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Re: Enterprising Investor post# 25

Saturday, 06/27/2015 9:34:15 PM

Saturday, June 27, 2015 9:34:15 PM

Post# of 79
Energy Future plans to hand Oncor to creditors, Hunts fighting for control (6/25/15)

The more than year long Energy Future Holdings bankruptcy case took an abrupt turn Thursday when the company’s attorneys announced in federal court they had a deal with multiple creditors to hand over the power line subsidiary Oncor.

The agreement effectively puts a halt to a bidding contest developing between Florida-based NextEra Energy and Hunt Consolidated, Dallas billionaire Ray L. Hunt’s energy and real estate conglomerate, for control of what is Texas’ largest power utility.

Instead creditors in the holding companies Energy Future Intermediate Holdings and Energy Future Holdings would take ownership of Oncor, which serves 3 million customers across North and West Texas. U.S. Bankruptcy Judge Christopher Sontchi canceled a scheduled auction for Oncor and set a trial date to conclude the bankruptcy case for January.

“There’s a lot of work left, but getting this on the calendar we have a schedule to live by,” said Marc Kieselstein, one of the attorneys representing Energy Future.

The former TXU Corp. declared bankruptcy in Wilmington, Del. last April, seeking protection from $40 billion in debt largely amassed during a 2007 leveraged buyout orchestrated by private equity moguls Henry Kravis and David Bonderman. At the time the company announced it would split Oncor from its unregulated businesses, generator Luminant and retailer TXU Energy. Energy Future told employees it planned to be out of court within a year.

But that deadline came and went, as attorneys professed difficultly finding middle ground with the multitude of creditor groups fighting for repayment on bonds that were trading for as little as pennies on the dollar last year.

In court Thursday, opposition rose again. Two weeks ago Hunt reached out to Energy Future with an alternative plan to take over Oncor and pay off creditors. Attorneys representing creditors aligned with Hunt argued that plan could be completed by the beginning of 2016 – at least six months ahead of Energy Future’s – and had $12.1 billion in new investment behind it.

“We’ll have the Hunts as owner and the existing Oncor management team running the business,” said attorney Thomas Lauria. “Our ability to move forward quickly is critical. We have a window of opportunity to get this in front of the court and the regulators.”

NextEra was not present in court Thursday. A spokesman declined to comment whether the company was still pursuing Oncor.

Timing is becoming an increasingly critical issue in the case, which is running roughly $1 million a day in legal costs.

Now the two proposals must vie for support among creditors. In court Thursday Energy Future’s attorneys said they had agreements with creditor groups representing $30 billion in debt, including the financial firm Fidelity, which is said to be leading the deal. The Hunt proposal meanwhile has a “core group” of supporters that own $4 billion in debt, Lauria said.

In court Thursday, Sontchi advised Energy Future it must work on both their proposal and Hunts if they are to meet their “fiduciary duty” under bankruptcy law.

The company’s attorneys agreed but also expressed skepticism.

“In our view we’re not nearly there yet. A galaxy of stars would need to align,” Kieselstein said.

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