Energy Future Holdings drops bankruptcy auction for Oncor

Dallas-based Energy Future Holdings canceled plans to auction Oncor Electric Delivery, its valuable power distribution business, and will try to resolve its $42 billion bankruptcy under one of two proposals backed by rival groups of creditors.

Unsecured creditors backed by Hunt Consolidated are trying to round up enough senior debtholders to push through a reorganization plan worth about $19 billion. If they succeed, EFH would seek court approval of the plan in October.

If Hunt can’t reach consensus with investors who lent money to Luminant, EFH’s power-generating business, the bankrupt company would proceed with a proposal supported by creditors led by Fidelity Investments. Both groups proposed raising billions of dollars to pay down debt through a sale of shares in a reorganized Energy Future.

Energy Future Holdings entered its $42 billion bankruptcy last year with a plan to break itself in two, giving each part to different sets of creditors. Groups that felt left out of that proposal have fought since then.

“Everyone is unhappy to one degree or another,” Marc Kieselstein, a lawyer for EFH, said Thursday at a court hearing in Wilmington, Del. That’s the nature of bankruptcy, he told U.S. Bankruptcy Judge Christopher Sontchi.

The company may file a revised reorganization plan favored by the Fidelity-led creditors, Kieselstein said. That group is opposed by creditors who endorse the Hunt deal.

EFH will continue to talk to the Hunt group, but at the moment, the company supports the Fidelity plan because it’s more developed, Kieselstein told Sontchi.

The Hunt creditors have offered to buy the regulated Oncor unit and settle many of the bankruptcy’s most contentious disputes, which involve the generating side of the business, Texas Competitive Electric Holdings. Oncor is considered more valuable because it’s profitable.

The Hunt-backed group has committed to raising $12.1 billion to put into the new company, which would own Oncor under the proposal, according to lawyer Tom Lauria. The full offer is worth $19 billion, Lauria told Sontchi.

Hunt Consolidated said in a June 8 regulatory filing that it intended to negotiate with Dallas-based InfraREIT, which it manages, on a possible merger with Oncor. Hunt owns more than 29 percent of InfraREIT, which owns 620 miles of high-voltage lines in Texas, according to the filing.

The rival plans supplanted a proposal that called for auctioning off Oncor. Energy Future’s lawyers told Sontchi that they will cancel a hearing to select a stalking horse to open the bidding.

Before Thursday’s hearing, NextEra Energy had emerged as the front-runner in the now-canceled auction, people with knowledge of the matter said this month. NextEra, based in Juno Beach, Fla., had made a cash offer worth about $18 billion, according to two people familiar with the matter.

This story was originally published June 25, 2015 at 2:06 PM with the headline "Energy Future Holdings drops bankruptcy auction for Oncor."