Marc Lipschultz, head of KKR & Co.’s Energy and Infrastructure unit, resigned from the board of directors at Energy Future Holdings Corp., the biggest power provider in Texas that’s seeking to restructure its $45.6 billion of debt.
Lipschultz played a leading role in the record $48 billion leveraged buyout of the former TXU Corp. led by KKR, Goldman Sachs Capital Partners and TPG Capital in 2007, according to his biography on KKR’s website. He served on Energy Future’s board since it was taken private and notified the company of his resignation on Jan. 17, according to a filing today with the U.S. Securities and Exchange Commission.
The buyout was a bet that natural gas prices, which set the price of electricity in Texas, would continue to rise; instead, prices fell as the development of hydraulic fracturing created a surge in U.S. gas supplies, triggering 10 straight quarterly losses since 2011. The power producer has been in talks with its creditors in an effort to agree on a plan to reorganize through bankruptcy.
“When you get into the zone of insolvency, the best thing is to have directors that are completely disinterested,” said Erik Gordon, a professor at the University of Michigan’s Ross School of Business in Ann Arbor.
Energy Future “has no immediate plans” to replace Lipschultz, whose resignation is effective immediately, said Allan Koenig, a spokesman for Dallas-based Energy Future. Kristi Huller, a spokeswoman at KKR, didn’t immediately return a telephone call seeking comment.
Energy Future has until March to sort out a plan for an organized restructuring when auditors may raise a doubt about its ability to remain a going concern, according to Andy DeVries, a New York-based analyst at CreditSights Inc.
Lipschultz’s departure leaves two KKR executives -- Jonathan Smidt and Brandon Freiman -- on Energy Future’s board, according to the company’s website.