From Bloomberg Businessweek
by Steven Church, Tiffany Kary and Linda Sandler
Energy Future Holdings Corp., the Texas power company that plans to leave bankruptcy in less than a year, can’t reduce its $50 billion in debt without fighting junior creditors who face losing their investment.
The Dallas-based electricity provider, taken private seven years ago by Henry Kravis and David Bonderman in a record leveraged buyout, filed for bankruptcy today in Wilmington, Delaware, after months of wrangling among creditors (TXU:US), owners and management yielded a restructuring proposal.
Second-lien noteholders owed about $1.6 billion say they were shut out of those talks and want court permission to probe what they call management’s “disabling conflicts of interest.” They also want the case moved to Texas.
, a lawyer in the Wilmington office of Polsinelli PC, a law firm that isn’t involved in the case, said the request for a venue change probably won’t cause much delay. Sontchi and other Delaware judges have dealt with transfer requests in the past “expeditiously,” handing out rulings within weeks, he said.
The request to probe management “throws a little wrinkle into the plan” but also isn’t likely to delay an exit from bankruptcy, he said. The company can set up a litigation trust to handle any court disputes while it carries out its exit plan on a separate track, he said.