Energy Future Holdings Corp. lenders may recover 74 cents on the dollar if the KKR & Co.-controlled power producer files for bankruptcy, according to debt research firm CreditSights Inc.
The value is up from 72.5 cents, for holders of the senior ranking borrowings for Energy Futur’s Texas Competitive Electric Holdings because a $340 million fee paid to extend another loan is no longer being taken into account in calculating recovery rates, CreditSights wrote in a report today.
The Texas Competitive unit may restructure later this year as the reduction in its hedges against fluctuations in gas prices governing electricity rates would mean that it will violate its debt covenants, according to the report. The company’s first-lien loan due in 2017 rose to 71.7 cents on the dollar today, according to prices compiled by Bloomberg. The debt traded as low as 53.3 cents a year ago.
Texas’s largest electricity provider, formerly known as TXU Corp., was bought by KKR, TPG Capital and Goldman Sachs Capital Partners in 2007 in a transaction that saddled it with more than $40 billion in debt, according to data compiled by Bloomberg. The deal was a bet that gas prices would rise and give the company’s power plants competitive advantage.
Instead, gas prices fell to a 10-year low last year. Natural gas futures traded at $4.08 per million Btu today, from $6.88 when KKR and TPG Capital took Energy Future private
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