Energy Future Holdings Chapter 11 filing as soon as Monday

  • Former TXU, biggest LBO, faces deadline next week
  • No disruptions seen for Texas power consumers
  • Talks on pre-packaged filing, but no deal yet: source

The former TXU Corp, which owns 14 power plants, faces a deadline next Thursday, sister news service Reuters reported, when a 30-day grace period stemming from a missed bond payment will expire and push the company into default.

A company spokesman declined to comment but the long awaited filing would be one of the biggest Chapter 11 bankruptcies in history.

It is unclear whether Energy Future will have the framework of a restructuring in place when it files for bankruptcy. The company has been in advanced talks with various sets of stakeholders in hopes of limiting the length and cost of bankruptcy. Sides are close to a deal, but talks remain ongoing, according to one of the sources.

Energy Future was created through a 2007 leveraged buyout, the largest in history, led by TPG CapitalKohlberg Kravis Roberts & Co and GS Capital Partners, Goldman Sachs’s private equity unit. The deal loaded the company with debt just before new drilling technology set off a domestic energy boom, reducing natural gas prices and eroding coal’s cost advantage. Falling gas prices have in turn depressed prices for wholesale power, forcing generators like Edison Mission Energy of Santa Ana, California, to file for bankruptcy.

Consumers are not expected to suffer power disruptions in the deregulated power market in Texas, but the bankruptcy could touch off years of expensive court-supervised negotiations with investment funds.

Several sources said the company is planning to file before markets open on Tuesday, and that the filing could come as early as Monday evening.

So-called “first day” court hearings, in which bankrupt companies seek court approval for routine matters like continuing to pay employees, would begin on Wednesday, two of the people said.

Nick Brown is a correspondent for Reuters in New York. Billy Cheung is a senior correspondent for Reuters LPC.