Energy Future and Elliott Management trade views on proposed deals

By Caroline Salls

Pittsburgh, July 10 – In a letter to Energy Future Holdings Corp.’s board of directors, Elliott Management Corp. said Elliott “has been in the process of negotiating a term sheet for a fully consensual restructuring that values reorganized EFH/EFIH at approximately $9.3 billion and Oncor at approximately $18.5 billion,” according to a Monday filing with the U.S. Bankruptcy Court for the District of Delaware.

The letter was written in response to Energy Future’s announcement that it is finalizing a possible change-of-control transaction with Berkshire Hathaway Energy Co.

“While we are entirely supportive of a transaction with Berkshire or another third party in the event that the value provided by that transaction exceeds the value being proposed by Elliott, we fear that the Berkshire transaction does not provide such value,” the letter said.

“Almost by definition, any transaction other than a creditor-led equitization that incorporates the current Oncor ring-fencing provisions ‘as is’ would introduce increased regulatory risk and therefore would increase both closing uncertainty as well as the potential for additional delay.”

Elliott said it intends to provide a significant amount of the new money required to fund its proposed equitization plan “and has been in contact with other parties that are interested in participating in the exit financing.”

According to the letter, Elliott is concerned that introducing a transaction with Berkshire at this time “will significantly undercut and potentially limit Elliott’s ability to provide a portion of the financing necessary to achieve the higher and otherwise superior transaction Elliott has proposed.”

In addition, Elliott asked the Energy Future board to include it in negotiations of any possible alternatives to its equitization plan.

In a letter responding to Elliott, Energy Future mentioned “issues that are impeding the debtors from proceeding with an Elliott-sponsored transaction at this time.”

Specifically, Energy Future said Elliott still lacks any committed financing for its proposed transaction, and the parties have a “fundamental disagreement” on how to mitigate Energy Future’s significant liquidation risk if proposed debtor-in-possession facilities are funded but the Elliott-sponsored transaction does not close.

According to the Energy Future letter, there is a “comparatively limited certainty of closing associated with an Elliott-sponsored transaction compared to the BHE-sponsored transaction.”

Also, Energy Future said the Elliott proposal comes with an unknown timeline associated with confirming and completing the associated transactions.

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

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