BlueMountain Capital Management LLC and Halcyon Asset Management LLC will suffer losses if Energy Future Holdings Corp. fails to pay them a $431 million premium on their notes, even after the hedge funds get back all the money they lent the power company, portfolio managers testified, Bloomberg News reported yesterday. John Greene of Halcyon and Ethan Auerbach of BlueMountain were in bankruptcy court yesterday to fight Energy Future’s decision to refinance the senior notes last year without also paying the $431 million premium. Such payments are sometimes made to compensate lenders for lost interest when a borrower redeems a debt early. The Energy Future unit that repaid about $4 billion in notes is profitable and solvent, unlike the rest of the company. That’s why Halcyon paid about 107 cents on the dollar for at least $100 million in Energy Future senior notes last year, Greene, the director of research at the hedge fund, told U.S. Bankruptcy Judge Christopher Sontchi.
