Creditors of Energy Future Got the Green Light to Vote on Bankruptcy Exit Plan

by San Antonio Attorney

Creditors of Energy Future have been authorized by a bankruptcy judge to start voting on the company’s exit plan after it suddenly reversed on a pact with senior lenders.

Before the end of 2016, the company broke off from a peace agreement with its high-ranking lenders and makes a new arrangement with junior bondholders GSO Capital Partners LP, York Capital Management Global Advisors LLC, Angelo Gordon & Co.  and Avenue Capital Management and

The latest deal is intended to guarantee Energy Future’s quick exit from bankruptcy.  But it infuriated in senior lenders that had anticipated getting almost $800 million in premiums aside from full payment on their loans under a lawsuit settlement.  Instead, there will be no payment for premiums and just the balance on the loans.

Judge Christopher Sontchi ruled that the energy company had provided voting creditors sufficient facts to decide on whether to approve its Chapter 11 bankruptcy plan.  The company’s bankruptcy plan was initially a debt-for-equity trade bargain and evolved into a strategy to repay creditors from the sale of its stake in Oncor, which is an electric distribution and transmission business.

After the voting, Energy Future is going to go back to the bankruptcy court to ask for a confirmation.  Oncor’s buyer, Florida-based NextEra Energy Inc., can withdraw if Energy Future doesn’t get court confirmation on or before Feb.  22.

The Chapter 11 plan includes allocating money from the Oncor sale to repay the senior lenders in case they eventually succeed in the make-whole lawsuit.  Philip Anker, a senior lender lawyer, said the Energy Future’s proposal is going to be disputed at confirmation because the cash being allocated is insufficient.   Just like in the case of Nortel, a relentless make-whole litigation is costly and usually takes a long time, Anker said.

Senior lenders wants only full payment without other conditions, Anker added.

Energy Future filed for Chapter 11 bankruptcy in April 2014, claiming $42 billion in liabilities.

 

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