Investors in Energy Future Holdings Corp.’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.
There’s a high probability that the electricity provider taken over in a $48 billion deal in 2007 led by KKR & Co., TPG Capital and Goldman Sachs Capital Partners “will announce a material restructuring in the fourth quarter,” probably giving investors across the company a recovery of about 50 percent, Moody’s analysts led by Jim Hempstead wrote in a note today.
“EFH is likely to see lower ultimate recoveries because of the sheer size of its debt load and the challenging market fundamentals” including low power prices and strict and expensive environmental regulations, they wrote.
Texas’s largest electricity provider, formerly known as TXU Corp., has struggled since the buyout left it with more than $40 billion of debt in a gamble natural gas prices would rise. Instead, prices plunged 74 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 debt held by its competitive power unit.
Allan Koenig, a spokesman for Dallas-based Energy Future, declined to comment on the report.
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 the senior secured first-lien notes from Energy Future Intermediate Holding and Texas Competitive Electric Holdings Co., the parent’s deregulated unit, may recover 68 percent and 63 percent respectively, while senior-unsecured lenders at Texas Competitive and the parent “would be pretty much wiped out,” recovering as little as 4 percent, the analysts wrote.
Investors ultimately recovered 92 percent from Calpine Corp., and 52 percent from NRG Energy Inc., according to the report. Enron Corp.’s investors recovered 24 cents on the dollar, and those at WorldCom Inc. 29 cents.
Texas Competitive’s $1.8 billion of 10.25 percent bonds due November 2015 traded at an all-time low of 3.47 cents on the dollar at 12:56 p.m. today in New York, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.