Energy company Energy Future Holdings, which was acquired in the world’s biggest leveraged buyout in 2007, is reportedly edging closer to filing for Chapter 11 bankruptcy protection.
The company, which has debts of $37.6bn, could file before November 1 when it is due to make a $270m payment to bondholders, said FT, citing its creditors.
Energy Future Holdings’ senior creditors including private equity firms Apollo Capital, Centerbridge, and Oaktree Capital, would prefer to force it to file for bankruptcy before that payment is made to bondholders as their claims are junior to theirs.
This could lead to one of the biggest corporate restructurings in history, which could wipe out the private equity backers and leave debt investors in control, said the report.
Earlier in 2013 Energy Future Holdings’s lenders rejected a proposed $32bn debt restructuring plan for being too lenient on the company’s private equity owners.
KKR, Goldman Sachs Capital Partners and TPG Capital offered to creditors the chance to swap their existing debt in Energy Future Holdings for a combination of debt and equity according to a filing with the US Securities and Exchange Commission.
The company was known as TXU Corp when the trio of firms bought it in a $43.2bn deal at the peak of the buyout boom, loading it with about $35bn of debt in the process.
About 95 per cent of the consortium’s investment in TXU has been written off since the deal, while a regulatory filing last June showed the company’s debt to EBITDA ratio was 9.5 times.
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