(Reuters) - Texas’ largest power company, Energy Future Holdings Corp, has scrapped a bankruptcy exit plan centered on the sale of its multibillion dollar power line stake and instead will pursue a reorganization, the company said in an internal memo on Thursday.
The company now expects to exit bankruptcy in mid-2016, about 15 months later than its estimate in April 2014 when it filed for Chapter 11.
The company has been working with a complex group of creditors with competing interests to overhaul its $42 billion in debt and find a consensual path out of bankruptcy.
Energy Future has proposed splitting itself in two. The Luminant power generating business and its TXU retail utility would be spun off to the senior creditors of those units, while the parent would retain its stake in Oncor, which operates the largest power distribution system in Texas.
In April, the company proposed three alternatives for the parent and Oncor: the auction, an equity investment to raise cash for creditors, or a standalone reorganization.
The company memo to staff, which was reviewed by Reuters, said various creditor groups had agreed in principle to back the standalone reorganization, under which the parent company would emerge from bankruptcy and likely become a publicly traded company.
On Thursday, the U.S. Bankruptcy Court in Wilmington, Delaware set a hearing in January to confirm Energy Future’s exit plan, the memo said.
The company’s bankruptcy plans have been strenuously opposed by a group of junior creditors of the TXU and Luminant side of the business, who are pushing their own proposal.
The junior creditors prefer to convert the Oncor investment into a real estate investment trust, which tend to be highly valued by investors.
The junior creditors lawyer, Tom Lauria, told Thursday’s court hearing they have been working with Hunt Consolidated Inc to acquire the Oncor stake in a deal worth $19 billion, Bloomberg News reported.
InfraREIT Inc, which owns power transmission lines, disclosed in a securities filing this month that Hunt Consolidated had approached it about combining InfraREIT with Oncor. Hunt owns 29.4 percent of InfraREIT.
Shares of InfraREIT closed down 5.7 percent at $30.85 on the New York Stock Exchange.
Energy Future was formed after the 2007 record buyout of TXU Corp led by KKR & Co, TPG Capital Management and the private equity arm of Goldman Sachs.