The bankruptcy court for Energy Future Holdings has scheduled a June 1 hearing on a May 11 motion by Energy Future Holdings and related companies for extra time to file a final reorganization plan without fear of a competing plan being filed.
Energy Future Holdings, a major operator of power plants in Texas, asked the U.S. Bankruptcy Court for the District of Delaware to extend the exclusive plan filing deadline to Oct. 29, and to extend to Dec. 29 the deadline for the companies to line up creditor backing for that plan.
Paul Keglevic, the Executive Vice President, Chief Financial Officer and Co-Chief Restructuring Officer of Energy Future Holdings. said in May 11 supporting testimony: “I believe that maintaining exclusivity is essential to the Debtors’ ability to advance these chapter 11 cases, especially in light of the recent filing of the Plan and related Disclosure Statement. If granted an extension of the Exclusive Periods, I anticipate that the Debtors will focus on: (a) capitalizing on the imminent Plan mediation with every [Texas Competitive Electric Holdings Co. LLC] creditor constituency; (b) advancing the EFH-EFIH Transaction and continuing to explore REIT alternatives with all interested parties and creditor constituencies; (c) continuing efforts to resolve interest and makewhole issues; and (d) discussing a potential Plan confirmation schedule with parties in interest and the Court, all with a view towards providing direction in these chapter 11 cases and allowing the Debtors to expeditiously exit chapter 11.
“I believe that continued progress on the Plan will be more difficult if the Debtors are forced to operate in an environment where competing plans can co-exist. I believe there is a risk that Plan mediation (which will commence in the next several days) will be less successful if the parties are simultaneously pursuing other plans of reorganization that may better improve their individual recovery. I also believe there is a risk that participation in the EFH-EFIH Transaction may be adversely affected if potential bidders begin to question the Debtors’ ability to exit chapter 11 in a reasonable timeframe.
“On the other hand, I believe an extension of the Exclusive Periods will allow the Debtors to advance the process for the EFH-EFIH Transaction, including a potential REIT structure. In addition, I believe Plan mediation, as well as ongoing negotiations regarding Plan recoveries, has the potential to settle potentially costly and time-consuming litigation, thereby maximizing the value of the estates. An extension of the Exclusive Periods will allow the Debtors to advance these important workstreams.
“Over the last several months, the Debtors have been working to develop a global plan of reorganization that seeks to maximize the value of all of the Debtors’ estates. This process, which began even before the Petition Date, involved the Debtors actively seeking feedback from each of their major creditor constituencies regarding their individual restructuring goals. This process was successful and the Debtors received proposals from certain constituencies and from combinations of constituencies. The proposals, however largely fostered individual creditor interests without necessarily considering how those interests fit into a global restructuring. The Plan filed on April 14, 2015 reflects the Debtors’ attempt to coalesce the proposals into a cohesive whole. Discussions on the Plan have continued since its filing, and I believe that an extension of the Exclusive Periods will foster ongoing, productive discussions regarding Plan recoveries.
“I anticipate that the next several months will be an active period on the EFH-EFIH Transaction, and I believe that an extension of the Exclusive Periods will advance such efforts. In addition, the Debtors are engaged in discussions with the potential bidders and creditor constituencies regarding a potential REIT structure. The Debtors and their stakeholders have long been aware of the possibility of a REIT structure, and the Debtors will continue to engage with interested parties regarding their interest in exploring a REIT alternative. I understand that a REIT structure has a number of regulatory and tax considerations that make execution a complex endeavor, and in any event the Debtors will use the extension of the Exclusive Periods to explore and determine the highest or otherwise best proposal for the EFH-EFIH Transaction.”
The extension motion itself noted the sale process for the company’s Oncor Electric Delivery business: “[T]he Debtors have continued to advance the auction process for the EFH-EFIH Transaction. The Debtors received second round bids from bidders in the auction process, and they are currently negotiating with the parties to develop a stalking horse bid for the Debtors’ indirect economic interests in Oncor. Thereafter, the stalking horse bid will be subject to an open marketing and auction process that will culminate in the selection of the highest or otherwise best transaction that both maximizes distributable value under the Plan and provides certainty of closing.
“The Debtors have also gone to great lengths to facilitate the efforts of key creditor constituencies to develop alternative plan structures premised on converting Oncor to a real estate investment trust (or ‘REIT’) structure. The prospect of a REIT conversion, which has been known to the Debtors and their stakeholders for some time, implicates a host of regulatory and implementation considerations, particularly if it is required as a condition to consummation of a Plan. Regardless, the Debtors, in accordance with their fiduciary duties, have considered and will continue to consider any creditor proposal in light of the risks and benefits to their estates, and in the context of the existing marketing process for the EFH-EFIH Transaction.”