Energy Future Holdings Corp., the Texas power company taken private in a record buyout seven years ago, may scrap a reorganization plan negotiated before it filed for bankruptcy unless it can reach new terms with creditors.
The deal may have to be amended or thrown out, Edward Sassower, a lawyer for the company, said today at a hearing in Wilmington, Delaware, citing rising prices for the company’s debt and new offers for the company’s assets. If changes can’t be made by Aug. 8 at the latest, the plan will be terminated, he said.
Before filing for bankruptcy in April, Energy Future had a deal with senior lenders to split itself in two and give Oncor, its profitable, electricity-transmission unit, to one group and its unprofitable, power-generating unit to a different group.
The plan had drawn stiff resistance from creditors who were slated to get a smaller recovery than those who worked out the deal. Some proposed an arrangement of their own that included a takeover of Oncor by NextEra Energy Inc. (NEE:US)
Saying the original restructuring plan “reflected the best deal that was available” at the time, Sassower today told U.S. Bankruptcy Judge Christopher Sontchi that the company expects it to either be canceled in the next few days or modified so it terminates automatically on Aug. 8.
Tom Lauria, a lawyer for creditors opposed to the deal, said his clients were pleased with the announcement.
“It sounds like it is going to die,” he said. Now creditors need to study the company’s financial details to determine “not only what the value is, but where the value is,” he said.
The company may stand behind the idea of splitting Energy Future into two parts because of the tax advantages, Sassower said. It came up with that idea after studying alternatives for two years, he said.
NextEra sweetened the terms of its bid this week. The new offer would increase the valuation of Oncor by $500 million, NextEra and investors holding second-lien notes issued by Oncor’s parent company said yesterday in a court filing.
The case is Energy Future Holdings Corp., 14-bk-10979, U.S. Bankruptcy Court, District of Delaware (Wilmington).
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