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Energy Future May Use $5.4 Billion Loan to Pay Creditors

Energy Future Holdings Corp. won U.S. bankruptcy court approval of a $5.4 billion loan it plans to use to repay senior creditors of its regulated electricity-transmission unit.

U.S. Bankruptcy Judge Christopher Sontchi today approved the loan as well as a related settlement offered to senior creditors, overruling the lone objection.

“I have a fundamental disagreement with the objectors,” Sontchi said in court today. “I don’t view this as a discriminatory settlement.”

Energy Future, which was taken private seven years ago in a record $48 billion leveraged buyout, sought court protection April 29, listing $49.7 billion in liabilities. The Texas company has proposed splitting itself into regulated and deregulated units.

The regulated unit, which owns Texas’s biggest electricity transmission company, has proposed borrowing money to refinance its debt. Creditors dropped opposition to the $5.4 billion loan today after the company took some of their objections into account in the loan package.

The company’s deregulated unit, Texas Competitive Electric Holdings, would be given to its senior lenders. That deal faces more opposition from lower-ranking creditors who may get nothing should Sontchi approve that proposal.

Related Settlement

The loan will be used to pay senior lenders of the company’s regulated unit, Energy Future Intermediate Holding Co., who have accepted the related settlement before their debts matured. Under the settlement, the company will pay the senior lenders less than the full amount of an early termination payment they claim they’re owed.

The senior lenders, including those who are not settling, will be repaid all of the principal and normal interest they are due. Some senior lenders also want the full value of the early termination payment.

The lenders who have rejected the settlement have the option of participating in a trial Sontchi has scheduled for September about whether the company can refuse to pay any termination payment.

The case is Energy Future Holdings Corp., 14-bk-10979, U.S. Bankruptcy Court, District of Delaware (Wilmington).

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