Energy Future begins exchange offers for $12.15 billion of notes

By Angela McDaniels

Tacoma, Wash., Oct. 5 - Energy Future Holdings Corp., Energy Future Intermediate Holding Co. LLC and EFIH Finance Inc. have begun exchange offers for seven series of notes, according to a company news release.

Covered by the offers are the following notes issued by Energy Future, which have an acceptance priority level of one:

• $1 billion of 5.55% series P senior notes due 2014;

• $750 million of 6½% series Q senior notes due 2024;

• $750 million 6.55% series R senior notes due 2034;

• $2.65 billion 11¼%/12% senior toggle notes due 2017; and

• $2 billion 10 7/8% senior notes due 2017.

Also covered by the offers are the following notes issued by Texas Competitive Electric Holdings Co. LLC and TCEH Finance, Inc., which have an acceptance priority level of two:

• $3 billion 10¼% senior notes due 2015; and

• $2 billion 10¼% senior notes due 2015, series B.

Consent solicitation

The companies are soliciting consents from holders of the Energy Future notes to some proposed amendments that would eliminate substantially all of the restrictive covenants in the indentures, eliminate some events of default, modify covenants regarding mergers and consolidations and waive all claims of any breach, default or event of default.

For the toggle notes and 10 7/8% notes, the amendments would also amend the limitation on the incurrence of debt and liens, such that an unlimited amount of secured debt could be issued by Energy Future, and some provisions relating to defeasance that would otherwise prevent a defeasance without, among other things, the delivery of an opinion of counsel confirming that such defeasance does not constitute a taxable event.

For the remaining Energy Future notes, the amendments would also change the limitation on the incurrence of secured debt.

Consents are not being solicited from the holders of the Texas Competitive Electric notes.

Holders who tender Energy Future notes by the consent date will be deemed to have consented to the proposed amendments, and holders cannot deliver consents without also tendering their notes. After the consent date, holders can tender their notes without delivering consents.

Holders who consent will receive a consent payment of $2.50 per $1,000 principal amount of notes. This payment is in addition to any new exchange notes received, and Energy Future's obligation to make consent payments is not conditioned on the consummation of the exchange offers.

The consent date is 5 p.m. ET on Oct. 19.

In order to execute the proposed amendments for a series of Energy Future notes, consents are needed from the holders of a majority of those notes.

Offer cap

If the required consents are received, the companies will issue up to $4 billion principal amount of new notes in the offers. If not, they will issue up to $3 billion of new notes.

In addition, the total principal amount of new notes issued in exchange for the Texas Competitive Electric notes is capped at $1.5 billion.

If the amount of Energy Future notes tendered is more than the cap, the notes will be accepted on a pro rata basis and no Texas Competitive Electric notes will be accepted.

If the amount of the cap that is left over after the acceptance of Energy Future notes is not enough to purchase all of the Texas Competitive Electric notes tendered, Texas Competitive Electric notes will be accepted on a pro rata basis.

Exchange payments

For each $1,000 principal amount of notes tendered, the company is offering:

• $710 principal amount of exchange notes for the 5.55% notes;

• $475 principal amount of exchange notes for the 6½% notes;

• $465 principal amount of exchange notes for the 6.55% notes;

• $660 principal amount of exchange notes for the toggle notes;

• $745 principal amount of exchange notes for the 10 7/8% notes; and

• $720 principal amount of exchange notes for both series of 10¼% notes.

In each case, the exchange amount includes an early tender premium of $30 principal amount of exchange notes for notes tendered by the early consent date.

If the needed consents are received, the exchange amount will be payable entirely in new 9¾% senior secured notes due 2019 issued by Energy Future. Otherwise, it will be payable 45% in the new Energy Future notes and 55% in new 9¾% senior secured notes due 2019 issued by Energy Future, Energy Future Intermediate and EFIH Finance Inc.

Holders will receive accrued interest up to but excluding the settlement date. Accrued interest on the toggle notes will be paid in the form of new notes.

The offers will expire at 5 p.m. ET on Nov. 3.

Offer conditions

The offers are not conditioned on any minimum principal amount of notes being tendered or the issuance of a minimum principal amount of new notes. They are, however, subject to the registration statement being declared effective and the new notes being approved for listing on the New York Stock Exchange.

The purpose of the exchange offers is to reduce the outstanding principal amount and extend the weighted average maturity of the long-term debt of Energy Future and its subsidiaries, according to the release.

Citigroup Global Markets Inc. (800 558-3745 or 212 723-6106) and Goldman, Sachs & Co. (800 828-3182 or 212 357-4692) are the lead dealer managers and the lead solicitation agents. Banc of America Securities LLC, Credit Suisse Securities (USA) LLC, J.P. Morgan Securities Inc., KKR Capital Markets LLC and Morgan Stanley & Co. Inc. are also acting as dealer managers and solicitation agents.

Global Bondholder Services Corp. (866 387-1500 or 212 430-3774) is the information agent.

Energy Future is a Dallas-based energy holding company.

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