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[Enterprising Investor]

Clock ticking, bankruptcy near for Energy Future Holdings (4/25/14)

Negotiations to determine the fate of Energy Future Holdings are expected to continue through the weekend ahead of a critical deadline next week.

With close to $40 billion in debt and a shrinking revenue base, EFH has long said it will have to file for bankruptcy eventually. Now the company is in talks with creditors in hopes of working out a final-hour debt restructuring deal that minimizes the power company’s time in court.

But time is running out. The company delayed a $109 million interest payment April 1, and if they don’t pay by Wednesday they go into default. At that point its creditors could call in their debt, leaving EFH with little choice but to file for bankruptcy.

Allan Koenig, a spokesman for EFH, declined to comment on the status of negotiations or the likely timing of the bankruptcy filing. And reports from the negotiating table have been mixed.

Bloomberg News reported this week that the EFH board was considering two proposals, one that leaves out a key creditor, Boston-based Fidelity Investments. In earlier reports Fidelity seemed to be coming on board with a deal.

One observer with ties to the company said this week that predicting how this will turn out is impossible, as negotiations seemed to ebb and flow so frequently.

That has been the case throughout the long wind-up to bankruptcy, but now analysts doubt EFH will reach a consensus deal with creditors.

“I’d still be surprised if they can pull this off without any objections from the seven layers of creditors across the whole capital structure,” Andy DeVries, an analyst with the research firm CreditSights, said in an email last week. “It seems like tax implications are keeping the whole thing together rather than the TCEH guys seizing the power plants and walking away the day they file.”

According to sources close to the talks, EFH has been considering splitting the company’s regulated transmission arm from its unregulated power generation and retail businesses, Luminant and TXU Energy.

Creditors on the regulated side have pushed to go their own way, likely selling off the transmission company Oncor to the highest bidder.

EFH has long maintained such a move would trigger a bill from the U.S. Internal Revenue Service in the billions. But earlier this year, sources said attorneys involved in the talks might have found a way to reduce the company’s tax exposure should it split apart.

Follow James Osborne on Twitter at @osborneja.

http://www.dallasnews.com/business/energy/20140425-clock-ticking-bankruptcy-near-for-energy-future-holdings.ece