Energy Future Holdings and its warring creditor groups expressed optimism about a new round of talks over an $11 billion proposal to reorganize the company so it can exit bankruptcy by year’s end.
Company officials “believe the time is right to begin a determined march” to end the $42 billion Chapter 11 case, attorney Edward Sassower told a judge at a hearing Tuesday in Wilmington, Delaware.
Some creditors of Dallas-based EFH have proposed raising $11 billion in debt and equity, a lawyer for a group of lower-ranking debt holders told the judge.
A deal could be two months off, should everybody involved in the latest negotiations stick with their current positions, said the attorney, Chris Shore, who represents a group of creditors that has fought the company since the bankruptcy began 11 months ago.
Energy Future’s reorganization has been stalled by fighting between lower-ranking creditors and senior bondholders. The lower-ranking debt holders succeeded in forcing the company to abandon a plan to split itself in two and hand its two main businesses to different groups of favored creditors.
EFH may ask U.S. Bankruptcy Judge Christopher Sontchi to appoint a mediator to help negotiate a final deal, Sassower said in court. On April 3, a new round of talks began aimed at turning part of the company into a real estate investment trust. That structure would capture value for creditors with lower-priority claims.
The $11 billion proposal being pushed by the lower-ranking creditors would maintain some elements of the proposal they have long questioned, according to a person familiar with the confidential talks.
Those points include splitting EFH’s profitable Oncor Delivery transmission unit off from its Luminant power-generating business and structuring the reorganization as a tax-free spinoff, said the person, who asked for anonymity because the talks are being conducted in secret.
Tuesday’s hearing was initially scheduled as a showdown between the company and the lower-ranking creditors who had asked for permission to sue investors involved in the company’s 2007 leveraged buyout and actions its owners took in the years after.
The company and the creditors agreed to put off that confrontation until May so they could accelerate negotiations. Energy Future filed an outline of its latest reorganization plan just before the hearing started.
That plan doesn’t reflect details of current talks, or include a specific amount of money to be given to the lower-ranking creditors by the senior creditors. Those details would be added later, Sassower said.
Because it lacks details, the plan has managed to unite creditors who have been fighting since the bankruptcy began, said Edward S Weisfelner, an attorney for one of the creditor groups.
“The consensus that we reached is that we all hate the plan that has been filed,” Weisfelner joked.