Energy Future Holdings Corp. is trying to establish a bidding and sale process that locks in the structure of a reorganization plan and produces “catastrophic” results for the unregulated power plants, creditors of the generation side of the company said in court filings at the end of last week, Bloomberg News reported yesterday. The objections come from senior noteholders of the generation business and the official creditors’ committee representing that side of the company. The bankruptcy judge in Delaware will lay down auction rules at an Oct. 17 hearing. Two factions epitomize the divergent views about how the bankruptcy reorganization, which began in April, should proceed. The holding company and creditors of the Oncor electric distribution business want a structure that avoids what they say would be a potential $7 billion tax liability. Avoiding taxes resulting from a sale requires a tax-free spinoff of the generation business, but creditors of the generation business say that the tax-free structure would deprive them of a stepped up basis in the assets that they would receive. In turn, the lack of a higher basis would mean the loss of billions of dollars of potential value in the generation business.
