Directors of Energy Future Holdings Corp., the Texas power provider seeking to restructure $45.6 billion in debt, won dismissal of a complaint by Aurelius Capital Management over $725 million in interest on intracompany loans.
Aurelius claimed the lending terms didn’t reflect a fair transaction between the parent company and the unit that made the loans, Texas Competitive Electric Holdings Co. Aurelius sued as a creditor under the unit’s senior secured facilities and some of its secured bonds, according to a regulatory filing.
“No unaffiliated third party would have extended such loans,” Aurelius said in its March 19 complaint.
U.S. District Judge Jorge Solis in Dallas threw out the complaint yesterday, saying Texas law doesn’t permit creditors to claim breach of a fiduciary duty under the circumstances. He gave Aurelius 21 days to file an amended complaint.
Energy Future, formerly known as TXU Corp., was taken over in a record $48 billion buyout in 2007 led by KKR & Co., TPG Capital and Goldman Sachs Capital Partners. The Dallas-based company, which had been negotiating with creditors, last year decided to make a $270 million interest payment, buying it as much as five extra months out of bankruptcy.
The power producer chose to make the distribution after creditors failed to agree on a reorganization plan before a Nov. 1 payment deadline.
Texas Competitive Electric Holdings “made hundreds of unduly generous demand loans for billions of dollars” to Energy Future from November 2007 to January 2013, Aurelius said in court papers. The unit is owed more than $725 million in additional interest, Aurelius said.
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.
The case is Aurelius Capital Master Ltd. v. Acosta, 13-cv-01173, U.S. District Court, Northern District of Texas (Dallas).