Energy Future reaches deal with creditors; Chapter 11 filing imminent
The board of Energy Future Holdings voted Monday to file for Chapter 11 bankruptcy protection after reaching a tentative deal with some of the company’s creditors, according to sources close to the situation.
The company will file in Delaware federal court, but the timing remains in flux, a source said Monday night.
The company has been locked in negotiations with creditors for weeks in hopes of working out a final hour debt restructuring deal that minimizes the power company’s time in court.
The former TXU Corp. was bought out for $45 billion in 2007 by the private equity firms KKR & Co., TPG and Goldman Sachs Capital Partners. But Texas power prices are half what they were in 2008. And EFH has struggled to keep up with $25 billion in additional debt loaded on the company at the the time of the buyout, the largest in U.S. history.
The largest power generator in Texas now owes close to $40 billion. Its creditors include investors like Leon Black, CEO of Apollo Global Management, and Warren Buffett, CEO of Berkshire Hathaway .
EFH has delayed a $109 million interest payment due April 1. If it doesn’t pay by Wednesday it goes into default. At that point its creditors could call in their debt, leaving EFH with little choice but to file immediately for bankruptcy protection.
Adam McGill, a spokesman for EFH, declined to comment. Firms that own EFH debt also declined to comment.
The details of the deal with creditors remained unclear Monday night. Bloomberg News reported that senior lenders on the company’s unregulated power generation and retail business, along with Fidelity Investments and bond holders on the company’s regulated transmission business, had agreed to terms.
Talks centered around splitting up Energy Future between the regulated and unregulated divisions. And the deal that was being hammered out Monday would avoid a tax bill that EFH had esimated to be in the billions of dollars, a source said.
Whether that would stand up to scrutiny by the Internal Revenue Service remains a critical question.
Follow James Osborne on Twitter at @osborneja.