(Adds the committee selecting a law firm, in paragraph five)
By Tom Hals
WILMINGTON, Del., May 12 (Reuters) - Unsecured creditors of bankrupt Energy Future Holdings, as well as one group of secured bondholders considered far out of the money, formed a committee on Monday that will play a major role in the restructuring of the biggest power company in Texas.
The seven-member committee, whose job is to advocate for all unsecured creditors, included the Pension Benefit Guaranty Corp, as well as representatives of bondholders and suppliers to the company which filed for Chapter 11 bankruptcy on April 29 with $9.6 billion owed to unsecured creditors.
The company also owes $32 billion to higher-priority creditors, making it one of the biggest non-financial companies to file for bankruptcy.
In a rare move, the committee will include a representative of secured noteholders that the company says are so unlikely to get paid that they are essentially involuntarily unsecured.
The committee selected the Morrison & Foerster law firm to represent them.
Creditors’ committees are appointed by the Office of the U.S. Trustee, a Department of Justice arm that oversees big bankruptcy cases. Such committees are critical components of big restructurings.
Their professional fees are paid by the estate of the bankrupt company, and their support is typically sought on any restructuring plan proposed by the company. Without the committee’s backing, a bankruptcy can get bogged down in expensive and time-consuming litigation.
Scores of firms descended on the DoubleTree by Hilton Hotel in Wilmington for Monday’s meeting for a chance to make their pitch to committee members. Representing creditors’ committees in bankruptcy is a lucrative and sought-after role.
Some advisers milling in the hotel lobby on Monday said they thought Energy Future should have had two committees. One would represent the creditors of the company’s unregulated Luminant generating business and TXU Retail power company, while a second would advocate for creditors of the holding company that owns the Oncor power lines business. Oncor is not in bankruptcy.
Lawyers for creditors argued in recent court hearings it might be a mistake to consolidate the various subsidiaries into one Chapter 11 case, a standard practice in bankruptcy, because the operations and creditors were so distinct. (Reporting by Tom Hals in Wilmington, Delaware; Additional reporting by Nick Brown in New York; Editing by Cynthia Osterman and Mohammad Zargham)