Energy Co. Seeks Creditor Help Against Hedge Fund Default Claims

Apr 5 2011 | 11:24am ET

Energy Future Holdings Corp., the Kohlberg Kravis Roberts- and TPG Capital-owned energy company accused of being in default by another hedge fund, has turned to its creditors to resolve that claim.

EFH has offered better terms to creditors who accept some concessions, including an affirmation that EFH did nothing wrong when it borrowed from a subsidiary. Hedge fund Aurelius Capital Management, a creditor of the subsidiary, alleges that it did, in fact, do something wrong, borrowing at unfairly favorable rates, and is therefore in default on nearly $24 billion in loans.

EFH angrily denied that claim and said that, "based on private negotiations," at least 50% of its creditors were prepared to accept that the loans were made on an "arms-length basis," as well as a longer payment schedule. In exchange, EFH is offering a half-point increase of their coupon.

"The company has shifted from dismissing our claims to paying the banks to waive them," Aurelius' Mark Brodsky said. "What we have learned in the interim confirms our view that an event of default has occurred."

EFH continued to deny that allegation. "We refute those claims," a spokeswoman for the company said. "We will continue to defend ourselves vigorously against those claims and any similar allegations, and this portion of the amendment would put those claims to rest once and for all."

In Depth

Financial Industry Blockchain Consortium R3 To Open-Source Platform Code

Oct 20 2016 | 9:03pm ET

Bitcoin's blockchain technology has spawned a flurry of activity among fintech startups...


U.S. Trust's Beard: The Rapid Growth of the Art Lending Industry

Oct 7 2016 | 10:55pm ET

Alternative investment managers have emerged as some of the most significant art...

Guest Contributor

Hedge Fund Marketing – Tips for Your Initial Sales Meeting

Sep 29 2016 | 5:46pm ET

There are two main goals a hedge fund should have for an initial in-person sales...