Stephen Pezanosky in the Dallas Morning News: Inside the Negotiations over Energy Future Holdings’ Breakup


It was already March, and negotiations around the distressed power company Energy Future Holdings appeared to be going nowhere.

Attorneys working for owners KKR & Co. and TPG had maybe two months before EFH went into default. A handful of creditors were ready to cut a deal to break up the more than century-old company. But a powerful group of senior lenders, who controlled more than half the company’s $40 billion in debt, was balking at the tax implications...

A tactic being employed by some of the firms was to buy up EFIH debt around what those in the business call the “fulcrum security,” roughly the point at which the outstanding debts exceed the value of the company.

If investors can position themselves on both sides of that line, they have bought themselves a seat at the negotiating table, said Stephen Pezanosky, a bankruptcy attorney with Haynes and Boone, LLP.

“You don’t worry about the ones that are fully secured. And you don’t worry about the ones out of the money. It’s the guys around the line you watch,” he said.

Excerpted from the Dallas Morning News, May 5, 2014. To view full article, click here.

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