TXU Bonds Plunge as Advisers Hired, Restructuring ApproachesPaul Armstrong and Brian Swint
Bonds of the Texas electricity provider formerly known as TXU Corp. plummeted to the lowest level on record before a potential restructuring of the debt raised to fund the largest leveraged buyout in history.
The $1.83 billion of 10.25 percent bonds due November 2015 issued by Energy Future Holdings Corp.’s unregulated Texas Competitive Electric Holdings Co. fell 9.3 cents to 15 cents on the dollar at 8:58 a.m. in New York, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. That’s the lowest level the notes have traded since they were issued in December 2008.
Energy Future retained law firm Kirkland & Ellis LLP to help restructure its debt load, and the private-equity firm KKR & Co. that partly owns the company hired Blackstone Group LP, according to a person familiar with the situation, who asked not to be identified, citing lack of authorization to speak publicly. The Wall Street Journal reported the hires yesterday on its website.
Energy Future, based in Dallas, has also tapped Evercore Partners Inc. as an adviser, according to a person familiar with the matter. The Journal earlier today reported the hiring of Evercore and Miller Buckfire & Co.
Allan Koenig, a spokesman at Energy Future, said the company doesn’t comment on the identities of its specific advisers. Pete Rose, a spokesman at Blackstone, Kristi Huller at KKR and Kate Slaasted of Chicago-based Kirkland & Ellis declined to comment.
Energy Future has $47.2 billion of debt, data compiled by Bloomberg show, after being taken private by KKR, TPG Capital and Goldman Sachs Capital Partners in 2007.
The company has struggled to be profitable ever since the LBO, as the shale revolution created a glut of natural gas, pushing U.S. prices to the lowest since 1999 last year. It has posted seven consecutive quarterly losses and had $37.4 billion of long-term borrowings as of Sept. 30.
Energy Future’s 2012 net loss widened to $2.17 billion from $1.91 billion the previous year as revenue fell, the company said Jan. 22 in a filing of preliminary results with the U.S. Securities and Exchange Commission. The company is due to publish fourth-quarter results on Feb. 15
The 2012 loss doesn’t include non-cash charges that may result from impairment to goodwill or intangible assets, the company said.
Energy Future has sought to protect the profitable part of its company from a potential restructuring at its unregulated unit by paying off intercompany loans and extending and amending debt maturities amid a slump in electricity prices.
Creditors agreed to exchange $1.37 billion of Energy Future’s bonds and to amend rules governing its securities to shift liabilities, the company said Jan. 9.
Billionaire investor Warren Buffett said a year ago that his $2 billion investment in Energy Future in 2007 was at risk of being wiped out. He wrote down holdings related to the company for the past three years and has called the investment “a big mistake.”