Bankrupt Energy Future says resolves objections to financing

WILMINGTON, Del, June 5 Thu Jun 5, 2014 1:26pm EDT

WILMINGTON, Del, June 5 (Reuters) - A lawyer for Texas's largest power provider, the bankrupt Energy Future Holdings , told a judge on Thursday the company had resolved most objections to financing arrangements that were important to maintaining its business.

Edward Sassower of Kirkland & Ellis, told Judge Christopher Sontchi of the U.S. Bankruptcy Court in Wilmington, Delaware, that the company would reached agreements with creditors to modify language in its requests to borrow up to $4.75 billion.

The money will be used to satisfy regulators, allow continued hedging of commodities and to pay the cost of the bankruptcy, which Chief Financial Officer Paul Keglevic told the court was estimated to be $900 million.

Energy Future filed one of the largest U.S. bankruptcies in April with a plan to slash its $42 billion in debt.

Much of the debt was taken on in 2007 when the company was formed with the record buyout of TXU Corp. The deal was led by KKR & Co, TPG Capital Management and the private equity arm of Goldman Sachs, but turned out to be an ill-timed bet on natural gas prices, which soon began to plummet.

Sontchi approved consolidating 71 separate bankruptcy cases relating to Energy Future into one, a routine request which was opposed by junior creditors of TCEH, Energy Future's generating and retail utility.

The junior creditors viewed the bankruptcy as two separate cases because of the way Energy Future has proposed restructuring its debt.

It plans to spin off its TCEH business to that unit's senior creditors, who are owed $24.4 billion. Junior creditors owed $7.7 billion will have to share around $200 million, or less than 3 cents on the dollar.

Energy Future's other main business, known as EFIH, is the majority owner of Oncor, the biggest operator of power lines in Texas. It has proposed emerging from bankruptcy under the control of its junior unsecured creditors.

On Friday, Sontchi will consider a request for final approval for EFIH to borrow $5.4 billion. That money will be used to refinance senior EFIH creditors.

While Thursday's hearing, which will continue into the afternoon, was largely consensual, Sontchi warned the parties to tone down the rhetoric in court filings.

"I found in the pleadings a lot of unhelpful comments disparaging others' motivations and positions," he said. "There were a couple pleadings where it was particularly bad ... You're not going to score points with me."

The real fight will come months down the road when Energy Future has to prove its TCEH business, which owns Luminant power plants and TXU Energy, lacks the value to repay junior creditors.

Chris Shore, a White & Case attorney who represents holders of $2.7 billion of unsecured junior debt, ticked off a list of factors that could boost TCEH's value, from coal regulations to forward energy prices.

"We're all going to be pulling our hair out trying to figure out how we come to a value," he told Sontchi. (Reporting by Tom Hals in Wilmington, Delaware; Editing by Marguerita Choy)

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