Fidelity hires advisers for Energy Future reshuffle plan -sources

Reuters

By Nick Brown and Michael Erman

NEW YORK, Oct 2 (Reuters) - Fidelity Investments, a creditorof Energy Future Holdings Corp, has hired advisersto propose a restructuring plan for the Texas utility in thehope of saving it from a protracted bankruptcy, according tothree people close to the matter.

Fidelity, which has amassed EFH bonds, is working on aproposal it aims to present this month, the people told Reuters,declining to be named because the information is not public.

EFH, saddled with $40 billion of debt, wants to finalize arestructuring plan before $250 million worth of bond paymentsare due on Nov. 1. 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.

Dispute among stakeholders over how to divide EFH equitymakes that deadline unlikely to be met, prompting Fidelity totake steps toward crafting its own plan.

Fidelity does not intend any proposal to necessarily competewith those already on the table. With sizable holdings on boththe regulated and unregulated sides of EFH's capital structure,Fidelity may want to propose a plan that strikes a compromise,two of the people said.

Fidelity has hired financial advisers from Perella WeinbergPartners and restructuring lawyers from Fried Frank HarrisShriver & Jacobson, the three people said.

A spokeswoman for Parella Weinberg declined to comment. Aspokeswoman for Fried Frank did not immediately respond torequests for comment on Tuesday evening.

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.

Fidelity's holdings consist of various EFIH secured bonds,according to company disclosures and analysts, some of whichinclude terms that make it costly for EFH to refinance them.Fidelity has not disclosed the exact amount of its EFH holdings.

EFH declined to comment on Tuesday.

NON-DISCLOSURE AGREEMENTS EXTENDED

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 major 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 larger creditors have signed extensions ofnon-disclosure agreements that will allow them to continuediscussing possible restructuring scenarios, said two of thepeople close to the matter. Initial NDAs would have expired onSept. 27, the people said, without elaborating on the newexpiration date.

So far, talks have been unsuccessful, and have included manyconstituents. Equity sponsors hope for a deal with EFH's securedlenders that allows them to retain an equity stake, but thelenders have insisted that any deal must also address the debtheld by unsecured bondholders of EFIH, several people close tothe matter told Reuters last month.

The lenders have offered those bondholders 9 percent of therestructured company, which the bondholders rejected last month.According to two people close to the matter, one option thesides have discussed to sweeten the pot for the bondholders wasthe inclusion of a so-called contingency value right, whichwould increase bondholders' payout if EFH meets certainperformance goals.

Several sources close to the discussions have told Reuters adeal to avoid bankruptcy is unlikely. Even a pre-negotiatedbankruptcy - in which sides agree to a basic framework beforefiling for Chapter 11 - would be difficult to achieve by theNov. 1 bond payment date, the people said.

EFH could elect to make its Nov. 1 payment and extend talks,but the company would like to resolve its debt issues soonerrather than later, said the people close to the matter.

EFH on Monday paid roughly $60 million to second-lienbondholders on its unregulated side, the people said. Companiesclose to bankruptcy often miss bond payments. This payment - adrop in the bucket for the enormous EFH - was expected, thepeople said.

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