Joel R. Glucksman
Partner
201-896-7095 jglucksman@sh-law.comFirm Insights
Energy Future Holdings Corp. closer to bankruptcy deal
Author: Joel R. Glucksman
Date: April 8, 2014
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Energy Future Holdings Corp. is closing in on a deal that will allow it to speed up its planned bankruptcy restructuring, according to Bloomberg. Six years ago, the company was bought out in a historic $48 billion leveraged buyout, which left it with debt it couldn’t afford to pay. The company’s board of directors met recently after loan holders who walked away from October talks rejoined the discussion. The October discussions were intended to establish a blueprint for when the company files for protection under Chapter 11 of the bankruptcy law.
The company is lining up $9 billion in bankruptcy loans before its filing, sources involved told Reuters. The $9 billion debtor-In-possession loan is not yet signed, but is expected to be the largest privately funded bankruptcy filing ever to occur. The financing will include a $4 billion DIP loan for Texas Competitive Electric Holdings, the company’s unregulated merchant generation unit, and an almost $5 billion DIP loan for Energy Future Intermediate Holdings.
The October negotiations fell apart before Energy Future paid out $270 million in interest to junior bondholders – money that senior lenders had hoped would stay within the company, according to Bloomberg. The company’s private equity owners have been seeking a plan that would keep the company together. They acquired the company in 2007, using $40.1 billion of debt, in a bet that energy prices would increase. Instead, energy prices fell.
In the third quarter of 2013, Energy Future brought in $5 million, its first net income since 2010, according to the news source. Total assets were $38.7 billion as of Sept. 30, 2013, compared to $50.2 billion in total liabilities.
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