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Largest LBO Puts Energy Future-Backed Bonds at Risk: Muni Credit

OppenheimerFunds Inc. and Nuveen Asset Management LLC lead municipal-bond investors that may see as much as $1 billion of combined holdings wiped out as Energy Future Holdings Corp. teeters on the brink of bankruptcy.

The Texas utility, previously known as TXU Corp., borrowed through three river-management agencies more than a decade ago to pay for pollution control equipment. The company was bought in 2007 in the largest leveraged buyout in history, which added debt to its balance sheet and bumped holders of its munis below other creditors in payment priority. The owner of Texas’s biggest electricity provider has struggled as natural-gas prices sank, and some of the bonds have lost 97 percent of their value.