Energy Future Postpones Hearing on Restructuring Agreement

Posted by Eric Haun
Friday, June 06, 2014

A lawyer for Energy Future Holdings, the bankrupt Texas power company, told a judge on Friday the company will postpone for a second time a hearing to approve an agreement that is key to its ambitious timeline to exit bankruptcy in 11 months.

The restructuring support agreement, or RSA, allows the company, Texas's largest power provider, to pay professionals and helps to hold its creditors to a process for restructuring its $42 billion in debt.

While the RSA hearing set for June 30 was postponed, U.S. Bankruptcy Court Judge Christopher Sontchi in Wilmington, Delaware, also barred an effort by junior creditors to use the RSA hearing to make their case that the company could afford to pay them more.

Energy Future filed one of the largest U.S. bankruptcies in April after a year of negotiations with creditors.

The company took on much of the debt in 2007, when it was formed with the record buyout of TXU Corp, led by KKR & Co , TPG Capital Management and the private equity arm of Goldman Sachs. The deal turned out to be an ill-timed bet on natural gas prices, which soon began to plummet.

The RSA outlines the company's plan to spin off its TCEH business, which owns Luminant power plants and the utility TXU Energy, to the unit's senior creditors, which are owed $24.4 billion.

The plan is opposed by junior creditors, who are owed $7.7 billion by TCEH. Under the plan, they will have to share about $200 million, or less than 3 cents on the dollar. Sontchi rejected their effort to use the RSA hearing to try to prove TCEH is being undervalued and they can get paid more.

Edward Sassower, a lawyer from the firm of Kirkland & Ellis who is representing Energy Future, said the company would postpone the RSA hearing to July 18 from June 30 because it could not comply with a June 20 deadline set by Judge Sontchi for disclosures, known as schedules.

"The debtors do not have confidence that we can file the schedules without errors by June 20," said Sassower. He said the company would seek the consent of the creditors and lenders that had signed on to the RSA to move the hearing to July 18.

Last month, the company postponed the RSA hearing to June 30 from early June.

While senior creditors will gain ownership of TCEH, less than half support the RSA plan, and they have been bickering over how to divvy up what they get under the proposal.

A lawyer for the junior creditors compared the bankruptcy to the differing classes on a flight.

"People in the front of the plane are arguing over caviar or lobster and will it be apportioned by row number or seat number," Chris Shore, of White & Case, told Sontchi, while his clients in coach hope "to get chips at some point."

The RSA also anticipates that unsecured creditors of EFIH, the other big part of Energy Future's business that controls the Oncor power line business, will take control of that unit when it emerges from bankruptcy.

Later Friday, Sontchi will be asked to approve a $5.4 billion loan that will be used to refinance senior creditors of EFIH.

(Reporting by Tom Hals in Wilmington, Delaware; Editing by Jeffrey Benkoe)

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