Energy Future Holdings Rejects Alternative Bankruptcy Plan

Energy Future Holdings Rejects Alternative Bankruptcy Plan

An update in one of the largest bankruptcy proceedings seen by the U.S. in recent history came the afternoon of June 24, when it was reported that Energy Future Holdings rejected an alternative restructuring plan.

The plan, which was advanced by a group of EFH investors, would have allowed junior creditors to recover more money than under the company’s own plan, and would have left NextEra Energy with a more profitable business, according to Bloomberg. The plan was floated June 18 by NextEra and investors in Energy Future’s Oncor transmission business in a letter to EFH CFO Paul Keglevic.

The group explained that, together with a $2.3 billion loan, the reorganization would follow the company’s plan for a tax-free assets spinoff, but would give unsecured lenders more value, the news source reported. Within the 30 days following the loan’s issuance, NextEra would seek an all-stock merger with the unit that controls Oncor.

Energy Future Intermediate Holding, or EFIH, rejected the proposal late on June 23 in favor of the proposal that it was already advancing, according to Reuters. NextEra, which is the largest generator of renewable energy in the U.S., had planned to contribute $1 billion to the proposal in the form of a loan to covert to EFIH equity. Despite EFIH rejecting the plan, NextEra shares were up 1.3 percent to $100.76 – almost a one-year high – in afternoon trades on the New York Stock Exchange. A company spokesperson told the news source that NextEra does not comment on potential transactions.

Energy Future filed for protection under Chapter 11 of the bankruptcy law in April, in an attempt to restructure more than $40 billion worth of debt. Most of this debt was taken on in 2007, in a massive buyout of TXU Corp in a bet that the price of natural gas would soon increase. This turned out to be false, and the price of natural gas fell precipitously.

If you have any questions about this post or would like to discuss your company’s creditors’ rights and bankruptcy matters , please contact me, Joel R. Glucksman at ScarinciHollenbeck.com.