Energy Future Recoveries Shrink for Some Creditors, S&P Says

Secured lenders to a unit of Energy Future Holdings Corp. probably will get less of their money back from the bankruptcy-bound power producer as its liabilities grow, including from new loans that will fund its reorganization, Standard & Poor’s said.

The credit grader said it now expects creditors holding the first-lien debt of Energy Future’s Texas Competitive Electric Holdings division to recover from 30 percent to 50 percent of their principal. That compares with a previous forecast of recoveries “marginally above” 50 percent, S&P said in a statement today.

Energy Future said in regulatory filings this week that it was skipping $109 million of interest payments due April 1 and using grace periods to avoid default. It also delayed an annual report that may have included a qualification to its ability to continue as a going concern, which would have triggered a default, the company said.

The company, which was taken private for $48 billion in 2007 in the biggest leveraged buyout ever, is working toward a restructuring plan that would reduce the time it takes to reorganize in Chapter 11.

The discussions include about $4.5 billion of bankruptcy financing known as debtor-in-possession loans that would get repaid before existing creditors, the company said in one of the filings. With those loans, and hedging liabilities of about $1.1 billion, “estimated claims have increased,” the S&P analysts said.

Adam McGill, a spokesman for Energy Future, declined to comment.

To contact the reporter on this story: Shannon D. Harrington in New York at

To contact the editors responsible for this story: Shannon D. Harrington at Caroline Salas Gage, John Parry

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