Texas Competitive’s 2014 Earnings Lowered 13%, CreditSights Says
The deregulated unit of Energy Future Holdings Corp. will earn $1.74 billion next year, 13 percent lower than the previous estimate, according to CreditSights Inc.
The New York-based debt-research firm reduced Texas Competitive Electric Holdings Co.’s projected earnings before interest, taxes, depreciation, and amortization from a previous forecast of $2 billion based on “weak summer power prices,” CreditSights analysts Andy DeVries and Charles Johnston wrote in a report today.
The analysts see a restructuring at the unit that owns Luminant and TXU Energy before a coupon payment is due Nov. 1. Assuming two years in bankruptcy and Ebitda moving back to $2 billion in 2015 or 2016, Texas Competitive’s first-lien creditors will recover 73 cents on the dollar, up from an estimate of 65 cents, “based on higher gas prices and cash flow retention in bankruptcy,” they wrote.
Texas’ largest electricity provider, formerly known as TXU Corp., has struggled to cut debt since it was taken over in a $48 billion deal in 2007 led by KKR & Co., TPG Capital and Goldman Sachs Capital Partners, leaving it with more than $40 billion of obligations in a gamble natural gas prices would rise.
Instead, prices plunged more than 70 percent from a July 2008 high. The company said in April that creditors had rejected a pre-packaged bankruptcy plan to restructure $32 billion in bonds and loans held by its competitive power unit.
Allan Koenig, a spokesman for Dallas-based Energy Future, declined to comment on the report.
Texas Competitive’s $1.8 billion of 10.25 percent bonds due November 2015 traded at 3.75 cents on the dollar Sept. 9, up from an all-time low of 3.69 cents on Sept. 6, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.
The company’s $15.4 billion term loan that expires in October 2017 traded at 68.7 cents today, up from 67.6 cents on Sept. 3, according to data compiled by Bloomberg.
Energy Future said last month it has “engaged in additional discussions” with a broader group of creditors and continues to evaluate restructuring options including filing for Chapter 11 bankruptcy for some or all of the company, excluding power-line unit Oncor Electric Delivery Co.
Holders of Energy Future’s debt may get less of their money back than comparable restructurings when the power company that was the target of the biggest leveraged buyout in history files for bankruptcy this year, according to Moody’s Investors Service. Investors across the company will recover about 50 percent when it files in the fourth quarter, Moody’s analysts led by Jim Hempstead wrote in a note yesterday.
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