UPDATE 1-Energy Future Holdings warns of bankruptcy risk

Tue Feb 19, 2013 8:16am EST

Feb 19 (Reuters) - U.S. power company Energy Future Holdings , formerly TXU Corp, said it could go into bankruptcy, liquidation or insolvency if lenders or noteholders accelerate repayment of all borrowings.

A source familiar with the matter told Reuters earlier this month that the company had hired law firm Kirkland & Ellis and asset manager Blackstone Group LP to advise on ways to deal with its debt load, which totaled $52 billion at the end of September.

"If lenders or noteholders accelerate the repayment of all borrowings, we would likely not have sufficient assets and funds to repay those borrowings," Energy Future Holdings said under the risk factors section of a regulatory filing on Tuesday.

The company in January extended the maturity date of a $16.5 billion term loan to 2017 from 2014. It has also exchanged debt on which it owed cash payments for debt on which interest payments could be deferred.

The hiring of advisers came just months before the company, taken private in 2007 in the largest leveraged buyout ever, must start making payments on some of its debt.

The $45 billion TXU buyout, which loaded the company with debt, is viewed as one of the most spectacular failures of the last decade's buyout boom. KKR & Co, one of the private equity firms that led the TXU deal, has written off 95 percent of the value of its investment in the company. TPG Capital Management and Goldman Sachs Group Inc's private equity arm were also part of the consortium that took the company private.

The TXU takeover was built on hopes that natural gas prices would stay high. Instead, they have dropped sharply, with benchmark U.S. prices falling about 57 percent to around $3.22 per million British thermal units now from around $7.50 per mmBtu in February 2007.

Energy Future Holdings is the largest power generator in Texas and has three units. The merchant power unit, Luminant, which owns more than 15,000 megawatts of nuclear, coal and gas-fired power plants, and its retail business, TXU Energy, are unregulated. Its power delivery business, Oncor, is regulated.

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