| NEW YORK
NEW YORK The creditors of Energy Future Holdings remain at odds over how to split the Texas power company's equity in an expected bankruptcy as their confidentiality agreements lapse, several sources familiar with the matter said on Monday.
Secured lenders at Texas Competitive Electric Holdings, which represents Energy Future's unregulated subsidiary, and unsecured bondholders at Energy Future Intermediate Holdings (EFIH), Energy's Future's regulated subsidiary, had previously been in direct negotiations. But the EFIH unsecured bondholders have so far been reluctant to re-sign confidentiality agreements, according to one of the sources.
If they do not re-sign confidentiality agreements, the creditors and the company will make public details of their talks in a filing with the U.S. Securities and Exchange Commision as early as Tuesday, said the sources, who asked not to be named because the talks are still private.
EFH, saddled with $40 billion of debt, wants to finalize a restructuring plan before November 1, when $250 million in bond payments are due. Filing for bankruptcy before November 1 would suspend the bond payments; but filing without a restructuring plan could entail years of battles and competing restructuring plans in bankruptcy court.
EFH, formerly TXU Corp, was taken private in 2007 in a $45 billion buyout, the largest-ever leveraged buyout. The deal saddled the company with debt just before a sharp decline in natural gas prices and energy markets.
The buyout consortium included private equity firms KKR & Co LP (KKR.N), TPG Capital Management LP TPG.UL and Goldman Sachs Group Inc's (GS.N) private equity arm.
EFH's capital structure includes more than $32 billion of debt split up into various categories at the holding company of its unregulated retail and merchant power units, and another $7.7 billion in senior and junior debt at Energy Future Intermediate Holding Company LLC TXEFEF.UL (EFIH), the parent of its regulated power distribution business, Oncor Electric Delivery Company TXEFHO.UL.
NOVEMBER 1 PAYMENT
Energy Future Holdings has not yet given any signal about whether the November interest payments to unsecured bondholders would be made. The sources said the company has suggested that a payment could be made to buy additional time to avoid a free-fall, prolonged bankruptcy.
But the sources also said secured creditors would view payment of the November interest as an obstacle to negotiation. Secured creditors view those payments as part of their underlying collateral and would be displeased with that money leaking into the hands of unsecured bondholders, they said.
The secured creditors are considering whether to withhold legal releases for Energy Future's board and sponsors, if such payments are made, another source said. Failure to obtain such releases could expose affected parties to lawsuits down the road.
Earlier this month, bondholder Fidelity Investments put together its own proposal to other EFH creditors in the hope of saving the company from a protracted bankruptcy.
But the sources said that creditors did not rally around that proposal. Nor did they agree on a previous plan that would have given EFIH unsecured creditors payments if certain value milestones were met.
Still, EFH is in talks with banks including Citigroup, JPMorgan, Morgan Stanley and Bank of America on a multibillion debtor in possession loan that would help the company meet its obligations if it files for bankruptcy, two of the sources said.
(Additional reporting by Nick Brown; Editing by Nick Zieminski, David Gregorio and Richard Chang)