By Nick Brown and Michael Erman
April 15 Texas power company Energy Future
Holdings, formerly known as TXU Corp, has proposed a prepackaged
bankruptcy that would restructure $32 billion of debt, but no
deal has been reached, the company said on Monday.
Energy Future, taken private in 2007 in the
largest-ever leveraged buyout, said in a U.S. Securities &
Exchange Commission filing that it has proposed a restructuring
deal to creditors that would exchange secured creditors' claims
for a combination of equity and new debt.
"The principals of the companies and the creditors are
currently not engaged in ongoing negotiations," Energy Future
It noted, however, that creditors have conveyed they would
consider the restructuring if it increased distributions and
better compensated them for the risk of taking on equity.
Energy Future is trying to restructure more than $30 billion
in debt after a buyout by a consortium including KKR & Co
, TPG Capital Management and Goldman Sachs Group
Inc's private equity arm. 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.
The company has a large and complex capital structure, and
industry experts have speculated about which entities may be
headed for bankruptcy and which could be spared.
The company has ringfenced Oncor, its regulated
power delivery business, in hopes of keeping it solvent, and the
restructuring proposal revealed on Monday would not have
included that unit or the holding company that owns its equity.
Most of Energy Future's debt sits on the unregulated side,
at Texas Competitive Electric Holdings, the holding
company for its unregulated retail business, TXU Energy, and its
unregulated merchant power unit, Luminant.
But according to Monday's SEC filing, creditors told Energy
Futures that they believe the company needs to address debt
structure issues at its parent as well as at the holding company
for ringfenced Oncor.
They said they would not accept the proposed prepackaged
bankruptcy unless, among other things, it achieved "a
sustainable debt capital structure" for the parent company and
Oncor's holding company "without reliance on TCEH's cash flows."
Spokesmen for KKR, TPG and Goldman were not immediately
available for comment.
Some of Energy Future's largest creditors include Apollo
Global Management, Oaktree Capital Management, Centerbridge
Partners, Fidelity Investments and Franklin Resources, according
to a source close to the matter.
The proposed restructuring would have allowed TCEH creditors
to trade in their senior claims for a combination of equity at
the Energy Future parent and a share of $5 billion in cash or
new TCEH debt.
Energy Future is not necessarily up against the clock.
Although it has about $270 million in interest payments due on
May 1, it can easily afford to make them. It has around $2.7
billion in liquidity - plenty for it to survive on, at least
until a $3.85 billion bank loan matures in October 2014, a U.S.
regulatory filing from January shows.
The TXU takeover was built on hopes that natural gas prices
would stay high. Instead, they dropped sharply and are still
down 45 percent from February 2007 levels.
Energy Future Holdings is the largest power generator in
Texas. Its merchant power unit, Luminant, owns more than 15,000
megawatts of nuclear, coal and gas-fired power plants.