Energy Future Holdings Corp. was sued for $665 million by a trustee for lenders that are being asked to change their securities into loans to finance the Texas power provider’s bankruptcy case.
Energy Future isn’t entitled to a “windfall” from failing to pay the premium owed for early redemption of debt, CSC Trust Co. of Delaware, which represents most holders of a unit’s $3.5 billion in 10 percent senior secured notes, said in the lawsuit. Energy Future is asking lenders to turn their debt into about $10 billion in debtor-in-possession, or DIP, loans for its restructuring.
“The DIP facility was sought for the purpose of attempting through these bankruptcy cases to accomplish what EFIH could not do outside of bankruptcy — refinance the 10 percent notes at lower interest rates without the required payment of the redemption premium,” according to the complaint filed in U.S. Bankruptcy Court in Wilmington, Delaware. EFIH is Energy Future Intermediate Holding LLC, which controls the regulated electricity-distributor Oncor.
CSC previously criticized Dallas-based Energy Future for failing to disclose that it was offering widely differing premiums in exchange for the DIP money. The objection was one of several brought by senior and junior lenders who say the financial plan the company devised to wind up its bankruptcy case in 11 months is unfair.
Energy Future said separately it will pay Fidelity Investments $11.3 million for contributing to a $1.9 billion cash loan to EFIH. Creditors who swap their securities for the DIP money will receive commitment fees of about $11 million and a $95 million closing fee. Lenders who backstop the deal and an equity conversion are eligible to receive about $200 million in fees, the company said.
Rothschild Inc., an adviser to junior lenders who were asked to join in EFIH’s cash loan, said in a filing it helped them devise an alternate DIP after the company refused to pay them $700 million. Rothchild’s proposed loan, to be arranged with JPMorgan Chase & Co., would cut out preferential payments such as Fidelity’s and give lenders more time to decide whether they want to participate in the exchange, among other benefits.
Energy Future, taken private seven years ago by Henry Kravis and David Bonderman in a record $48 billion leveraged buyout, filed for bankruptcy April 29 after negotiating a restructuring deal among creditors, owners and management.