Dallas-based Energy Future Holdings has received more than one bid for its Oncor electricity-transmission unit and is beginning the second phase of a bankruptcy court-supervised auction process for the company’s most valuable asset, a lawyer said Tuesday in court.
In about six weeks, the company may announce its choice of a stalking horse bidder to make the opening offer should the auction be held, company attorney Stephen Hessler told the judge overseeing the bankruptcy in Wilmington, Delaware.
Energy Future agreed last year to put its 80 percent stake in Oncor up for auction after lower-ranking creditors rebelled against the power company’s original plan. Since then, Energy Future has been soliciting offers for Oncor — the regulated utility that operates and maintains the power lines in North Texas — as it negotiates with creditor groups on a full reorganization structure.
After the hearing, Hessler said the company will now negotiate with bidders seeking to be named the stalking horse for the auction. If the company picks a stalking horse, Energy Future will file a notice with the court, as is typical in bankruptcy, Hessler said.
In bankruptcy auctions, the stalking horse often has an advantage over other bidders because it can receive a breakup fee if it loses the auction. And if no other bidders participate, the stalking horse automatically wins.
Oncor is the biggest electricity-transmission company in Texas. One potential bidder last year valued it at $17.5 billion.
When EFH filed for bankruptcy last April, it had a plan to restructure about $42 billion in liabilities in part by trading Oncor to a favored group of creditors in exchange for debt reduction. Dissenting creditors succeeded in derailing that proposal.
The company still plans to pursue a complicated reorganization based on avoiding certain tax liabilities, a proposal opposed by some creditor groups. On March 9, the company sent a revised reorganization proposal to creditors that includes estimates for how much money each class of debt-holders may recover, an EFH attorney, Edward Sassower of the law firm Kirkland & Ellis, said in court.
Creditors disagree with each other and with EFH’s controlling investors over the tax-avoidance proposal. At Tuesday’s hearing, Energy Future won court permission to pay some of its second-tier debt to save future interest payments.
Hessler did not say when the auction may be held.