| HOUSTON, April 30
HOUSTON, April 30 Texas-based power company
Energy Future Holdings has $11.8 billion in debtor-in-possession
(DIP) loans to back operations through the massive Chapter 11
bankruptcy that it filed for on Tuesday.
Subject to bankruptcy court approval, the
multibillion-dollar financing ranks as the largest privately
funded DIP financing ever.
Getting the pre-negotiated restructuring deal to the finish
line is by no means assured, however. A proposed tender offer to
secured bondholders at Energy Future Intermediate Holdings
(EFIH), which owns most of the company's regulated transmission
business Oncor, looms as the next bankruptcy hurdle.
The company has threatened to bring litigation against
recalcitrant bondholders, which could rattle the restructuring
plan that the company has struck. Energy Future has more than
$40 billion in debt, it said in its filing.
Before entering bankruptcy, Energy Future reached a last
minute restructuring deal with several large creditor factions
including a lender group representing 41 percent of those senior
debt claims, handing over the company's unregulated generation
and retail power assets to lenders in a tax-free transaction.
Ownership of distributor Oncor would be turned over to
unsecured bondholders at Energy Future and EFIH.
To back operations under Chapter 11 and buy time to rally
creditors on their side, the company is taking out $7.3 billion
of DIP loans at EFIH and a $4.475 billion DIP package at Texas
Competitive Electric Holdings (TCEH), the company's unregulated
merchant generation unit.
EFIH is preparing to use proceeds from the $5.4 billion
first-lien tranche of the $7.3 billion DIP to fund a tender
offer for EFIH first lien notes at 105 to settle "make-whole"
claims asserted by bondholders, according to court filings.
"Make-whole" payments are made to compensate bondholders for
forgoing the present value of their coupons resulting from being
refinanced before the bond's maturity.
The first-lien EFIH bonds are currently trading above the
tender price at 106. If bondholders choose not to tender, EFIH
would then litigate the "make-whole" claims.
A $1.9 billion second-lien EFIH DIP will also be raised to
refinance existing EFIH second lien notes and 50 percent of
those related "make-whole" claims. A separate deal has been
struck with Fidelity, which ranks among the largest EFIH second
lien bondholders, in which the investment firm would not only
refinance their notes with 50 percent recovery on the
"make-whole" claim but also a receive $11.25 million cash
In lieu of receiving the make-whole claim in cash, Fidelity
can exchange up to $500 million of its second-lien bond and
make-whole claims for EFIH first-lien DIP debt.
Deutsche Bank is leading the first lien EFIH DIP facilities
with Citigroup, Bank of America Merrill Lynch, Morgan Stanley,
Barclays, Royal Bank of Canada and Union Bank rounding out the
LOAN ECLIPSED ONLY BY GENERAL MOTORS
The first-lien EFIH DIP loan, which matures in two years,
will pay lenders a Libor plus 325 basis point spread, with a 1
percent minimum Libor floor, according to court filings.
The $4.475 billion TCEH DIP consists of a $1.95 billion line
of credit, a $1.425 billion term loan, and a $1.1 billion
delayed-draw term loan.
These loans are slated to fund Energy Future's power
merchant operations and letters of credit. In addition, the
delayed draw tranche will enable the company to post a
collateral bond to the Railroad Commission of Texas to meet
mining reclamation bond obligations.
TCEH DIP term lenders will receive a Libor plus 275 basis
spread for providing the 24-month loans, while the credit line
will pay a Libor plus 250 basis point spread, all pricing of
which are subject to a 0.75 percent Libor minimum, according to
The combined Energy Future financing is bigger than the
$8.04 billion DIP for then privately owned petrochemical
manufacturer LyondellBasell in early 2009. It is eclipsed only
by General Motors $33 billion DIP loan, which was advanced by
the United States Treasury, in June 2009. The size of Energy
Future's loan matches the scale and complexity of Energy
While Energy Future aims to exit bankruptcy in 11 months,
the company can extend its two-year DIP financing by another six
months, if the need arises. The bankruptcy was on par with those
of Pacific Gas & Electric Co and Enron in 2001 but trailed
behind the $691 billion in assets the investment bank Lehman
Brothers had when it blew up in 2008, according to
(Editing by Michelle Sierra, Terry Wade and Tom Brown)