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Energy Future Holdings Chpt 11. $24b debt
Energy Future Holdings Corp.'s deal-based chapter 11 plan cleared another hurdle Monday when a judge granted the company permission to start polling creditors on the proposal.
The Dallas energy company filed for bankruptcy protection in April 2014 , overloaded with debt in a depressed energy market. Its chapter 11 plan is premised on selling its valuable Oncor power transmissions business to an alliance of creditors and Hunt Consolidated Inc.
Once the votes are counted, Energy Future is slated to return to court in November to seek confirmation of its chapter 11, a ruling that will call on the company to prove the strategy is fair to creditors and will resolve the financial troubles that triggered the bankruptcy.
In addition to another level of court review, Energy Future's debt workout must pass muster before Texas energy regulators and the Internal Revenue Service . The Oncor transaction is premised on getting favorable rulings on a transformation of the business into a real estate investment trust.
The company's energy retailing and generating division, the so-called "T-side" of Energy Future , will be spun out into a new company under the plan. Senior lenders owed more than $24 billion will swap their holdings for the reorganized T- side company.
Many of the T-side creditors are pledged to support Energy Future's chapter 11 emergence plan, under an agreement approved last week. Many are also investing in the Oncor buyout. The Oncor deal has been touted as a way out for a company that was bogged down in a contentious bankruptcy case, a means of raising enough cash to silence potential foes.
Creditors of Energy Future's "E-side" division, which owns Oncor, have been promised payment in full under the chapter 11 plan, so they won't be getting ballots to cast votes on it.
That could prove a fatal error on the part of Energy Future if Fidelity Research & Management Co. succeeds in attacking the chapter 11 plan. Fidelity says it is entitled to a vote on the chapter 11 plan and isn't getting one.
Fidelity, a big investor in the Energy Future parent company debt, says it was repeatedly promised payment in full in cash. Friday night, however, Fidelity found out Energy Future intends to reinstate the parent company debt holdings, nearly $500 million worth, as debt of the reorganized T-side company.
Gary Kaplan , lawyer for Fidelity, said the move harms investors in parent company debt. Reinstatement doesn't make them whole, he said. It makes them junior investors in a coal-mining, electricity-generating and retailing operation, in a market where such assets are struggling to stay ahead of their debts.
Energy Future said the information was added to clarify Fidelity's treatment under the chapter 11 plan, and it isn't a material change. Standard language has long provided the company could pay off parent company debt in cash or by some other means that amounts to payment in full, the company contends.
If Fidelity convinces the judge that investors in parent company debt aren't getting everything they are owed, and they were deprived of the chance to cast a ballot, "that would be fatal to confirmation," commented Judge Christopher Sontchi .
Monday's preliminary review of voting materials focused on the question of whether the company had provided sufficient information to creditors about what they will get if Energy Future's plan comes to fruition. The judge found the 200- page voting report sufficient.
(Dow Jones Daily Bankruptcy Review covers news about distressed companies and those under bankruptcy protection. Go to http://dbr.dowjones.com)
Write to Peg Brickley at [e-mail]
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(END) Dow Jones Newswires
09-21-15 1344ET
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