Energy Future unit rejects $2.3 billion NextEra/second-lien proposal

By Caroline Salls

Pittsburgh, June 24 – Energy Future Intermediate Holding Co. LLC and EFIH Finance Inc. second-lien notes trustee Computershare Trust Co., NA and Computershare Trust Co. of Canada said the EFIH entities rejected a $2.3 billion strategic financing and restructuring proposal from investor NextEra, Inc. and a group of second-lien noteholders.

According to a preliminary objection filed Monday with the U.S. Bankruptcy Court for the District of Delaware, EFIH agreed to negotiate with the second-lien noteholders after they submitted an alternative financing proposal on May 12.

However, shortly after advisers to the EFIH second-lien group met with the company’s management and representatives on May 30 to discuss the proposal, EFIH asked parties to submit their “final and best” offers for second-lien financing.

The joint financing proposal and new restructuring plan was submitted by NextEra and the noteholders on June 18 and revised on Monday “to further improve the terms and address the few concerns the debtors’ advisors had mentioned.”

Computershare said it was told that EFIH intends to move forward with the proposal submitted by holders of its unsecured senior toggle notes.

The joint proposal from NextEra “is superior both in cost of financing and value to EFIH’s estate and its creditors,” Computershare said.

Specifically, the trustee said the second-lien/NextEra proposal includes significantly lower interest and rates, superior enterprise valuation of equity conversion/investment, enhanced recoveries to all key creditor constituencies, facilitation of the debtors’ tax strategy and improved executability.

Proposal details

According to the financing proposal, $1.6 billion of the $2.3 billion two-year debtor-in-possession financing would be provided by NextEra.

Interest on the financing would be 6%.

The proposal also includes a potential tax-free merger of NextEra and Energy Future Holdings in an all-stock transaction, bringing NextEra’s ownership to 100%.

NextEra and the second-lien noteholders said their financing proposal is not contingent on the potential merger, and they would remove reference to the potential merger from the proposal if the Energy Future debtors had any concern with its inclusion.

Pre-conversion splits remain the same under the NextEra/second-lien proposal as under the existing restructuring support agreement, with 98% of the DIP equity going to EFIH unsecured PIK/toggle notes, 1% to Energy Future unsecured creditors and 1% to existing equity.

The proposed DIP facility, together with $100 million of retained second-lien notes, would convert into 68% of reorganized Energy Future Holdings’ equity, with an implied equity value of $3.6 billion.

Computershare said the NextEra/second-lien proposal improves creditor treatment by paying EFIH PIK/toggle noteholders and EFIH second-lien noteholders in full through a combination of cash and equity and providing a $20 million or greater cash payment over the payment expected in the current restructuring agreement to Energy Future Holdings unsecured noteholders.

The funds derived from the NextEra/second-lien proposal would go toward partial refinancing of the EFIH second-lien notes, including payment of a make-whole claim, and for general corporate purposes and pre-funding of a plan of reorganization.

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

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.