TXU Teeters Five Years after LBO

LBO firms reap $528 mln in fees.

KKR & Co., TPG Capital and Goldman Sachs Capital Partners, which took the former TXU Corp. private five years ago in the largest leveraged buyout in history, have paid themselves $528.3 million in fees, even as the electricity provider teeters toward a near-term bankruptcy or restructuring.

The payments consist of a $300 million charge for advising on the buyout, annual management fees totaling $171 million and as much as $57.3 million for consulting on debt deals, the Dallas-based company now called Energy Future Holdings Corp. said in regulatory filings. The private-equity firms’ fees are as much as 25 times greater than average, based on data from law firm Dechert LLP and researcher Preqin Ltd.

Default Swaps

Kristi Huller, a KKR spokeswoman, Owen Blicksilver, a spokesman for TPG with Owen Blicksilver Public Relations Inc., and Andrea Raphael of Goldman Sachs declined to comment.

Income Sources

Private-equity managers have been seeking new ways to make money since deal-making sunk from the LBO boom that preceded the financial crisis. The largest firms, including Blackstone Group LP, Carlyle Group LP, Apollo Global Management LLC and KKR, have started new lines of business including real estate investing, hedge fund management, credit lending and advisory services.

‘Blew Up’

Natural gas futures have fallen to $3.62 per million British thermal units from $6.88 on Oct. 11, 2007, the day KKR and TPG took Energy Future private, and a peak of $13.58 in July 2008, as a recession sapped demand and drilling expanded in the gas-rich Marcellus shale in the eastern U.S., creating a supply glut.

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