Energy Future Board Said to Meet on Two Bankruptcy Plans

Energy Future Holdings Corp.’s directors are meeting today to consider two creditor proposals for reorganizing the power producer in bankruptcy, with or without the blessing of one of its biggest lenders, according to two people with knowledge of the talks.

The board is seeking a plan that would reduce the amount of time it takes to restructure the company’s $45.4 billion of debt in Chapter 11 proceedings. One of the plans wouldn’t include Fidelity Investments, which has been a key holdout, said the people, who asked not to be identified because the discussions are private.

The electricity provider formerly known as TXU Corp., which KKR & Co., TPG Capital and Goldman Sachs Group Inc.’s private-equity arm took private in 2007 in the largest-ever leveraged buyout, is racing to finish up the talks before May 1, when it would be considered in default, accelerating repayment of its obligations. A bankruptcy blueprint would limit the chaos of a free-for-all filing and may allow the company to avoid triggering a tax bill that could exceed $7 billion.

Adam McGill, a spokesman for Dallas-based Energy Future, declined to comment on the negotiations. Telephone messages left with Sophie Launay, a spokeswoman for Fidelity, weren’t immediately returned.

Under terms being discussed, Fidelity would get almost 40 cents on the dollar in cash for notes it holds in the parent company of the power producer, one of the people said. The Boston-based money manager had rejected a previous offer for a debt swap valued at 10 cents on the dollar, according to a Nov. 1 filing with the U.S. Securities and Exchange Commission.

Fidelity’s Holdings

Fidelity, which manages $1.9 trillion of assets, owns debt in at least seven parts of Energy Future, according to data compiled by Bloomberg. Because varying levels of seniority in the holdings determine which creditors are paid first, the firm has been left in the position where any reorganization decision would favor some assets over others.

Key investors that hold $22.6 billion of first-lien loans at Energy Future have agreed to almost all the terms of the deal being discussed, according to the people. Apollo Global Management LLC, Oaktree Capital Group LLC and Centerbridge Capital Partners LP are in that class of debt.

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