UPDATE 2-Energy Future, unit to offer $4.5 bln in senior note

(Recasts; adds background)

By Dena Aubin

NEW YORK, Oct 15 (Reuters) - Power company Energy Future Holdings Corp, formerly called TXU Corp, plans to sell up to $4.5 billion of senior notes to help repay temporary loans used for its leveraged buyout, the company said on Monday.

The offering will include up to $2 billion of cash-pay senior notes due in 2017, plus up to $2.5 billion of cash-pay notes due in 2015 from its indirect subsidiary Texas Competitive Electric Holdings Co LLC.

Appetite for high-yield debt has surged since the Federal Reserve cut interest rates a half percentage point last month, making investors more comfortable taking on risk.

The recovering high-yield market is helping underwriters clear part of a backlog of more than $300 billion of leveraged buyout debt that had piled up when the high-yield market seized up during this summer's credit crunch.

In addition to TXU, First Data Corp. and Bausch & Lomb BOL.N are also marketing bonds this week to help finance their LBOs.

"It's still tough. You still have to have a deal that everybody is really comfortable with," said Robert Grimm, co-head of the high-yield group at J. Giordano Securities in Stamford, Connecticut. "We're certainly not back to the old days of 'you can sell anything at any price.'"

Kohlberg Kravis Roberts & Co., Texas Pacific Group and Goldman Sachs Capital Partners acquired TXU on Wednesday in a transaction valued at about $49 billion, renaming it Energy Future Holdings.

The merger was funded with about $30.5 billion of new debt and $8.3 billion of equity. Debt funding included about $11.25 billion of bridge loans, part of which will be replaced with this week's issue of high-yield notes.

The $2 billion Energy Future Holdings notes will be led by Morgan Stanley, while the $2.5 billion notes from its unit will be led by Goldman Sachs.

Official price talk was not available, though high-yield research firm KDP Investment Advisors said Energy Future's $2 billion in notes are expected to yield about 10.5 percent.

First Data's bonds are expected to yield about 10.75 percent, while Bausch & Lomb's are expected to yield about 10 percent, KDP said in a report. (Additional reporting by Avishek Mishra in Bangalore and Tom Ryan of Reuters Loan Pricing Corp in New York)