Energy Future Plan Foes Must Wait to Challenge Valuation

The judge overseeing Energy Future Holdings Corp.’s bankruptcy limited the ways lower-ranking creditors can attack a proposed deal to turn the company’s main operating unit over to senior lenders.

U.S. Bankruptcy Judge Christopher Sontchi rejected a request by unsecured creditors owed billions of dollars to put on testimony about the value of Energy Future’s Texas Competitive Electric Holdings unit when the deal comes before him for preliminary approval as early as June 30.

That hearing may be moved to July 18 if the company can’t provide information about its finances to creditors quickly enough, Sontchi said.

The ruling means creditors who may get nothing under that deal must wait until later in the case to try to prove that the unit is worth so much that there should be enough money to repay them.

Sontchi’s decision may make it easier for the company to win approval this month or next of an agreement that would hand control of Texas Competitive to senior lenders. Before that agreement can be implemented, the company must still persuade the judge to approve a broader reorganization plan at a hearing tentatively scheduled for early next year.

At that point, the lower-ranking creditors will get the chance to challenge the value estimates, Sontchi said.

11 Months

Energy Future, which was taken private seven years ago in a record $48 billion leveraged buyout, filed for bankruptcy April 29, listing $49.7 billion in liabilities. The company has said it anticipates winning all of the court approvals it needs to exit bankruptcy within about 11 months.

The lower-ranking creditors claim the company is rushing the case and they have sought to challenge the economics of the deal as soon as possible.

Before the company filed bankruptcy it reached a deal with senior lenders to give them the operating unit in return for canceling their debt. Lower ranking creditors claim they were shut out of those talks.

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

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