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Energy Future Holdings says Oncor sale is dead

(Reuters) - Energy Futures Holdings Corp’s plan to sell its Oncor power distribution business for about $19 billion to fund its exit from bankruptcy will not close as expected, a company lawyer told a U.S. Bankruptcy judge on Thursday.

The lawyer said Texas’ largest power company will present an alternative plan for exiting bankruptcy and hopes to have that plan confirmed by the court in the coming months.

The Oncor deal required financing from a group of investors in order to close by April 30. While Oncor is considered a crown jewel asset, the Public Utility Commission of Texas imposed conditions for approving the deal that have discouraged the investors.

“We now know that the investor group is not going to fund,” Marc Kieselstein, a Kirkland & Ellis attorney for Energy Future Holdings, told the U.S. Bankruptcy Court in Wilmington, Delaware.

“This is a surprise to me,” said U.S. Bankruptcy Judge Christopher Sontchi.

The complex Oncor deal, which involved converting it into a real estate investment trust, ended more than a year of expensive litigation over the best path for getting Energy Future out of bankruptcy.

A lawyer representing the investor consortium behind the Oncor deal, Tom Lauria of White & Case, disputed Kieselstein’s assessment and said his group continues to try to close the Oncor deal.

He said his group has a hearing in front of the Public Utility Commission next week and it will urge the commissioners to reconsider their ruling.

If the deal does not close by April 30, Energy Future would be free to pursue an alternative path for exiting bankruptcy, which was filed two years ago.

The company was forced into bankruptcy by weak electricity prices and $42 billion in debt, much of it taken on to finance a leveraged buyout of what was then known as TXU Corp by KKR & Co, TPG Capital and an affiliate of Goldman Sachs.

Energy Future plans to unveil a proposal next week to get the company to a hearing in 90 days to confirm an alternative bankruptcy exit plan, Kieselstein said.

He said the confirmation process could be accelerated because many of the settlements among creditors remain in place even if the Oncor deal collapses.

An attorney for senior creditors said his clients may file their own plan for bringing Energy Future’s power plants and retail power business out of Chapter 11 quickly under their control, leaving Oncor behind.

Reporting by Tom Hals in Wilmington, Delaware; Editing by Matthew Lewis

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