Energy Future Holdings Corp. is near obtaining commitments from lenders for about $7.2 billion in loans for the power provider’s regulated businesses as part of a plan to speed a bankruptcy reorganization, according to two people with direct knowledge of the talks.
The debtor-in-possession financing, typically used to fund operations during Chapter 11 proceedings, would include a $5.2 billion portion being provided by lenders including Citigroup Inc. (C), Morgan Stanley (MS) and Deutsche Bank AG, said the people, who asked not to be identified because the talks are private. A second loan for as much as $2 billion would give the company the option of repaying existing second-lien debt at its Energy Future Intermediate Holding Co. division.
The loans are part of talks by Energy Future, its private-equity owners and unsecured lenders to the parent and its Intermediate division to solidify a plan aimed at avoiding a free-for-all during Chapter 11 proceedings. The Dallas-based company, known as TXU Corp. when KKR & Co., TPG Capital and Goldman Sachs Capital Partners took it private in 2007 in the largest leveraged buyout ever, is seeking to restructure $45.6 billion of debt before month-end, when auditors may raise doubts about its ability to remain a going concern.
Allan Koenig, a spokesman for Energy Future, declined to comment, as did Mayura Hooper, a spokeswoman for Deutsche Bank and Robert Julavits of Citigroup. Mark Lake, a spokesman for Morgan Stanley, didn’t immediately comment.
Energy Future’s deregulated unit, Texas Competitive Electric Holdings, is separately arranging more than $4 billion of DIP financing for that business, one of the people said.
The company’s private-equity owners have been seeking to forge a reorganization plan that would keep the power giant together during a bankruptcy, giving them a chance to retain an equity stake. A failure to keep the regulated and deregulated portions of the company intact could trigger a tax bill of at least $2 billion, the company said in a regulatory filing last April.
Nailing down a restructuring plan for the regulated side of the company may entice debtholders at the deregulated division to agree to a reorganization that wouldn’t trigger the tax liability, one of the people said.
The private-equity firms and the unsecured lenders at the Intermediate unit have agreed to the restructuring plan; Fidelity, which is a key bondholder in the parent company, has balked so far, the person said.