Hunt Consolidated has reached an agreement to take over Oncor, the biggest power distributor in Texas, as part of a deal to end the $40 billion bankruptcy of Energy Future Holdings and break up the company eight years after its record-setting leveraged buyout.
Hunt, Energy Future and a group of the power company’s lower-ranking creditors will ask a judge to approve their proposal in October, over any objections from lenders who may feel left out of the agreement.
Dallas-based Hunt and one group of Energy Future creditors plan to raise more than $12 billion to be used to pay off debt owed to another set of lenders. Should the plan win court approval after a vote of creditors, Energy Future would be split into two companies owned by different sets of lenders.
Hunt and some unsecured creditors would get Oncor, the regulated unit that sends power to more than 3 million Texas customers over 119,000 miles of power lines. Energy Future’s money-losing generating division, which includes coal-fired power plants, would go to a different set of creditors in a spinoff that avoids hitting investors with a big tax bill.
The transaction, which would make Oncor part of a real estate investment trust to save on taxes, must be approved by Texas regulators as well as U.S. Bankruptcy Judge Christopher Sontchi in Wilmington, Del., who has overseen the bankruptcy since it was filed in April 2014.
Energy Future accepted the deal after resisting offers from its unsecured creditors for more than a year. The breakthrough followed a series of legal rulings by Sontchi that upset Energy Future’s initial plans to give Oncor to a different set of favored creditors. That deal would have collected less money to pay the unsecured creditors backing the Hunt deal.
EFH filed for bankruptcy in April 2014, seven years after it was created with the $45 billion buyout of the former TXU Corp. led by private investment giants KKR, TPG Capital and Goldman Sachs. At the time, the company listed liabilities of nearly $50 billion.
In July, Energy Future called the proposal by Hunt and unsecured creditors “superior” to an alternative that favored creditors led by Fidelity Investments.
The Hunt group includes Anchorage Capital Group, Arrowgrass Capital Partners, Avenue Capital Group, BlackRock, Centerbridge Partners, GSO Capital Partners and the Teacher Retirement System of Texas, according to a statement by Hunt.