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TXU Seeks $1.4 Billion Bond Exchange, Requests Loan Extension

Energy Future Holdings Corp., the KKR & Co.-backed utility struggling to avoid default, has begun a $1.4 billion bond exchange to push out maturities as it seeks to extend the portion of its credit line due next year.

Energy Future, formerly known as TXU Corp., proposed yesterday to exchange as much as $1.3 billion of new 10 percent senior secured notes due 2020 for existing notes, according to a regulatory filing. It’s also seeking permission from secured bondholders to scrap “many of the restrictive covenants” in the notes’ indentures, according to the filing.

The company also is offering to swap as much as $124 million of unsecured notes due in 2018 in exchange for obligations due in 2017.

The company is asking lenders to extend until 2016 $645 million of a revolving loan that matures in 2013 at its Texas Competitive Electric Holdings Co. unit, according to the filing. One undisclosed lender holding $425 million of the financing already agreed to the transaction, Dallas-based Energy Future said in the document.

KKR & Co., TPG Capital and Goldman Sachs Capital Partners acquired the electric power utility for about $43 billion in 2007 in the largest leveraged buyout ever.

TCEH will add $340 million of term loans if all the revolving credit commitments due in 2013 are extended, according to the filing.

‘Likely’ Default

A default “is highly likely to occur within the next 12 months” at TCEH, Jim Hempstead, senior vice president at Moody’s Investors Service, wrote in a Dec. 5 report. Energy Future and the parent of its Oncor Electric Delivery Co. unit were “increasingly unlikely” to default, he wrote.

Oncor is regulated and distributes power to homes and businesses, while TCEH operates in the unregulated market and has suffered from falling natural gas prices that are used to set the electricity rates

TCEH has $1.3 billion of cash and $114 million of borrowing capacity left under a letter of credit, according to yesterday’s filing. It has $700 million of debt maturing in 2013 and $3.9 billion due in 2014, with annual interest payments of $2.7 billion next year and $2.6 billion in the following period.

The unit had earnings before interest, taxes, depreciation and amortization of $1.78 billion in the 12 months through June 30, according to data compiled by Bloomberg.

As part of the loan extension request, Citigroup Inc. will resign as so-called swingline lender, Energy Future said in the filing.

Money under a revolving credit line can be borrowed again once it’s repaid.

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