(New throughout, adds judge dismisses objections to financing
By Tom Hals
WILMINGTON, Del, June 5 Texas's largest power
provider, the bankrupt Energy Future Holdings, was
cleared to get final approval on Thursday for about $4.5 billion
in financing deals that it has said were important to
maintaining its business.
Judge Christopher Sontchi of the U.S. Bankruptcy Court in
Wilmington, Delaware, said he would dismiss objections that the
financing was overly favorable to senior creditors who will end
up owning the company's generating and retail utility unit.
Energy Future filed one of the largest U.S. bankruptcies in
April with a plan to slash its $42 billion in debt.
The company plans to spin off its TCEH business, which owns
Luminant power plants and TXU Energy, to that unit's senior
creditors, who are owed $24.4 billion. Much of Thursday's
hearing focused on opposition by junior creditors, who are owed
$7.7 billion by TCEH. Under the plan, they will have to share
around $200 million, or less than 3 cents on the dollar.
The junior creditors opposed the company's proposal to make
$100 million monthly payments to senior creditors in return for
using the senior creditors' collateral.
The parties were still working out final language to the
The money will be used to satisfy regulators, allow
continued hedging of commodities and pay the cost of the
bankruptcy, which Chief Financial Officer Paul Keglevic told the
court was estimated to be $900 million.
The company took on much of the debt in 2007 when it was
formed with the record buyout of TXU Corp, led by KKR & Co, TPG
Capital Management and the private equity arm of Goldman Sachs.
The deal turned out to be an ill-timed bet on natural gas
prices, which soon began to plummet.
Although senior creditors will end up owning the TCEH
business, only 41 percent of them support the spin-off plan. At
Thursday's hearing a lawyer for the Aurelius Capital Management
hedge fund displayed the split among senior creditors and
objected to the way the $100 million monthly payments were being
"This is an issue that might flow through this case," said
William Weintraub of Goodwin Procter, who represents Aurelius.
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 unsecured creditors, and will be the subject of a
hearing on Friday.
Barring a settlement, the real fight over the TCEH unit will
come months down the road when Energy Future has to prove the
unit is not worth enough 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 and David Gregorio)