Joel R. Glucksman
Partner
201-896-7095 jglucksman@sh-law.comEnergy Future Holdings Proposes Bankruptcy Plan
Author: Joel R. Glucksman|May 2, 2013
Energy Future Holdings Proposes Bankruptcy Plan
Private energy giant Energy Future Holdings proposed a pre-packaged bankruptcy plan to its creditors in the event that it’s forced to seek bankruptcy law protection under Chapter 11 of the Bankruptcy Code.
Under the proposal to restructure roughly $32 billion in debt, the company’s largest creditors would forgive $25 billion in debt in exchange for equity in the parent company and $5 billion in cash or new debt. Private-equity sponsors said they would support the proposal if retained 15 percent of the company’s equity interest, leaving 85 percent for holders of the unit’s senior loans. However, those close to the situation said creditors have yet to agree to these terms.
“This means nothing until the creditors agree to it,” Joseph DeSapri, a credit analyst at Morningstar Inc., told Bloomberg in a telephone interview. “An 85 percent equity share in the company has to be sufficient for the forgiveness of debt and if it is not, the creditors won’t agree to it.”
While all parties involved are negotiating on the terms of a potential restructuring, the company has not yet officially filed for bankruptcy protection. The New York Times reports that it may take several months before Energy Future determines if filing is in its best interest.
The Texas-based company went private in 2007 in a $45 billion buyout led by KKR, TPG Capital and Goldman Sachs Group Inc. However, Bloomberg explains that the deal was a large gamble as the buyout saddled the company with $40 billion in debt and the company hoped that natural gas prices would rise, thereby giving its coal-fired plants an advantage. However, these prices fell in 2012, putting the company in a precarious financial position.
Energy Future Holdings Proposes Bankruptcy Plan
Author: Joel R. Glucksman
Private energy giant Energy Future Holdings proposed a pre-packaged bankruptcy plan to its creditors in the event that it’s forced to seek bankruptcy law protection under Chapter 11 of the Bankruptcy Code.
Under the proposal to restructure roughly $32 billion in debt, the company’s largest creditors would forgive $25 billion in debt in exchange for equity in the parent company and $5 billion in cash or new debt. Private-equity sponsors said they would support the proposal if retained 15 percent of the company’s equity interest, leaving 85 percent for holders of the unit’s senior loans. However, those close to the situation said creditors have yet to agree to these terms.
“This means nothing until the creditors agree to it,” Joseph DeSapri, a credit analyst at Morningstar Inc., told Bloomberg in a telephone interview. “An 85 percent equity share in the company has to be sufficient for the forgiveness of debt and if it is not, the creditors won’t agree to it.”
While all parties involved are negotiating on the terms of a potential restructuring, the company has not yet officially filed for bankruptcy protection. The New York Times reports that it may take several months before Energy Future determines if filing is in its best interest.
The Texas-based company went private in 2007 in a $45 billion buyout led by KKR, TPG Capital and Goldman Sachs Group Inc. However, Bloomberg explains that the deal was a large gamble as the buyout saddled the company with $40 billion in debt and the company hoped that natural gas prices would rise, thereby giving its coal-fired plants an advantage. However, these prices fell in 2012, putting the company in a precarious financial position.
