Energy Future Creditors Fail to Halt $706 Million AccordSteven Church
Energy Future Holdings Corp. creditors lost a bid to temporarily stop the bankrupt power provider from settling a $706 million dispute with noteholders, clearing one of two main obstacles to a unit’s reorganization.
The Dallas-based company plans to settle noteholders’ claims that it owes them a fee for refinancing their debt. Under the deal, Energy Future’s regulated transmission unit would borrow $5.4 billion and pay senior noteholders in full, with some getting extra to resolve their early-repayment claims.
Noteholders that accepted the settlement earlier would get a bigger percentage of their claims than those that joined later. CSC Trust Co. of Delaware, a trustee for holders of $3.5 billion of the regulated unit’s notes, appealed the deal June 9, saying it was unfair to the majority of noteholders.
U.S. District Judge Gregory Sleet rejected CSC Trust’s request for a review today in Wilmington, Delaware, saying the trustee didn’t provide evidence to “justify overruling the bankruptcy court’s finding that the settlement is non-discriminatory.”
Energy Future had asked Sleet to allow the settlement to go forward, saying a halt would disrupt its plan to refinance Energy Future Intermediate Holding Co.’s notes at a lower interest rate. The company, which filed for bankruptcy April 29, seeks to exit court protection in the first quarter.
Noteholders had until yesterday to join the settlement, according to a bankruptcy court filing. They may be owed early termination fees totaling as much as $706 million, CSC Trust said in court papers. Opponents of the accord can fight the company in a trial set for September.
U.S. Bankruptcy Judge Christopher Sontchi last week overruled an objection by CSC Trust while approving the $5.4 billion loan and the related settlement. He is set to consider a similar accord for the unit’s second-lien noteholders June 30.
Energy Future’s main operating unit, Texas Competitive Electric Holdings, faces opposition to its reorganization plan from some creditors. Under the proposal, senior lenders would take control of the unit in exchange for canceling about $23 billion debt, while lower-ranking creditors owed $7.7 billion would recover only about $350 million.
The case is Energy Future Holdings Corp., 14-bk-10979, U.S. Bankruptcy Court, District of Delaware (Wilmington).