Investors owning $1.7 billion or more in top-ranking debt say a $7.3 billion piece of Energy Future Holdings Corp.'s financing plan is a flawed and "incoherent" attempt to evade bankruptcy rules, the Wall Street Journal reported today. Through their bond trustee, holders of a majority of some first-lien notes attached to the company's Energy Future Intermediate arm took aim at a planned series of transactions designed to rework the balance sheet of the business, one of two major divisions that filed for chapter 11 protection along with parent Energy Future in April. Investors say that the complex deals are an "unprecedented" effort by the Texas power seller and its affiliate "to reset their entire multibillion-dollar capital structure and lock in creditors" without offering creditors the protections of the Bankruptcy Code. Instead of a chapter 11 plan process with court-approved disclosures, Energy Future is using bankruptcy financing as a vehicle for revamping the balance sheet of the Energy Future Intermediate division, court papers say. The investors' big problem with the proposed financing is the treatment of a $1.4 billion early-payment premium on the Energy Future Intermediate debt. Energy Future says that it doesn't owe any early-payment premium, but it is willing to offer extra value in the financing for investors who agree to settle.
