Energy Future indenture trustee wants clarification on ruling finality

By Caroline Salls

Pittsburgh, April 6 – The indenture trustee for the first-lien notes issued by Energy Future Holdings Corp. subsidiary Energy Future Intermediate Holding Co. LLC and EFIH Finance Inc. (EFIH) asked the U.S. Bankruptcy Court for the District of Delaware to clarify that a ruling on premium payment is not the final judgment in a related lawsuit, contested matter and stay applicability motion, according to a Monday court filing.

If the March 26 order does constitute a final order, Delaware Trust Co. said an appeal must be filed within 14 days within entry of the order, which it said is “well before this court will be able to hold a trial and issue a decision on the trustee’s pending motion to life the automatic stay to rescind acceleration.”

Without clarification, the trustee said it or EFIH may feel compelled to file a notice of appeal, which could create potential disputes regarding whether or not the bankruptcy court “may be divested of jurisdiction over aspects of the makewhole dispute and able to grant either side complete relief.”

As previously reported, the court ruled that Energy Future’s bankruptcy filing was not an intentional default under the indenture for the 10% first-lien notes due 2020, and no premium payment is required upon repayment of the notes in connection with bankruptcy or insolvency.

U.S. Bankruptcy Court for the District of Delaware judge Christopher S. Sontchi said the EFIH debtors sought court approval of debtor-in-possession financing in April 2014 to repay all of the outstanding notes and settle some noteholder claims.

Delaware Trust objected to the financing motion, arguing that the noteholders were entitled to a secured claim for an “applicable premium,” because an optional redemption would occur when the notes were repaid, the EFIH debtors intentionally defaulted by filing bankruptcy to avoid paying the premium, and the repayment would be a breach of the noteholders’ right to rescind the notes’ acceleration.

The trustee filed an adversary proceeding in May 2014 that included the claims from the objection, plus an unsecured claim for breach of a no-call covenant and three unsecured claims related to the objection counts.

The trustee also sought a ruling that it could decelerate the notes without violating the automatic stay.

The court approved the DIP financing on June 6, 2014, as well as the use of the financing to pay the first-lien noteholders and the settlement resolving the claims of some of the noteholders for the applicable premium. The noteholders who chose not to accept the settlement sought claims for an applicable premium in the adversary proceeding, although they have been paid their full principal and accrued interest using DIP financing.

Energy Future, a Dallas-based power generation company and utility operator, filed for bankruptcy on April 29, 2014. The Chapter 11 case number is 14-10979.

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