Hedge fund makes move to block Berkshire’s bid for Oncor Electric

Elliott Management has bought debt in the parent company of Oncor Electric Delivery in its latest bid to block Berkshire Hathaway’s $9 billion offer for the state’s largest power distributor, according to people familiar with the matter.

Paul Singer’s firm acquired about $60 million of leveraged buyout notes in Oncor’s bankrupt parent from Fidelity Investments, said one of the people, who asked not to be identified. Buying the notes means Elliott and Sunrise Partners, which also opposes Berkshire’s offer valued at $18.2 billion including debt, own the majority of every class of impaired credit in the holding company, the person said.

Bankruptcy courts typically require only one impaired creditor to support a deal for it to proceed. By acquiring the Fidelity notes, Elliott believes it will be able to block the deal by acting as a dissenting impaired creditor, the person said.

Elliott has said Berkshire’s deal doesn’t value the company enough in the credit holders’ perspective.

Berkshire Hathaway Energy, the utility arm of Warren Buffett’s conglomerate, said late Wednesday that it’s standing firm on its bid for Oncor. Representatives for Elliott and Oncor declined to comment. Fidelity didn’t immediately respond to requests for comment.

Elliott’s salvo is the latest in a back-and-forth tussle between billionaires Buffett and Singer, who’ve been clashing in bankruptcy court over the terms of the deal.

Berkshire announced its bid to buy Oncor in July. The offer was soon challenged by Elliott, which tried to delay consideration of Berkshire’s offer while the hedge fund cobbled together money for its own takeover proposal.

Elliott, among the largest creditors in Energy Future Holdings with about $2.9 billion of its debt, and Sunrise Partners said in a court filing Wednesday that they’ll vote all of their claims to reject the plan.

Oncor’s sale is key to ending Energy Future’s high-profile bankruptcy. The company was formed a decade ago through the buyout of TXU Corp. by KKR, TPG Capital and Goldman Sachs. In 2014, it sought protection from creditors after natural-gas prices plummeted, forcing down what the company could charge for its power in unregulated markets.

Two previous attempts to buy Oncor have already been struck down by the Public Utility Commission of Texas. NextEra Energy’s bid, valued at $18.4 billion, was dismissed in April after the company refused to place protections on Oncor’s credit and give it an independent board.

Winning over state regulators is crucial for closing the merger. Berkshire agreed to keep those protections and more when it laid out 47 regulatory commitments in July.

This story was originally published August 17, 2017 at 2:00 PM with the headline "Hedge fund makes move to block Berkshire’s bid for Oncor Electric."