Energy Future Offers New Reorganization Plan Amid Deal Dispute

  • Proposal to sell Oncor unit to Hunt Consolidated in jeopardy
  • Energy Future says Hunt deal rejected by senior creditors

Energy Future Holdings Corp. wants to replace a court-approved reorganization plan that would sell its most-profitable business to a group led by Hunt Consolidated Inc. because a key deadline for that proposal has expired.

In a rare, Sunday-morning court filing, EFH asked the judge overseeing its record-breaking bankruptcy for permission to replace a plan that had been hailed as a breakthrough just five months ago, when warring groups of hedge funds settled their dispute about how to divide the company’s assets. EFH offered a new organization proposal in the filing.

Hunt’s group missed an April 30 deadline related to state regulatory approval in Texas, allowing one set of senior lenders to back out of its support, EFH said in court papers. In a statement, Hunt acknowledged the deadline, but said it’s still committed to closing the deal for the Oncor power-distribution business. The company and its allies, who include hedge funds that own lower-ranking Energy Future debt, will ask Texas regulators to modify conditions they imposed on the proposed takeover.

Under the current, Hunt-backed reorganization plan, EFH would be broken into two parts, with different groups of creditors taking over different parts of the company, or being paid out in cash. That basic structure would remain under the new proposal, but without any guarantee that Hunt or its creditor allies would get the Oncor unit. Instead, that unit could go to noteholders that had long objected to Hunt’s deal.

Approval Hearing

EFH has asked U.S. Bankruptcy Judge Christopher Sontchi to set an Aug. 1 hearing to approve the new plan, giving all the various factions time to either come up with a new deal, agree to continue backing Hunt’s takeover, or for a new buyer to emerge.

EFH filed for bankruptcy reorganization in April 2014, with almost $50 billion in debt, much of which was racked up by its record leveraged buyout seven years earlier by KKR & Co., TPG Capital and Goldman Sachs Capital Partners. That bet went bad when natural gas prices plunged.

After Hunt’s deal was approved by Sontchi in December, it ran into trouble at hearings held by Texas regulators. Consumer advocates, some industrial electricity customers and regulatory experts questioned the complicated proposal. The EFH unit that owns Oncor would be converted into a real estate investment trust owning 121,000 miles of wiring that delivers power throughout Texas. The typical REIT owns shopping centers or office parks and makes money through rent; this one would make money by leasing its transmission lines to Hunt, a Dallas-based oil and gas, real estate and power company.

State regulators approved the deal, but imposed conditions that Hunt and the creditor group opposed. At a hearing in Texas this week, they may ask regulators to reconsider. Should they win concessions from regulators, Hunt would have an easier time returning to bankruptcy court and arguing that the current reorganization plan should be implemented instead of moving ahead with the new proposal.

The case is Energy Future Holdings Corp., 14-bk-10979, U.S. Bankruptcy Court, District of Delaware (Wilmington).{BBLS DD X1Q6N21E4PO2}

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