Hedge Fund Sees Default In Energy Co. Loans

Feb 28 2011 | 10:27am ET

A Texas energy company owned by a pair of private equity giants is angrily denying allegations leveled by a hedge fund that it is in default on nearly $24 billion in loans.

Energy Future Holdings disclosed the accusation by Aurelius Capital Management in a regulatory filing last week. The company, known as TXU Corp. prior to its $45 billion buyout by KKR & Co. and TPG Capital, called that claim "utterly meritless."

Still, Citigroup, which is the administrator of the $23.9 billion in loans, will begin talks with the lenders to Energy Future subsidiary Texas Competitive Electric Holdings. Aurelius is among the largest TCEH creditors and stands to profit handsomely if the company is pushed into a restructuring.

But EFH said they would "defend ourselves vigorously against these allegations." According to the company, Aurelius is the only creditor alleging default.

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