Wilbur Ross’s ‘Turnaround Titan’ Tries to Beat the Oil Routby
A decade ago, Wilder engineered biggest leveraged buyout ever
At Exco, he’s downsizing, adjusting debt profile to survive
C. John Wilder pulled the Texas utility TXU Corp. from the brink of insolvency a decade ago, then made a fortune selling it to a group including KKR & Co. in one of the biggest leveraged buyouts in history.
Now Wilder, once called a “turnaround titan” in local media, is on to his next challenge: reviving the hard-pressed energy explorer Exco Resources Inc. for billionaire Wilbur Ross Jr. Ross, whose companies owned 18 percent of Exco in June, handpicked Wilder last year to save it even as the worst oil downturn in a generation has battered small drillers, forcing at least 90 into bankruptcy since the start of 2015.
Exco took a key step forward Tuesday, meeting a midnight deadline to amend terms with some of the holders of its senior notes. It can now sell more types of secured debt, after previously being restricted to bank loans and credit lines, a company statement shows.
Wilder “has succeeded fairly well at every one of the initiatives he has undertaken,” according to Ross, whose fortune was built on his knack for leading restructuring efforts in industries from steel to textiles.
"He’s done a very good job downsizing it," Ross said in a telephone interview. “He’s done a good job reducing its capex. He’s done a good job reducing headcount. There are no longer any fundamental issues idiosyncratic to Exco that are within its own control.”
Wilder declined to comment for this story through a representative at his Bluescape Resources Co LLC investment firm.
The biggest factor outside Wilder’s control remains the low price of oil. Exco has acreage in Texas’s oil-rich Eagle Ford shale, where 90 percent of production may return should oil rise above $55 a barrel, based on analysts’ projections. U.S. crude, meanwhile, has remained stubbornly under $50 a barrel. It was trading at $47.06 in New York at 11:10 a.m. on Thursday.
When Wilder was named Exco chairman, the move seemed a challenge he was uniquely qualified to tackle.
At TXU a decade earlier, he established himself as a man who always had a plan, meticulously developing strategies to the very last detail, according to those who knew him during that time. He looked everywhere for ways to shrink debt, from selling money-losing businesses to selling art at the company’s headquarters.
He was “mostly the kind of person that would evaluate every strategy possible, even the most unthinkable, and really question why not," said Daniele Seitz, who was a utilities analyst at the time Wilder ruled TXU and is now vice president at Ascension Asset Management. “There were very few people who did this.”
Gavin Wolfe, now a managing director at Bank of America Merrill Lynch, worked at Credit Suisse from 2000 to 2012 and represented TXU during its sale. He recalled Wilder as a thoughtful leader who sweated the details.
“I remember quite vividly that, from the moment John got hired, he had a plan,” Wolfe said by phone. “Analytically and tactically, I’d put John up against virtually anyone in the energy industry.”
Wilder took advantage of a rally in natural gas prices to focus TXU on generating electricity, successfully navigating the company through the state’s transition to wholesale markets. The end result: A $1.7 billion profit line in 2005. The company’s shares responded in kind, rising almost 400 percent from when he took over in 2004 to when he left in 2007.
Wilder stepped down at TXU after orchestrating the KKR buyout in a deal so convincing it drew the support of Warren Buffett, the billionaire chairman of Berkshire Hathaway Inc.
Buffett bought about $2 billion in debt carried by the company renamed Energy Future Holdings Corp. His investment didn’t prove as rewarding as it was for Wilder. Gas prices started plunging in the second half of 2008 and, six years after TXU was sold, Energy Future joined a number of independent power producers in filing for bankruptcy. Berkshire took a pretax loss of $873 million in 2013.
“Most of you have never heard of Energy Future Holdings,” Buffett said then in a letter to his shareholders in 2014. “Consider yourselves lucky. I certainly wish I hadn’t.”
Buffett didn’t respond to a request for comment sent to an assistant, while Exco and KKR declined to comment.
Even after Wilder left TXU, he had a plan: He laid out a detailed bucket list in a farewell letter to employees cited by the Dallas Morning News. It included reading the bible cover-to-cover, learning to ballroom dance and renting a lake cabin to teach his younger son to water ski.
His reputation as a leader who stuck to the plan has earned him both admirers and critics over the years.
In 2006, his plan to build 11 coal-fired power plants across Texas drew intense opposition from environmentalists and local leaders, including the mayors of Houston and Dallas. Wilder not only refused to negotiate, he declined to even meet with critics, including then Dallas mayor Laura Miller, whose office overlooked Wilder’s, said Jim Marston, founding director of the Environmental Defense Fund’s Texas office.
Miller described Wilder as the type of man who “just sits in a tower and thinks of ways to make money.” The two sides eventually reached a middle ground, with TXU settled on building just three plants as part of negotiations over its takeover.
In 2001, Wilder’s aggressiveness landed him in the center of open warfare between Florida-based FPL Group Inc. and the New Orleans utility owner that it was proposing to buy. The head of FPL wanted then-Entergy Corp. Chief Financial Officer Wilder fired, according to Entergy’s CEO, after he pushed a plan to build more power plants in wholesale markets. The $16 billion takeover eventually unraveled.
Since joining Exco last year, Wilder has been quick to deploy strategies to slash the explorer’s costs. Its workforce is down almost 60 percent from the fourth quarter of 2014, and its 2016 capital plan has shrunk to $85 million, from $277 million a year ago. Exco’s shares have risen about 70 percent since he became executive chairman.
Since the start of the year, the company’s 8.5 percent, senior unsecured bonds maturing in April 2022 have climbed 17.25 cents to most recently trade at 37.25 cents on the dollar on Aug 15, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.
In meeting the midnight deadline on its senior notes Tuesday, Exco may be readying for another step in Wilder’s plan. “Keep your eye out for a secured bond offering," said Spencer Cutter, an analyst with Bloomberg Intelligence.