned that the answer may rest, at least, in part, on the
conflicts of interest that appear to have marred the process by which the
settlement was negotiated and approved. These conflicts arose at several levels.
First, it appears that management's interests in negotiating the settlement may
not have been properly aligned with those of the Company, its shareholders
generally and its creditors like Harbert whose rights and value were established
under the Plan and are also now shareholders. We understand that at least one
member of management, Michael Hanson, is a defendant in litigation brought by
Magten, which the proposed settlement would have resolved. In addition,
management may have been unduly influenced, in its settlement deliberations, by
a desire to avoid the burden on management time and resources that a
continuation of the Magten litigation might have entailed. Since the shares
being proposed to be paid in the Magten litigation are already outstanding and
are either held in reserve under the Plan for litigation or distributable to
Class 7 and 9 creditors, payment of even a large amount of such shares is not
dilutive to shares owned by management but is highly dilutive to most of the
Company's shareholders. Finally, we understand that the Company's counsel, the
Paul Hastings law firm, suffers from a conflict of its own, in that at least one
of the suits that Magten is prosecuting and that the proposed settlement would
have resolved names Paul Hastings as a defendant. As a defendant in the Magten
litigation, and a direct beneficiary of any settlement, Paul Hastings is not in
a position to evaluate and advise the Company objectively as to the merits of
any proposed settlement of that litigation.
6 of 10
The proposed settlement violates the express terms
of the Company's confirmed Plan of Reorganization
-------------------------------------------------
Section 4.8 (b)(ii) of the Plan gives each member of Class 8(b) the
right to elect either a settlement option, denominated "Option 1," or a
litigation option, denominated "Option 2." Each holder who elects Option 1 is to
receive its pro rata share of 1.4% of the new common stock of NorthWestern to be
issued and outstanding on the Effective Date (prior to dilution), plus its pro
rata share of warrants exercisable for an additional 2.3% of new common stock.
Each holder who elects Option 2 is to receive its pro rata share of any
recoveries eventually obtained upon resolution of the so-called QUIPS
Litigation. As to each holder in Class 8(b) who chooses Option 2, Section
4.8(b)(ii) goes on to provide that
any New Common Stock which otherwise would have been distributable
to such holder if such holder had chosen Option 1, shall be
distributed, pro rata to Class 7 and Class 9, and the Warrants which
otherwise would have been distributable will be cancelled.
The proposed settlement would contravene NorthWestern's express
obligations under Section 4.8(b)(ii) of the Plan -- specifically, its
obligations (i) to distribute to members of Class 7 and Class 9 the new common
stock that would have been distributed to holders electing Option 2 had they
chosen Option 1, and (ii) to cancel the warrants that would have been
distributed to such holders had they chosen Option 1. There is no basis in the
Plan for NorthWestern's continued failure to distribute these shares and cancel
these warrants.
The Board of Directors should disapprove the proposed settlement, instruct
management to comply with the Company's obligations under the Plan, and take
steps to cure the flaws that appear to have tainted the settlement process
-----------------------------------------------------------------------------
We are confident that, having been apprised of the flaws that mar
both the proposed settlement and the process that led management to approve it,
the Board of Directors will take prompt and effective corrective action. As a
creditor entitled under the Plan to rights and value established thereunder, we
ask that the Board take the following steps, in addition to whatever other steps
it may deem appropriate:
1. The Board should disapprove the proposed Magten settlement, and
should instruct management not to take any further steps to consummate the
settlement or to seek Bankruptcy Court approval for it.
2. The Board should instruct management to cause the Company
promptly to comply with its obligations under Section 4.8(b)(ii) of the Plan --
specifically, its obligations (i) to distribute to members of Class 7 and Class
9 the new common stock that would have been distributed to Class 8(b) had it not
rejected the Plan, and (ii) to cancel the warrants that would have been
distributed to such holders had they not rejected the Plan.
3. The Board should take proper steps to protect against the
potential future recurrence of the flaws that appeared to have marred the
negotiation and approval of the proposed Magten settlement. For example:
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(a) In instances where (as appears to have been the case here)
members of management suffer from a conflict of interest, the Board should
ensure that the settlement is negotiated by members of the Board or management
who are free of any such conflict.
(b) In instances where (as appears to have been the case here) the
Company's counsel suffers from a conflict of interest, the Company should retain
special counsel to advice it in connection with settlement negotiations and to
advise the Board in connection with its review and approval of the settlement.
(c) We understand from the Company's outside counsel that, in the
present case, the Company was compelled to issue a press release disclosing the
terms of the proposed Magten settlement, prior to Board approval, in response to
an unauthorized "leak" by the Company concerning that settlement. We urge the
Board to investigate the source of this leak and to take proper steps to prevent
future leaks of the terms of other settlements. In the event (which we trust is
very unlikely) that the terms of any future proposed settlement were to be
leaked before the Board had reviewed and approved it, any press release issued
by the Company should be drafted so as to minimize public misperceptions
concerning the Company's level of support for the settlement in question.
Specifically, any such press release should disclose that the settlement in
question is subject to the Board's review and approval and has not yet been
approved; that the settlement is also subject to review and potential objection
by the Plan Committee; and that the press release was occasioned by an
inadvertent disclosure, to which the Company felt compelled to respond.
(d) Pursuant to Section 7.9 of the Plan, the Company is required to
submit material proposed settlements to the Plan Committee for its review. For
the past several months, Harbert -- as the Company's largest shareholder and one
of the largest holders of its pre-petition debt -- has been requesting
appointment to that Committee of itself and other creditors (most of which are
also now shareholders) as contemplated by the Plan. This committee at present
has only one member, Wilmington Trust. We understand that that Committee's one
member has the power to appoint additional members of its choosing and is
amenable to appointing Harbert. The Company and its counsel, however, has
delayed Harbert's appointment by interposing a series of objections, which in
our view lack merit. It is imperative that this process be completed without
further delay, so that Harbert and/or one or more other appropriate creditor
representatives can be added to the Plan Committee before any further material
settlements are proposed.
We appreciate the Board's consideration of these issues and urge the
Board to take prompt and appropriate action.
Sincerely,
Philip Falcone
Cc: Jesse Hibbard, HBK Investments, LP
Robert Platek, MSD Capital
Kevin Cavanaugh, Greenwich Capital
Robert Fraley, Fortress Investment
Robert Fields, MFP Investors LLC
8 of 10
Mike Embler, Franklin Mutual Advisors
Peter Faulkner, PSAM
John Barrett, Avenue Capital
Brett Haire, Brave Asset Management
Sandra Ortiz, Wilmington Trust
Alan Kornberg, Paul Weiss
Phil Bentley, Kramer Levin
Tom Knapp, NorthWestern General Counsel
9 of 10
EXHIBIT C
NEWS RELEASE
Contact: Howard Kagan
212-508-3727
FOR IMMEDIATE RELEASE
HARBERT MASTER FUND SENDS LETTER TO
BOARD OF DIRECTORS OF NORTHWESTERN CORPORATION
NEW YORK, NEW YORK, February 15, 2005/PR Newswire/-- Harbert Distressed
Investment Master Fund, Ltd. today delivered the following letter to the Board
of Directors of NorthWestern Corporation (NASDAQ:NWEC). Harbert sent the letter
because it believes that NorthWestern has taken actions that violate the terms
of the recently consummated NorthWestern bankruptcy reorganization plan and that
are prejudicial to the interests of holders of claims against the bankruptcy
estate, including Harbert.
Harbert Distressed Investment Master Fund, Ltd. is focused on high-yield
(special situation) and distressed securities on both the long and short sides,
including debt and equity investments in turnarounds, restructurings,
liquidations, event driven situations and inter-capital structure arbitrage.
[Text of Letter]
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