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Hunt’s play for Oncor gets new life in Energy Future bankruptcy (7/23/15)

Dallas billionaire Ray L. Hunt’s pursuit of Oncor, Texas’ largest power utility, gained momentum Thursday, as negotiations in the 18 month-old Energy Future Holdings bankruptcy case took another sharp turn.

Energy Future’s attorneys filed a new reorganization plan in U.S. Bankruptcy Court in Delaware Thursday and stated the company was now “working to reach rapid closure” with a consortium led by Hunt Consolidated, the energy and real estate conglomerate.

The filing reversed course from a month ago when Energy Future backed a group led by the investment firm Fidelity to take over Oncor. At the time one of the company’s attorneys characterized Hunt’s plan as so unlikely “a galaxy of stars would need to align.”

In a statement Thursday, Hunter Hunt, CEO of Hunt Consolidated Energy, described their proposal as offering a “quick resolution” to the Energy Future bankruptcy.

“We look forward to working diligently with EFH in the coming days to be chosen as the final bankruptcy plan filed with the court. If selected, we will work closely with the Public Utility Commission of Texas and other stakeholders to demonstrate our commitment to a strong and robust Oncor,” he said.

The reorganization plan proposed by Energy Future revolves around splitting apart the former TXU Corp., which was rebranded Energy Future Holdings after a $45 billion leveraged buyout in 2007 led by private equity firms KKR & Co. and TPG.

The power generation company Luminant and retailer TXU Energy, which have lost value as electricity prices in Texas have fallen, would be handed over to senior creditors. Oncor would be sold off, likely for upwards of $18 billion, with the money paying off various creditors groups in a complex cascade of high finance.

Hunt is proposing placing Oncor in what’s termed a real estate investment trust, a corporate structure that would shift tax liability and potentially allow higher earnings. The consortium, which includes investment firms and the Teacher Retirement System of Texas, had raised $12.1 billion to fund the deal, Energy Future said in its filing.

But they might still have competition. Energy Future said Thursday it might still revive its deal with Fidelity should negotiations with Hunt reach an “impasse.” Also, NextEra Energy, which was pursuing a deal for Oncor until Energy Future called off a long scheduled auction last month, might jump back in.

Ray L. Hunt, the chairman of Hunt Consolidated, has been pursuing Oncor for close to a decade. With more than 3 million customers across North and West Texas, Oncor dwarfs Hunt’s own Sharyland Utilities – a relatively small player in the state’s transmission market with 50,000 customers.

When Energy Future filed for bankruptcy in April 2014, its initial reorganization plan called for Oncor to be handed over to a creditor’s group aligned with Hunt. But then NextEra jumped in with an offer, eventually forcing U.S. Bankruptcy Judge Christopher Sontchi to order an auction for the transmission company.

Hunt has since switched allegiances, partnering with a group of junior creditors led by the bankruptcy attorney Thomas Lauria. Known for his aggressive courtroom style, Lauria helped Nolan Ryan and Chuck Greenberg take control of the Texas Rangers in 2010.

The Hunt plan offers a potentially faster route out of a bankruptcy case that executives hoped would be completed months ago. Under the proposal put forward by Fidelity a month ago, the trial to decide how Energy Future’s assets are divided up would not have begun until early 2016.

In its filing Thursday, Energy Future said they were working with the Hunt group to begin that trial as early as October.

http://bizbeatblog.dallasnews.com/2015/07/hunts-play-for-oncor-gets-new-life.html/