- Scrapping its original debt-cutting plan
- Creditors demanding a slower process
- Still plans to spin retail utility to creditors
The company asked Delaware Bankruptcy Judge Christopher Sontchi to extend its exclusive right to seek a creditor vote on a plan of reorganization until April 25, 2015, from its current deadline in October.
The company filed for bankruptcy on April 29, with a restructuring support agreement, or RSA, with some creditors that aimed to get a plan to cut its $40 billion in debt approved by Sontchi before February. “Since the debtors have filed for Chapter 11, certain parties have made potentially higher or better offers to the debtors and the debtors have decided to terminate the RSA to pursue such potential offers,” the company’s lawyers said in a court filing on July 23.
Energy Future’s original plan triggered lawsuits by creditors, demands that it slow down the process and attracted the interest of potential buyers such as NextEra Energy Inc. Sontchi expressed skepticism about the company’s approach to its restructuring plan on July 1. Energy Future now anticipates conducting a court-supervised auction for itself and its EFIH subsidiary, which owns 80 percent of the Oncor power distribution business, according to a securities filing on July 24.
The company said it remains committed to spinning off its TCEH subsidiary, which owns the Luminant power generating unit and TXU Energy retail utility, to TCEH senior creditors. Those creditors are owed $24 billion. The success of that spin-off depends on how it is treated for taxes. The company said in court documents it continues to discuss the plan with the Internal Revenue Service.
Energy Future’s original plan included borrowing $1.9 billion to finance a tender offer for the high-yielding second-lien notes issued by its EFIH unit, which it said would save millions of dollars a month in interest costs. As a result of scrapping its original debt-cutting plan, the company said that any notes that were tendered would be returned to the holder and no payments would be made.
Many holders of those notes sued Energy Future over the proposal because they said Energy Future was denying them an early redemption fee.
Energy Future filed for bankruptcy after struggling for years with low power rates, driven down by a glut in natural gas. Its bankruptcy is among the largest ever in the United States, with much of the debt taken on in the 2007 record leveraged buyout of the former TXU Corp that was led by Kohlberg Kravis Roberts & Co, TPG Capital and Goldman Sachs Group Inc’s private equity arm GS Capital Partners.
The private equity firms are likely to recover next to nothing in the bankruptcy.
Tom Hals is a correspondent for Reuters in Wilmington, Delaware.