A $1 Billion Price Tag to Avoid Default

When Henry Kravis's KKR (KKR) and David Bonderman's TPG Capital paid $43.2 billion—much of it borrowed—for Texas energy company TXU in October 2007, it was the biggest buyout in history. Since the deal, natural gas prices have plunged more than 39 percent, curbing the Dallas-based utility's revenue, which fell to $8.2 billion last year from $11.4 billion in 2008. Now the company, renamed Energy Future Holdings, may pay more than $1 billion to renegotiate some of its loans.

Lenders holding $15.37 billion of term loans agreed to push their due date to 2017, according to an Apr. 13 news release. They also agreed to extend revolving line of credit and letter of credit loan maturities. In return, the company offered to pay its lenders a 3.5 percent fee and an extra 1 percentage point a year in interest for the extended term and letter of credit loans. That would be $574 million upfront and $164 million in annual interest for as long as six years. On Apr. 7 lenders approved changes to Energy Future's loan agreements to allow the company to address a claim by Aurelius Capital Management, a hedge fund that said it had violated the agreements. Lenders that agreed to the change were paid a fee of half a percentage point of the loan amount, according to a regulatory filing.