Energy Future Holdings Corp.’s unsecured bonds are soaring to the highest level in a year as junior creditors challenge the power producer’s plan to restructure about $40 billion of debt in bankruptcy, Bloomberg News reported yesterday. Bonds of the company that don’t have senior claims on assets returned 37.4 percent since April 29, when it filed for chapter 11 protection, beating the 1.7 percent gain for all high-yield, high-risk securities, according to data compiled by Bloomberg. Energy Future, formerly known as TXU Corp., was the subject of a record $48 billion leveraged buyout in 2007. The rally shows rising speculation that the plan may be blocked, increasing returns for some junior creditors and providing recoveries for others who were deemed out of the money. Bankruptcy Judge Christopher Sontchi assured lower-ranking lenders including Appaloosa Management LP and Marathon Asset Management LP last week that they’d have an opportunity to challenge Energy Future’s reorganization plan, adding that he wasn’t “buying into” the company’s method for valuing its assets this early in the case.
