Energy Future Holdings’ Debt Swap Comes Up Short

Nov 13 2009 | 11:24am ET

Dallas-based Energy Future Holdings (EFH) said Thursday that bondholders had offered to swap just $357.5 million of the $6 billion in debt it had hoped to exchange this week.

The private company is trying to restructure part of its $43 billion debt load, but bondholders proved resistant to its offer of 46.5 to 74.5 cents on the dollar for outstanding notes.

Gimme Credit analyst Carl Blake, in a note on Thursday, said that the response – just 6% of bondholders supported the offer – would allow Energy Future to reduce its debt by $100 million, rather than the $2 billion reduction the company had hoped for.

“We weren’t surprised because the proposed offer wouldn’t have guaranteed bondholders a superior recovery, nor would it have done much to reduce Energy Future Holdings’ untenable debt load,” Blake said.

Energy Future said in a statement it will issue about $256.6 of new senior secured notes in exchange for the tendered notes. The company also said it did not receive the necessary consents to amend some covenants, or lending terms.

“We remain committed to improving our balance sheet,” Paul Keglevic, Energy Future’s chief financial officer, said in a statement. “We will continue to explore all options available to us to achieve this objective.”

EFH is an energy holding company, with subsidiaries, primarily in Texas, including TXU Energy, Luminant and Oncor. Luminant has over 16,100MW of generation capacity in Texas, mostly coal-based but including 2,300MW of nuclear. Luminant is also the largest purchaser of wind-generated electricity in Texas and fifth largest in the United States.

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