Energy Future second-lien trustees’ premium payment request denied

By Caroline Salls

Pittsburgh, Oct. 28 – Energy Future Intermediate Holding Co. LLC and EFIH Finance Inc. (collectively EFIH) second-lien notes trustees’ motion for a ruling that a premium is due in connection with EFIH’s partial paydown of the second-lien notes was denied Wednesday by the U.S. Bankruptcy Court for the District of Delaware.

EFIH issued $406.39 million of 2021 second-lien notes and $1.75 billion of 2022 second-lien notes. Computershare Trust Co. NA and Computershare Trust Co. of Canada are the indenture trustees for the second-lien notes.

In Wednesday’s ruling, judge Christopher S. Sontchi referenced a ruling he had made in connection with requested payment of a premium on the company’s first-lien notes, calling the first-lien and second-lien indentures “substantially identical.”

As previously reported, EFIH requested court approval to pay $750 million of principal and interest accrued on the second-lien notes using its remaining debtor-in-possession financing. The court approved the partial paydown, which was completed on March 11, 2015.

The second-lien trustees subsequently filed a complaint in connection with EFIH’s failure to pay an applicable premium, which the trustees claim became due with the partial paydown. The trustees also asked the court to rule that any future paydown of the second-lien notes before their call dates would give rise to a secured claim for the applicable premium.

Since the first-lien and second-lien indentures are so similar, Sontchi incorporated and applied his ruling on the first-lien notes into Wednesday’s order.

Specifically, in the first-lien premium payment order, Sontchi found that EFIH’s bankruptcy filing was not an intentional default under the indenture, that EFIH’s bankruptcy filing caused an automatic acceleration of its notes obligations and that, under the plain language of the indenture, EFIH’s repayment of the notes did not meet the conditions necessary for an applicable premium to become due.

Although the second-lien trustees argued that an acceleration clause in the second-lien indenture differed from the first-lien indenture, Sontchi said “the second-lien indenture’s acceleration clause is unambiguous, insufficient and lacking in explicitness regarding whether a make-whole premium is due upon an event of default.”

“Thus, after acceleration, the second-lien trustee does not have a valid claim for the applicable premium,” Sontchi said in Wednesday’s ruling.

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

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