Energy Future Term Loan Drops Before November Coupon Payment Due

Energy Future Holdings Corp.’s first-lien term loan fell to the lowest level in eight months, three weeks before the electricity provider heading for bankruptcy is scheduled to make coupon payments to junior bondholders.

Texas Competitive Electric Holdings Co.’s $15.4 billion term loan dropped 0.7 cent today to 66.3 cents on the dollar, the lowest level since Feb. 14, according to prices compiled by Bloomberg. The loans are down from 74.2 cents on May 21.

The former TXU Corp. is scheduled to make $270 million in coupon payments on Nov. 1 to junior bondholders. Those investors may recover as little as 4 percent in a bankruptcy reorganization, Moody’s Investors Service said in a Sept. 9 report.

Texas Competitive’s $1.83 billion of 10.25 percent senior unsecured bonds, which pay interest on Nov. 1, traded at 3.38 cents as of 1:46 p.m. in New York, up from an all-time low of 1.87 cents on Sept. 25, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

“We continue to have a high degree of confidence” in an Energy Future restructuring before the interest payment is due Nov. 1, debt-researcher CreditSights Inc. analyst Andy DeVries wrote in a report today.

Allan Koenig, a spokesman for the Dallas-based company, declined to comment.

Energy Future has struggled with its debt load since it was taken private in 2007 by KKR & Co., TPG Capital and Goldman Sachs Capital Partners for a record $48 billion. Creditors are working on a bankruptcy proposal to cut the company’s $43.6 billion of obligations before its November coupon payment. Lenders turned down an initial proposal advanced by the company, according to an April 15 regulatory filing.

Texas’s largest electricity provider made a coupon payment Oct. 1 as scheduled, a person with knowledge of the transaction said at the time. The company owed as much as $59 million in interest in October, CreditSights said in a Sept. 29 report.

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