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Lengthy bankruptcy likely for private equity-backed Energy Future

21 Feb 2014

texas cattleEnergy Future Holdings, which was taken private in the world’s biggest LBO deal in 2007, is reportedly unlikely to emerge from bankruptcy anytime soon.

Efforts to negotiate a restructuring deal for the Texas utility are looking bleaker and a long bankruptcy is starting to look like the most likely option, said Reuters, citing several people close to the matter.

The time is running out before potential defaults and a free-fall bankruptcy is looking more likely, said three of the people.

A bankruptcy would likely lead to the breakup of Energy Future, but it is unclear how it would be broken up and it could still be kept together, two people told Reuters.

The sources said there is a disagreement over whether holders of senior loan debt are entitled to a tax basis step up, which would enable them to save on tax payments post-bankruptcy.

Energy Future is in talks for a $4bn loan to fund its holding company through bankruptcy and for a bankruptcy loan with a consortium that includes Citigroup, according to the report.

KKR, TPG Capital and Goldman Sachs Capital Partners took the company private in the world’s biggest LBO deal in 2007, loading it with about $35bn of debt.

Last year the company’s lenders turned down a proposed $32bn debt restructuring plan for being too lenient on Energy Future’s owners.

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