| NEW YORK
NEW YORK Oct 24 Energy Future Holdings has
stepped up talks with bondholders of its regulated unit, several
people close to the talks said on Thursday, as it holds out hope
of reaching the framework of a restructuring agreement before an
The Texas utility is seeking support for a deal proposed by
bank lenders at its unregulated holding company to restructure
the bulk of its $40 billion in debt.
Within the last few weeks, it has ramped up efforts to get
first- and second-lien bondholders of Energy Future Intermediate
Holdings (EFIH), its regulated holding company, behind the deal
as well, the people close to the talks said. They declined to be
named because talks are not public.
The first-lien bondholders are being advised by lawyers from
Ropes & Gray and financial advisers from Capstone, said the
people. Pimco and Blackrock are among the largest holders of
The talks with the bondholders underscore the complexity of
EFH's capital structure and its efforts to achieve a path for
its restructuring before it files for Chapter 11 bankruptcy.
The company will likely file for bankruptcy, according to
analysts and people familiar with the company's thinking, but
would prefer to garner as much support from creditors as
possible to facilitate a much easier and cheaper bankruptcy.
Time to reach such a framework is running out: EFH has about
$270 million in interest payments due next Friday, Nov. 1, and
any bankruptcy filing would have to come by then to avoid a
While EFH could make the payment and extend the runway for
restructuring talks, people close to the matter told Reuters it
is unlikely to do so.
BONDHOLDERS IN THE LOOP
EFH, formerly TXU Corp, was taken private in 2007 in a $45
billion buyout, the largest-ever leveraged buyout. The deal
saddled the company with debt just before a sharp decline in
natural gas prices and energy markets. The buyout consortium
included private equity firms KKR & Co LP, TPG Capital
Management LP and Goldman Sachs Group Inc's
private equity arm.
The first- and second-lien bondholders at EFIH were
initially not a critical part of restructuring discussions
because they are considered in the money. But a restructuring
plan put forth by the lenders, disclosed by the company in a
Securities & Exchange filing last week, carries implications for
While the economics of the plan could change, it purports to
give the lenders all of the company's equity plus $8 billion in
two tranches of debt, with the buyout sponsors receiving $800
million to be split with other creditor classes. The plan would
forgo certain 'make-whole' payments that the EFIH first- and
second-lien bondholders claim they are owed.
Make-whole payments are generally triggered when creditors
are repaid early to compensate them for the present value of
foregone interest. The EFIH first-lien bondholders are
negotiating in hopes of enforcing the payment if the bonds are
refinanced, said two of the people close to the matter.
The likelihood of getting a deal done remains uncertain,
with sides still far apart on key issues, the people said. And,
to be sure, EFH does not need any creditor support to file for
bankruptcy, though having it would reduce the uncertainty of
what would be a large and complex case.
Ideally, the company would also like the support of other
bondholders at EFIH. But holders of EFIH payment-in-kind notes
already walked away from talks, and the second-lien bondholders
are currently not restricted from trading, which limits the
substance of any discussions they may have, according to two of
the people close to the matter.