KKR, TPG, Goldman net $520m fees from debt-stricken energy giant TXU


The trio of private equity firms behind the largest leveraged buyout in history have paid themselves more than $500m in fees, despite dragging the debt-ridden company towards potential bankruptcy.

KKR, TPG Capital and GS Capital Partners paid $43.2bn for Dallas-based energy company TXU at the peak of the buyout boom, loading it with about $35bn of debt in the process.

That debt pile has risen to more than $42bn since the 2007 transaction, all but wiping out the firms’ initial equity stake amid a continued slump in natural gas prices.

But the trio have paid themselves a total of $528.3m in fees since making the ill-fated purchase, according to a regulatory filing by the renamed Energy Future Holdings Corp.

It shows the breakdown of payments as $300m for advising on the deal, $171m in management fees and more than $57m for consultation on debt deals.

EFH is now facing possible bankruptcy or restructuring with debt paybacks looming in 2014, although it is yet to default on a debt obligation.

Despite that, its ratio of debt to EBITDA was 9.5 times, according to a filing with the US Securities & Exchange Commission in June.

Other multibillion-dollar deals struck at the height of the private equity boom have also managed to stave off bankruptcy, with some even going on to reap huge profits for their owners.

Hospital chain HCR was bought by KKR, Bain Capital and Merrill Lynch for $5.5bn of equity and $26.1bn of debt in 2006.

The company subsequently raised $3.8bn during a public listing last year, making it the largest private equity-backed IPO in history.

Other megadeals to have ridden out the financial crisis include Caesars Entertainment and Freescale Semiconductor.

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