Posted on 04/29/2014 7:20:35 AM PDT by thackney
Dallas-based Energy Future Holdings filed for Chapter 11 bankruptcy protection early today after reaching a deal with creditors that calls for breaking off its power generation and retail arms in exchange for reducing debt. The bankruptcy petition was filed in Delaware.
The state’s largest power company, formed in 2007 with the $45 billion buyout of the former TXU Corp. led by KKR, Texas Pacific Group and Goldman Sachs, has been struggling under the weight of $40 billion in debt as its revenues have plunged with lower prices for natural gas and electricity.
Under terms of the proposed restructuring agreement, Texas Competitive Electric Holdings — which includes the company’s unregulated power company Luminant Generation and retail provider TXU Energy — would be transferred to its first lien lenders in a deal that would eliminate approximately $23 billion of its debt, the company said in a news release. Luminant is the state’s largest power generator. TXU Energy is Texas’ biggest electricity retailer, with more than 1.5 million customers.
Energy Future Intermediate Holdings, which owns 80 percent of Oncor Electric Delivery, will remain part of Energy Future Holdings, although creditors would gain an unspecified stake in the unit under a proposal that calls for a new debt structure. Oncor, a regulated utility that operates the power lines serving much of North Texas, is not part of the bankruptcy filing.
“We are pleased to have the support of our key financial stakeholders for a consensual restructuring,” said John Young, president and chief executive officer of Energy Future Holdings, in a prepared statement. “This restructuring is focused on our balance sheet, not our operations. We fully expect to continue normal business operations during the reorganization.”
EFH said it expects to file its plan of reorganization “in the near term.”
(Excerpt) Read more at star-telegram.com ...
So their “key financial holders” get the assets and the small investor gets nothing?
Bankruptcy won’t hit TXU Energy operations
http://fuelfix.com/blog/2014/04/29/bankruptcy-wont-hit-txu-energy-operations/
Energy Future Holdings, which filed for bankruptcy this morning, stressed that its operations will continue as usual during the Chapter 11 proceedings.
That means its customers, including those of its retail electric business – TXU Energy — can expect business as usual. TXU serves markets throughout Texas, including the Houston area.
Texas’ power grid operation, the Electric Reliability Council of Texas, put out a bulletin this morning saying much the same.
“It is our understanding that EFH and its affected subsidiaries expect to continue operating generation assets and serving retail customers in Texas,” the grid operator said in a statement.
Energy Future Holdings also transmission lines and power plants that aren’t in the Houston area.
“(The) transmission business is not included in the bankruptcy filing,” ERCOT said. “Therefore, ERCOT sees no immediate concerns related to system reliability or market efficiency associated with this filing.”
“With this restructuring plan, we now have a path to a sustainable capital structure that would put EFH and its family of companies in an even stronger position over the long term to deliver for all of our stakeholders, including our customers, our employees and our business partners,” John Young, president and chief executive officer of EFH, said in a statement. “This restructuring is focused on our balance sheet, not our operations. We fully expect to continue normal business operations during the reorganization.”
I don’t consider a lien holder the same as “key financial holder”.
In a bankruptcy common shareholders usually get nothing, whether large or small. It's the secured debt holders and preferred shareholders who are first in line for assets.
I'm just about out of the stock market. I'll no longer purchase even my small number of shares in a company that doesn't have very low debt and a plan to pay it.
Translation: "The executives get to keep their multi-million dollar comp packages. John Young made $6+ Million in salary and bonus in 2012."
If someone thinks that's the case they can always tell the bankruptcy judge about it. I learned the hard way that common shareholders get left holding the bag. Caveat emptor, do your due diligence, etc.
This was the largest LBO in US history. It was all predicated on the price of natural gas staying up.
A lot of people got it wrong back then in 2005-2006.
T Boone Pickens. Sarah Palin
A ‘lien holder’ is a ‘secured debt holder’.
BTTT
“What I don’t much care for is when the assets of a company are stripped to pay off the secured debt holders leaving the stockholders out.”
TXU was taken PRIVATE in a 2006 Leveraged buyout, financed by Goldman-Sach’s, Kohlberg Kravis Roberts, Texas Pacific Group.
They loaded the company down with debt, on the assumption that it could finance itself off of revenues. OOPS... Obama’s war on coal and Nuclear has really hurt them, driving up production costs.
Watch how many Obama-supporting Oligarch’s come out with big parts of the company.
Crony capitalists to provide the money, entitlement army to provide the votes. A winning Democrat strategy.
TXU posted 35% profit margin on the back of deregulation. The LBO was based on that profit margin, not recognizing that the profit margin was not supportable from the market.
No sympathy here for these folks.
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