Energy Future committee questions merger agreement termination fee

By Caroline Salls

Pittsburgh, Aug. 9 – Energy Future Holdings Corp.’s official committee of unsecured creditors raised concerns about the proposed $270 million termination fee included in the company’s merger agreement with Berkshire Hathaway Energy Co., according to an objection filed Wednesday with the U.S. Bankruptcy Court for the District of Delaware.

The committee said the merger agreement contains a number of milestones, which, if not met, each give Berkshire the right to terminate the agreement and trigger the fee.

According to the objection, some of the provisions connected to the termination fee “shift undue burden to the debtors’ estates and their creditors, and thus must be modified.”

In addition, the committee said there is no evidence or basis to conclude that the termination fee was required to induce Berkshire’s bid or is necessary to preserve that bid.

“Certain provisions of the merger agreement relating to BHE’s termination rights and the payment of the termination fee could lead to scenarios that are highly value-destructive for the debtors’ estates – harm that would be borne by the EFH/EFIH committee’s constituency,” the objection said.

The creditor group said an “overly broad confirmation milestone” allows Berkshire to terminate the agreement at any time before the closing and receive the termination fee if the court does not confirm Energy Future’s plan by Dec. 15.

The committee said this term is overly broad because if Berkshire chooses to exercise this termination right, it should not receive the benefit of the fee while there are closing conditions within its control that have not been satisfied.

Also, the committee said it has raised concerns with Berkshire related to the size of the termination fee.

The committee said it will consider evidence expected to be presented by Energy Future on the necessity of such a large fee in order to preserve the value of the estate and the Berkshire offer, reserving its right to respond further at the hearing to the size of the fee.

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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