On Sunday, May 1st, Energy Future Holdings Corp. (“EFH”) filed a new joint chapter 11 plan of reorganization and disclosure statement (the “New Plan”) after plans to fund EFH’s exit from bankruptcy by selling its Oncor power distribution business failed.
The Bankruptcy Court for the District of Delaware had previously confirmed the Sixth Amended Joint Plan of Reorganization of Energy Future Holdings Corp., et al. in December of 2015 (the “Original Plan”). The Original Plan would have split EFH into two silos (commonly referred to as the “E-side,” indirectly owned by EFH subsidiary Energy Future Intermediate Holding Co., and the “T-side,” indirectly owned by EFH subsidiary Texas Competitive Electric Holdings Co. LLC), transferring certain assets, including the debtors’ power plants and retail business, to first lien creditors, and selling Oncor, EFH’s power line subsidiary, to a group of investors led by Dallas billionaire Ray Hunt.
However, due to conditions imposed by Oncor’s regulator, the Public Utility Commission of Texas, the Hunt investor group missed the April 30 deadline to obtain state regulatory approval for the Oncor transaction. As a result, the ad hoc group of first lien creditors exercised an option allowing them to trigger a “Plan Support Termination Event,” rendering the Original Plan null and void.
However, the Original Plan provided that if the Oncor sale fell through, the debtors would be able to pursue an “Alternative Restructuring” in accordance with the Plan Support Agreement entered into by the debtors and the supporting creditors. The New Plan constitutes their election to do so.
THE NEW PLAN
The New Plan incorporates the “Alternative Restructuring” terms set forth in the Plan Support Agreement. Under the New Plan, the debtors would still spin off their power plants and retail electricity business to first lien creditors of EFH in a tax-free transaction. These first lien creditors would also receive 100% of the proceeds from a $700 million unsecured settlement claim against EFH. Junior creditors of EFH
would receive a $550 million cash payment (subject to reduction under certain circumstances).
Unlike the Original Plan, the New Plan allows the T-side confirmation proceedings to advance independently of E-side. As such, the T-side confirmation proceedings are expected to move forward before any resolution on the E-side is achieved.
The occurrence of a “Plan Support Termination Event” does not terminate the Plan Support Agreement, but rather only terminates the parties’ obligations to support the Original Plan. The Plan Support Agreement continues to bind its parties and obligates them to support the New Plan. Therefore purchasers of T-side bank debt should continue to track whether the debt they are purchasing is bound by the Plan Support Agreement by obtaining appropriate representations from their sellers and ensuring that they are in compliance with its terms.
The Bankruptcy Court has set a hearing for May 23 at 10:00 a.m. EDT to consider debtors’ proposed schedule for discovery, disclosure statement proceedings and plan confirmation. A new voting deadline will be set by the Bankruptcy Court, and a confirmation hearing is currently expected to begin in August. If the New Plan is confirmed, the new record date for distributions under the plan will be five business days after the confirmation date.
The case is Energy Future Holdings Corp., 14-bk-10979, U.S. Bankruptcy Court, District of Delaware (Wilmington).