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Restructuring experts circling ailing company at heart of biggest ever LBO

18 Feb 2013

energy_electricity_power_170sqThe ailing energy company at the centre of the largest leveraged buyout in history is reportedly being tipped for bankruptcy by lawyers and bankers with an eye on a restructuring of the company.

Energy Future Holdings was known as TXU Corp when KKR, TPG Capital and Goldman Sachs Capital Partners bought it in a $43.2bn deal 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 and placing the entire future of the company at risk.

The Texas-based company has enough cash to pay its debts this year, but has already contacted law firm Kirkland & Ellis and financial advisors Evercore Partners and Blackstone over restructuring, according to Reuters.

It also said law firms such as Cadwalader Wickersham & Taft, Brown Rudnick, Otterbourg Steindler Houston & Rosen, and White & Case were interested in taking part in the restructuring process, citing unnamed people close to the matter.

About 95 per cent of the consortium’s investment in TXU has been written off since the deal, while a filing with the US Securities and Exchange Commission last June showed the company’s debt to EBITDA ratio was 9.5 times.

Reuters said the company extended the maturity date on a $16.5bn term loan from 2014 to 2017 last month, and has enough liquidity to survive until a $3.85bn bank loan matures in October next year.

The company’s debt is held by scores of lenders including Aurelius Capital Management, Centerbridge Partners and Angelo Gordon & Co, it added.

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