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Energy Future, senior creditors reach $800 million bankruptcy deal
December 20, 2016 / 3:40 PM / a year ago

Energy Future, senior creditors reach $800 million bankruptcy deal

WILMINGTON, Del. (Reuters) - Energy Future Holdings Corp and its senior creditors agreed to an $800 million deal aimed at bringing the owner of Texas’s largest network of power lines works out of Chapter 11 next year, according to a securities filing on Tuesday.

The deal follows a federal appeals court ruling in November that found Dallas-based Energy Future was liable for paying hundreds of millions of dollars in early redemption premiums, or make-whole claims, to its first-lien and second-lien noteholders.

In response, Energy Future rewrote its bankruptcy exit plan to shift the cost of the ruling to junior creditors by reducing their payouts.

Under the terms of the settlement, Energy Future agreed to pay its first-lien noteholders 95 percent of their make-whole claims if junior creditors back the new bankruptcy plan, according to the filing. Double-digit interest continues to accrue on the make-wholes, and Energy Future estimated the first-lien claim to be worth $574 million if the company exited bankruptcy in April.

The company agreed to pay second-lien noteholders 87.5 percent of their estimated make-whole claim of $244.6 million.

Both noteholders will also collect fees and other payments worth around $50 million.

Make-whole payments protect holders of high-yielding securities from losing potential interest if the debt is repaid before maturity.

Energy Future refinanced most of the $6 billion in notes soon after filing for bankruptcy, although the company had argued Chapter 11 barred make-whole claims.

The settlement does not have the support of holders of billions of dollars of unsecured notes, according to the filing.

    The company said these junior creditors had sought an additional $150 million of distributable value under the plan. They also proposed reducing the amount first-lien noteholders could collect on their make-whole claim to 93 percent and the amount second-liens could collect to 80 percent.

    The company said talks continue.

    The plan is funded by the sale of Energy Future’s stake in the Oncor power distribution network to NextEra Energy Inc (NEE.N) of Juno Beach, Florida for $18.6 billion.

    Energy Future filed for bankruptcy in 2014 to cut its $42 billion in debt. The company has already spun off its power generation business and its retail utility to senior lenders who were owed $24 billion.

    Energy Future was created from the record $45 billion leveraged buyout of TXU Corp in 2007, a deal led by KKR & Co and TPG Capital.

    Reporting by Tom Hals in Wilmington, Delaware; Editing by Meredith Mazzilli

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