Energy Future Holdings Corp., the Texas power company KKR & Co. and TPG Capital took private in 2007 with Goldman Sachs Group in the biggest-ever leveraged buyout, filed for bankruptcy on Tuesday after reaching a deal to cut billions of dollars in debt.
The filing in Delaware is the result of months of wrangling among creditors, owners and management, and represents the failure of a bet that natural gas prices would rise enough to justify the company's $48 billion price. Instead, the financial crisis, coupled with booming shale production, sent gas prices down starting in 2008.
“We are pleased to have the support of our key financial stakeholders for a consensual restructuring,” CEO John Young said in a statement. “We fully expect to continue normal business operations during the reorganization.”
Energy Future said it seeks to exit bankruptcy in 11 months. The Dallas-based company, formerly known as TXU Corp., also said it has commitments for financing that total more than $11 billion, including $7.3 billion for Energy Future Intermediate Holding.
The filing listed assets of $36.4 billion and debt of $49.7 billion.
The 2007 going-private deal, coming at the peak of a three-year boom in leveraged buyouts, turned into a big loss for KKR, as well as TPG Capital and Goldman Sachs Capital Partners, which loaded the company with debt. KKR and TPG's losses were partly offset by more than $500 million in fees generated by the buyout through October 2012, Energy Future said in regulatory filings.
They later wrote down most of their $5 billion equity investment to 5 cents on the dollar. The deal included a total of $8.3 billion in equity, including checks from co-investing clients.
Under the proposal announced Tuesday, the company's Texas Competitive Electric Holdings Co. deregulated unit would separate from Energy Future without triggering “any material tax liability,” according to the company. The plan would hand ownership of Texas Competitive to creditors in exchange for eliminating $23 billion in debt.