Energy Future Holdings Corp. is near obtaining commitments from lenders for about $7.2 billion in loans for the power provider’s regulated businesses as part of a plan to speed a bankruptcy reorganization, according to two people with direct knowledge of the talks.
The debtor-in-possession financing, typically used to fund operations during Chapter 11 proceedings, would include a $5.2 billion portion being provided by lenders including Citigroup Inc., Morgan Stanley and Deutsche Bank AG, said the people, who asked not to be identified because the talks are private. A second loan for as much as $2 billion would give the company the option of repaying existing second-lien debt at its Energy Future Intermediate Holding Co. division.
The loans are part of talks by Energy Future, its private-equity owners and unsecured lenders to the parent and its Intermediate division to solidify a plan aimed at avoiding a free-for-all during Chapter 11 proceedings. The Dallas-based company, known as TXU Corp. when KKR & Co., TPG Capital and Goldman Sachs Capital Partners took it private in 2007 in the largest leveraged buyout ever, is seeking to restructure $45.6 billion of debt before month-end, when auditors may raise doubts about its ability to remain a going concern.
Allan Koenig, a spokesman for Energy Future, declined to comment, as did Mayura Hooper, a spokeswoman for Deutsche Bank and Robert Julavits of Citigroup. Mark Lake, a spokesman for Morgan Stanley, didn’t immediately comment.
Energy Future’s deregulated unit, Texas Competitive Electric Holdings, is separately arranging more than $4 billion of DIP financing for that business, one of the people said.
The company’s private-equity owners have been seeking to forge a reorganization plan that would keep the power giant together during a bankruptcy, giving them a chance to retain an equity stake. A failure to keep the regulated and deregulated portions of the company intact could trigger a tax bill of at least $2 billion, the company said in a regulatory filing last April.
Nailing down a restructuring plan for the regulated side of the company may entice debtholders at the deregulated division to agree to a reorganization that wouldn’t trigger the tax liability, one of the people said.
The private-equity firms and the unsecured lenders at the Intermediate unit have agreed to the restructuring plan; Fidelity, which is a key bondholder in the parent company, has balked so far, the person said.