By Michael Erman and Billy Cheung
NEW YORK, Oct 14 (Reuters) - The creditors of Energy FutureHoldings remain at odds over how to split the Texas powercompany's equity in an expected bankruptcy as theirconfidentiality agreements lapse, several sources familiar withthe matter said on Monday.
Secured lenders at Texas Competitive Electric Holdings,which represents Energy Future's unregulated subsidiary, andunsecured bondholders at Energy Future Intermediate Holdings(EFIH), Energy's Future's regulated subsidiary, had previouslybeen in direct negotiations. But the EFIH unsecured bondholdershave so far been reluctant to re-sign confidentialityagreements, according to one of the sources.
If they do not re-sign confidentiality agreements, thecreditors and the company will make public details of theirtalks in a filing with the U.S. Securities and ExchangeCommision as early as Tuesday, said the sources, who asked notto be named because the talks are still private.
EFH, saddled with $40 billion of debt, wants to finalize arestructuring plan before Nov. 1, when $250 million in bondpayments are due. Filing for bankruptcy before Nov. 1 wouldsuspend the bond payments; but filing without a restructuringplan could entail years of battles and competing restructuringplans in bankruptcy court.
EFH, formerly TXU Corp, was taken private in 2007 in a $45billion buyout, the largest-ever leveraged buyout. The dealsaddled the company with debt just before a sharp decline innatural gas prices and energy markets.
The buyout consortium included private equity firms KKR & CoLP, TPG Capital Management LP and Goldman SachsGroup Inc's private equity arm.
EFH's capital structure includes more than $32 billion ofdebt split up into various categories at the holding company ofits unregulated retail and merchant power units, and another$7.7 billion in senior and junior debt at Energy FutureIntermediate Holding Company LLC (EFIH), the parentof its regulated power distribution business, Oncor ElectricDelivery Company.
NOVEMBER 1 PAYMENT
Energy Future Holdings has not yet given any signal aboutwhether the November interest payments to unsecured bondholderswould be made. The sources said the company has suggested that apayment could be made to buy additional time to avoid afree-fall, prolonged bankruptcy.
But the sources also said secured creditors would viewpayment of the November interest as an obstacle to negotiation.Secured creditors view those payments as part of theirunderlying collateral and would be displeased with that moneyleaking into the hands of unsecured bondholders, they said.
The secured creditors are considering whether to withholdlegal releases for Energy Future's board and sponsors, if suchpayments are made, another source said. Failure to obtain suchreleases could expose affected parties to lawsuits down theroad.
Earlier this month, bondholder Fidelity Investments puttogether its own proposal to other EFH creditors in the hope ofsaving the company from a protracted bankruptcy.
But the sources said that creditors did not rally aroundthat proposal. Nor did they agree on a previous plan that wouldhave given EFIH unsecured creditors payments if certain valuemilestones were met.
Still, EFH is in talks with banks including Citigroup,JPMorgan, Morgan Stanley and Bank of America on a multibilliondebtor in possession loan that would help the company meet itsobligations if it files for bankruptcy, two of the sources said.
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