An adviser to Energy Future Holdings Corp. said Fidelity Investments has an option to fund $500 million of a $5.4 billion loan for reorganizing its regulated power business, while Pacific Investment Management Co. has committed to backing almost $1.5 billion of the financing.
In a court filing this week, the adviser, David Ying, head of Evercore Group LLC’s restructuring group, also responded to junior lenders who object to incentives proposed for senior creditors, saying a 1.75 percent fee was reasonable and necessary to secure their support for the loan.
“It is the product of extensive, virtually nonstop, good-faith negotiations that spanned the first four months of 2014 between interested parties,” he said. The Fidelity deal helped talks with Pimco, he said.
The Texas power provider last week agreed to delay until June 30 a court fight over an agreement it struck with some creditors before filing for bankruptcy last month. Today, it extended the time for junior lenders to opt into the bankruptcy deal until July 3, also delaying the date when they can receive a premium for agreeing to its plan until June 11.
Pimco may withdraw its backing if certain deadlines aren’t met, Ying said in the May 25 filing in U.S. Bankruptcy Court in Delaware as part of the company’s request for a judge’s approval of the $5.4 billion loan.
Some creditors have opposed splitting the company into regulated and deregulated entities, as Dallas-based Energy Future plans to do, as well as the fees to what they call “privileged” lenders.
Pimco, together with another investor, which also will back the $5.4 billion loan, owned 32 percent of the company’s senior, or first-lien, notes when they signed the restructuring agreement, according to Ying. As of April 29 they held 21 percent of the senior notes outstanding, he said.
Fidelity, an 11 percent holder of senior notes as of the bankruptcy filing, also owned about 73 percent of Energy Future’s unsecured debt and 30 percent of the regulated unit’s junior, or second-lien, notes, he said.
To cut its interest costs, Energy Future plans to pay about $4 billion of senior notes and $2.2 billion of junior notes. By May 19, holders of 42 percent of senior notes had agreed to exchange their securities for bankruptcy loans, Ying said.
Rothschild Inc., an adviser to junior lenders who were asked to join in a $1.9 billion cash loan to the regulated unit, said in a filing this month that it helped devise an alternate debtor-in-possession, or DIP, loan to be arranged with JPMorgan Chase & Co. It would cut out preferential payments such as Fidelity’s and give lenders more time to decide whether they want to participate in the exchange, among other benefits.
The proposed reorganization plan will almost wipe out the equity of former owners KKR & Co., TPG Capital and Goldman Sachs Capital Partners. The firms took the former TXU Corp. private in a record leveraged buyout seven years ago.
Energy Future set a goal of leaving court protection in 11 months when it filed for bankruptcy April 29, listing $49.7 billion in liabilities. It’s borrowing about $10 billion of so-called debtor in possession money for two years.
The case is Energy Future Holdings Corp., 14-bk-10979, U.S. Bankruptcy Court, District of Delaware (Wilmington).