ISS, Glass Lewis say holders should back TXU deal

HOUSTON/NEW YORK (Reuters) - Proxy advisory firms Institutional Shareholder Services (ISS) and Glass Lewis and Co on Tuesday recommended TXU Corp. TXU.N shareholders vote in favor of a $32 billion buyout of the Texas power company.

ISS said in a report that "at least some value will be irretrievably lost" should TXU shareholders vote against the deal, assuming that the credit peak has passed.

TXU agreed earlier this year to be bought by private equity firms Kohlberg Kravis Roberts & Co KKR.UL and TPG Capital LP TPG.UL for $69.25 a share. TXU has set a September 7 shareholder vote, where it needs two-thirds approval for the deal to go through.

Since the deal was struck, however, a credit crunch has effectively put a halt on large buyouts, causing the financing on a number of deals to be renegotiated as investors reassess their appetite for risk.

ISS said in its report that it appeared KKR and TPG had locked in financing for the TXU buyout at the top of the credit cycle.

Rival proxy advisory services Egan-Jones and Proxy Governance have also recommended TXU shareholders vote in favor of the buyout.

Egan-Jones wrote, in a report issued last week, that the current state of the credit markets made the emergence of a better offer unlikely. Proxy Governance noted that the investor group has secured financing for the deal and "shows no signs of walking away at this time."

ISS and Glass Lewis also advised shareholders to vote for TXU's slate of directors.

(Reporting by Eileen O'Grady and Anna Driver in Houston and Megan Davies in New York)