Energy Future Resumes Reorganization Bankruptcy after a Failed Bankruptcy Plan

by San Antonio Attorney

Energy Future Holdings Corp. will have to undergo a long process as the company will need to choose from two proposals that serve as a backup from the failed bankruptcy plan due to pressure from Texan regulators.

Bankruptcy Judge Christopher Sontchi said on Monday that the company should wait for approval of the plans introduced.  Energy Future’s electricity-generating units are expected to be presented with a proposal that provides an opportunity for the senior lender to take over.

Sontchi added that it was time for the company to move on.  Sontchi has been handling the bankruptcy case for more than two years in the Delaware Federal Court since its filing almost three years ago.

Energy Future serves as the parent company for TXU Energy, Luminant and Oncor Electric Delivery.  The early draft for reorganization failed when the regulators of Texas strictly imposed conditions on the proposal of Hunt Consolidated taking over Oncor, a power line business.

Hunt’s alliance of investors, pulled out of the deal last April 30.

Another plan requires dividing Energy Future into two separating entities.  Each entity has its own set of issues and the creditors are currently embroiled over the handling of information.

The biggest risk for business is the Internal Revenue Service.  The lenders requested the IRS that a tax-free process of reorganization should be approved.  The company will face another challenge with its creditors if done without a favorable ruling.

The reorganization of power-line businesses is difficult and may take quite a while to recover.

Energy Future recently filed for bankruptcy protection in 2014.  The company had a total of $50 billion in debt, that it triggered a buyout of TXU Corp.  This buyout was seven years earlier by other companies such as TPG Capital and Goldman Sachs.

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