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Re: Enterprising Investor post# 10

Tuesday, 04/29/2014 10:46:53 PM

Tuesday, April 29, 2014 10:46:53 PM

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Looking To Shed $40B In Debt, Energy Future Holdings (TXU) Files Ch. 11 (4/29/14)

Energy Future Holdings filed for Chapter 11 protection in Wilmington, Del., this morning, after reaching a long-awaited deal with creditors on a restructuring that would shed about $40 billion in debt.

Energy Future said it expects confirmation of the plan will take about nine months, with a Chapter 11 exit expected in 11 months. The company said it has secured two debtor-in-possession credit facilities: $4.475 billion for Texas Competitive Electric Holdings Company, and $7.3 billion for Energy Future Intermediate Holding Company.

The pre-arranged restructuring plan, which EFH said it expects to file “in the near term,” will separate Texas Competitive Electric Holdings and its subsidiaries from Energy Future Holdings without triggering any material tax liability, the company said. TCEH’s first-lien lenders will receive all equity in reorganized TCEH and the cash proceeds from new debt issued by TCEH in exchange for eliminating about $23 billion of TCEH’s funded debt.

At Energy Future Intermediate Holding Company, the holding company for Oncor Electric Delivery Company, EFH’s regulated business, the plan would eliminate about $2.5 billion of EFIH’s funded debt through a capital infusion of up to $1.9 billion from certain EFIH unsecured note holders, EFH said. The capital will convert, along with all EFH and EFIH unsecured notes, into equity in reorganized EFH when the company exits Chapter 11. Certain EFIH unsecured note holders will also receive cash under the plan, the company said.

At EFH, the plan will eliminate about $600 million of funded debt. The reorganized EFH will continue to own EFIH, and EFIH will retain its interest in Oncor.

The newly filed case has already prompted a battle over the company’s choice of bankruptcy venue. Wilmington Savings Fund Society, the trustee for TCEH’s second-lien notes, filed a motion this morning seeking to transfer the case from Wilmington to the bankruptcy court in Dallas, a “nine-minute walk” from EFH headquarters.

Kirkland & Ellis is serving as EFH’s lead bankruptcy counsel. Evercore Partners is serving as financial advisor, with Alvarez & Marsal as restructuring advisor. — John Bringardner

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