[The spirit of Enron lives on....] http://dealbook.nytimes.com/2014/04/29/big-texas-utility-files-for-bankruptcy/?hp
Big Texas Utility Files for Bankruptcy By JULIE CRESWELL and MICHAEL J. DE LA MERCED April 29, 2014, 7:15 am Too big just failed. The troubled Texas utility Energy Future Holdings – which, as TXU, was private equity’s biggest-ever buyout – filed for bankruptcy on Tuesday. After months of on-again, off-again talks between the company, its owners and a dizzying hierarchy of creditors, the company went into Chapter 11 protection with a plan intended to stave off months of potentially rancorous fighting in court over pieces of the power company. Energy Future will probably be split between its regulated electricity arm, Oncor, and its unregulated power-generation business. The talks had long been stymied by an array of issues, including whether such a split would create a tax bill of more than $7 billion. Energy Future will become one of the biggest Chapter 11 filings in corporate history. This is not the ending that the Wall Street private equity firms, including Kohlberg Kravis Roberts, TPG Capital and the private equity arm of Goldman Sachs, envisioned in 2007, when they acquired the TXU Corporation in a colossal $45 billion deal. Their investments are expected to be all but be wiped out in the bankruptcy. The takeover of TXU was an audacious transaction that epitomized the golden era of private equity. Buyout firms went on a buying spree, acquiring hotel chains, gambling icons, giant hospital systems and mammoth real estate properties. When the financial crisis struck, many of these boom-era deals struggled. Still, amid dire predictions, few have actually failed, thanks to their owners’ savvy market movements that allowed them to refinance their mountains of debt at friendly terms over the last two to three years. Energy Future Holdings refinanced its debt as well – pushing back nearly $25.7 billion of its debt to later dates. But its problems ran much deeper than the simple sum of its debt. Indeed, while it faced a total debt load of about $38 billion, much of which was taken on to complete the buyout in 2007, its underlying business – the generation and sale of electricity – deteriorated sharply. In the deregulated Texas market, electricity prices are strongly related to those of natural gas. That fact, essentially, made the buyout of Energy Future Holdings a towering bet on the price of natural gas. But instead of rising, natural gas prices fell. And kept falling. That led to billions of dollars in losses at the company. [snip] _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
