It took three courtrooms to accommodate the lawyers, advisers and observers gathered for the first hearing in Energy Future Holdings Corp.’s bankruptcy in Wilmington, Delaware.
The Dallas-based power provider today is seeking permission from U.S. Bankruptcy Judge Christopher Sontchi to keep paying employees and key vendors while it reorganizes about $40 billion in debt under a plan negotiated with senior lenders. More than 60 percent of Fortune 500 companies are incorporated in Delaware, which gives them access to the state and federal courts there.
Second-lien noteholders owed about $1.6 billion say the fact that a unit of Energy Future is incorporated in Delaware isn’t enough to keep the case in Wilmington. They want the proceedings moved to Texas, where Dallas-based Energy Future does all its business, has all its operations and is overseen by state utility and environmental regulators.
Energy Future, which was taken private in a record $48 billion leveraged buyout in 2007, filed for bankruptcy April 29 after falling natural gas prices pulled down electricity rates in Texas. It listed $49.7 billion in liabilities, the most ever for an energy-industry bankruptcy.
The trustee for the second-lien noteholders, Wilmington Savings Fund Society FSB, is also seeking permission to investigate the restructuring deal, which will spin off Energy Future’s deregulated business to senior creditors.
The noteholders are part of a group of hedge funds and banks that hold lower-ranked debt issued by Energy Future’s deregulated unit. Under the power producer’s bankruptcy-exit proposal, they stand to recover less than $350 million of the $7.7 billion they are owed, according to court filings.
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UPDATE, 10:24 a.m.
EFH asked Sontchi to set a June hearing on approval of a loan that would be used to fully repay some creditors of a unit of the bankrupt Texas power provider.
Company attorney Stephen Hessler said the company will use a $5.4 billion loan to “promptly repay” about $4 billion in principal owed to senior lenders of the Energy Future Intermediate Holding unit and a second, $1.9 billion loan to do the same thing with lower-ranked creditors.
Those creditors will then have the option to either settle for a lower amount any early-payoff fee they may be owed, or fight Energy Future in court over the so-called make-whole claims. The company said it doesn’t owe any make-whole payments.
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