Energy Future Wins Chapter 11 Plan Confirmation -- Update
February 17 2017 - 11:54AM
Dow Jones News
By Peg Brickley and Jonathan Randles
NextEra Energy Inc.'s planned acquisition of one of the
country's largest electricity transmissions businesses, Oncor,
moved to the next phase Friday, when a judge said he would confirm
the bankruptcy-exit plan of Oncor owner Energy Future Holdings
Corp.
Confirmation sets the stage for hearings before the Public
Utility Commission of Texas, which must approve the acquisition of
Oncor, a critical element of the state's power system, by NextEra,
a Florida company.
Judge Christopher Sontchi's confirmation ruling is the second
for an Energy Future bankruptcy-exit plan. An earlier chapter 11
plan built around the planned sale of Oncor to a group of investors
led by Hunt Consolidated Inc. was confirmed last year, but the deal
fell apart after Texas regulators put conditions on the
transaction.
NextEra will pay $4.4 billion in cash and stock, plus pay off
$5.4 billion in financing that helped Energy Future through
bankruptcy, to gain control of Oncor, which carries power to some
10 million Texans.
Energy Future, the former TXU Corp., filed for chapter 11
protection in April 2014 with $42 billion in debt. Most of the debt
was resolved when Energy Future's electricity generating and
retailing businesses exited bankruptcy last year as a new company
called Vistra Energy.
Parent company Energy Future remained in bankruptcy, with an 80%
stake in Oncor as its principal asset. NextEra had been trying to
buy Oncor since 2014. Two years later, NextEra was declared the
winner of a bidding contest that revived after the Hunt deal was
scrapped.
In the months leading up to Friday's confirmation ruling, Energy
Future's chapter 11 proceeding was rocked by a decision from a
federal appeals court in Philadelphia. Handed down in November, the
ruling marked a loss for Energy Future after years of wins in an
$800 million battle with lenders.
At issue was whether Energy Future was bound to pay lenders
"make-whole" premiums on debt that was refinanced early in the
bankruptcy proceeding. Make-whole provisions are common in
sophisticated debt deals, meant to protect lenders from losing
expected profits if a borrower pays off a loan early. Energy Future
said its bankruptcy excused it from making the payment and, for a
time, the courts agreed.
The appellate ruling shifted much of the value from the NextEra
deal into the pockets of senior lenders, upsetting junior creditors
and roiling the dynamics of the big chapter 11 case.
Talks ensued, and by the time Energy Future launched
confirmation hearings Tuesday in the U.S. Bankruptcy Court in
Wilmington, Del., agreements were in the works to settle the
make-whole trouble.
Confirmation came over the protests of lawyers for people
claiming asbestos injuries they say are attributable to Energy
Future affiliates. NextEra has set aside $100 million to pay
asbestos personal injury claims that were filed in Energy Future's
chapter 11 proceeding.
The problem, according to asbestos lawyers, is that Energy
Future's chapter 11 plan cut off the legal rights of people who
have no way to know they have grounds for personal injury claims.
The lung diseases that come from asbestos can take decades to
develop. So people exposed to asbestos while on the job for Energy
Future could become ill in a year or five or 10, and find their
right to sue has been barred because they hadn't filed a claim in
Energy Future's bankruptcy, lawyers said.
Judge Sontchi found Energy Future handled its asbestos problems
fairly, and overruled the objection from the asbestos claimants. He
said there was "clear evidence" that the reorganization plan was
developed in good faith and doesn't preclude future asbestos
claimants from seeking remedy later.
"This plan is not designed to avoid asbestos liabilities," Judge
Sontchi said.
Bankruptcy was popular among companies like chemical maker W.R.
Grace & Co. and building material manufacturer Owens Corning
Inc., which faced daunting liability for asbestos damages. Energy
Future's asbestos liabilities grew out of discontinued operations.
The company never made or sold asbestos products.
Energy Future's financial struggles grew out of diving energy
prices, which rendered the load of debt taken on in a leveraged
buyout unsupportable.
Write to Peg Brickley at peg.brickley@wsj.com and Jonathan
Randles at Jonathan.Randles@wsj.com
(END) Dow Jones Newswires
February 17, 2017 11:39 ET (16:39 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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