Energy Future Reaches Bankruptcy Deal

Biggest LBO ever ran aground after a wave of deregulation.

Energy Future Holdings Corp., the Texas power company Henry Kravis and David Bonderman took private in 2007 in the biggest-ever leveraged buyout, filed for bankruptcy after reaching a deal to cut billions in debt.

The filing today in Wilmington, Delaware, is the result of months of wrangling among creditors, owners and management, and comes after a wave of deregulation opened Texas’s wholesale energy market to competition.

Eleven Months

Energy Future said it seeks to exit bankruptcy in 11 months. The company also said it has commitments for financing totaling more than $11 billion, including $7.3 billion for Energy Future Intermediate Holding.

Shale Boom

The buyout, larger even than KKR’s 1989 takeover of RJR Nabisco Inc., left Energy Future struggling to reduce debt. The trouble began when the financial crisis, coupled with booming shale production, sent gas prices down starting in 2008.

DIP Loan

The $1.9 billion capital infusion will be funded by five holders of the company’s “payment-in-kind” notes due 2018, a person familiar with the matter said. They are Avenue Capital Group, York Capital Management, GSO Capital Partners, Third Avenue Management and Peter Schoenfeld Asset Management, said the person, who requested anonymity because the matter isn’t public.

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