Energy Future Holdings Chapter 11 Exit Plan Advances
November 25 2015 - 1:10PM
Dow Jones News
Energy Future Holdings Corp. could win confirmation of its
chapter 11 exit plan as early as next week, far ahead of schedule,
after to a number of recent settlements that were approved on
Wednesday by a bankruptcy judge.
"We sit here with settlements that substantially smooth the way
toward consensual confirmation," Judge Christopher Sontchi said at
a hearing in the U.S. Bankruptcy Court in Wilmington, Del.
The judge signed off on deals that end litigation and quiet most
of the remaining objections to Energy Future's plan to emerge from
chapter 11.
Judge Sontchi set a Dec. 2 hearing for closing arguments on
Energy Future's chapter 11 plan, which is actively backed by more
than 90% of its creditors.
The outbreak of peace is a significant change for a chapter 11
proceeding that was marked by contention for more than a year. It
is also a boost to Energy Future's plan to split itself in two and
sell its Oncor transmission business to get its debts in line.
Energy Future was taken private in 2007 by KKR & Co., TPG
and Goldman Sachs Group Inc.'s private-equity arm in a $31.8
billion deal. It filed for bankruptcy in April 2014, a victim of
plummeting natural-gas prices and too much debt.
The Dallas energy company then saw its $42 billion restructuring
plan bog down in fights among warring creditors. Although a number
of creditors backed the chapter 11 plan the company ultimately
presented, there was still significant opposition as confirmation
hearings began, notably from mutual fund giant Fidelity Research
and Management and creditors of the Energy Future unit that owns
Oncor.
Under the plan, Energy Future's
electricity-generating-and-retailing division will be spun off and
handed over to senior creditors owed more than $24 billion. Oncor
will be sold in a deal that, if successful, will provide cash to
pay off many of Energy Future's debts and appease other creditors
with the opportunity to invest.
Fidelity settled its quarrels with Energy Future in
mid-November, not long after other major institutional investors
came to terms with the company over disputes involving the amount
of interest due on debts. That left the official committee of
unsecured creditors of one division to negotiate on behalf of
smaller bondholders and other creditors that didn't have the clout
to bargain on their own.
The committee brokered a settlement that gives smaller creditors
the advantage of the deals struck by big institutions and
safeguards them against the risk that Energy Future's plan to sell
Oncor doesn't work out, said Andrew Dietderich, lawyer for the
committee.
Settlements were worked out in the hallway while the chapter 11
plan confirmation fight was waged in the courtroom. In addition to
cash, Energy Future offered creditors the opportunity to join in
the investing opportunity presented by the Oncor sale plan.
Oncor is slated to be taken over by a group of existing
creditors and outside investors, led by Hunt Consolidated Inc. The
takeover depends on favorable rulings by the Internal Revenue
Service and the Public Utility Commission of Texas.
Bondholder lawyer Thomas Lauria, one of the chief architects of
the Oncor deal, on Wednesday said Energy Future's chapter 11 plan
is a "big complex structure of one settlement built upon another,"
all of them hanging on an innovative deal.
Oncor is to be converted to a real estate investment trust, a
feat that has been accomplished, by Hunt, but one that is being
attempted on a larger scale as part of Energy Future's exit
strategy.
As a REIT, the cash-generating transmissions business will have
tax advantages not available as the business is currently
structured.
Mr. Lauria said on Wednesday that he hopes Energy Future will be
able to implement its chapter 11 plan in the first quarter of
2016.
NextEra Energy Inc., which made a play for Oncor last year, has
let regulators and Energy Future know it's still interested in the
business and isn't counting on a REIT structure to make Oncor
attractive.
If regulators reject the Hunt takeover, Energy Future's chapter
11 exit plan has a fail-safe provision that will allow the company
to pursue an alternative exit plan swiftly, without renewed
hostilities from creditors
Write to Peg Brickley at peg.brickley@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
November 25, 2015 12:55 ET (17:55 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
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