Sep. 22--Alliant Energy Corp.'s past investments in Brazilian electricity ventures, which tanked and were sold at a loss several years ago, are still affecting the company's bottom line.

Alliant is offering to buy back 5.9 million senior notes -- a form of high-priority corporate debt -- worth $402.5 million when it was obtained nearly 10 years ago to finance the purchase of the Brazilian assets. The notes are now valued by the company at one-tenth that amount.

The move comes as Alliant fights a lawsuit, scheduled for trial in U.S. District Court in Madison in February, alleging it violated terms of the debt.

Buying back the notes could result in a charge of $125 million, or $1.13 per share, on Alliant's third-quarter earnings, the company said in a recent filing with federal regulators.

But if Alliant were to lose the federal lawsuit, the pre-tax loss could be nearly three times that much, or $364.2 million, and other financing deals involving utility subsidiaries Wisconsin Power & Light and Interstate Power & Light could be jeopardized, as well, according to Alliant's quarterly earnings statement last June.

Alliant spokesman Rob Crain declined to comment on any issue involving the lawsuit.

Alliant Energy Resources, a subsidiary that once held utility-related assets around the U.S. and the world, obtained the $402.5 million loan in 2000 with the financing managed by Firstar Bank, which later merged with U.S. Bank.

The notes are not due until February 2030, but the U.S. Bank National Association claims that because Alliant sold its holdings to companies outside the U.S. that did not take on the accompanying debt, it violated terms of the arrangement.

U.S. Bank filed a notice of default in September 2008 and took the case to federal court in Minnesota. The lawsuit was transferred to U.S. District Court in Madison last January.

Alliant sold $1.2 billion in electricity-related assets in Brazil, China, Australia, New Zealand and Mexico starting in 2003, after the company's high level of debt and poor performance of some of the assets drew sharp criticism from shareholders.

The company also sold holdings in U.S. ventures such as low-income housing projects, Whiting Petroleum and McLeodUSA. Alliant held a large stake in McLeod, a Cedar Rapids telecom company, and used some of the stock as collateral to obtain the $402.5 million in financing for foreign acquisitions, primarily in Brazil. In 2002, though, McLeod filed for Chapter 11 bankruptcy protection and its stock sank from more than $20 to less than 20 cents a share.

For the current buyback offer, Citibank and J.P. Morgan Chase Bank have agreed to loan Alliant up to $200 million and Alliant will use cash on hand. The loan will have to be repaid by Dec. 31, according to documents filed with the U.S. Securities and Exchange Commission. The interest rate was not disclosed.

Alliant said it does not believe it has defaulted on the $402.5 million loan but said it is offering to buy back the 5.9 million notes, sold at $67.75 each. Those who turn in their notes by Monday will get $40 each; those who surrender the notes between Tuesday and Oct. 15 will get $38 each.

That's a lot more than the company values the notes, which are carried on Alliant's books at a rate of $6.60 each, or a total of $39 million, because of the sharp drop in value of the former McLeod stock. (McLeod is now part of PAETEC, a publicly traded holding company based in Fairport, N.Y.)

A lawsuit involving the same issue, accusing officers and directors of Alliant of breaching their fiduciary duties by approving the asset sales in violation of the terms of the loan, was filed in February by a shareholder of the company in Dane County Circuit Court. Alliant is fighting that lawsuit, as well.

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