Bankruptcy Court Orders Energy Future Holdings and Creditors into Mediation
Dallas-based Energy Future Holdings (EFH), locked in a battle with investors dissatisfied with its handling of a failed electrical generation business unit, has been ordered into formal mediation with the group of investors by the bankruptcy judge presiding over the case. The creditors had been threatening a lawsuit over the stalled negotiations, but this has also been blocked by the judge until the mediation process is over.
EFH filed for bankruptcy in 2014, citing $42 million in debt. They presented a plan to a group of smaller creditors that involved selling off some profitable stakes the company holds and settling their debt claims for $800 million, but the creditors collectively complained that the offer was far too low.
The group then presented an alternative plan that would restructure EFH and raise more than $10 billion through equity sales and other plans, including the sale of its valuable stake in Texas-based power transmission company Oncor Electric Delivery, which has been valued at $10 billion. This would allow EFH to repay the investors at a much higher rate. EFH rejected this plan in favor of their more modest restructuring, and the creditors group threatened to sue. Seeking to forestall a lengthy and slow-moving litigation, U.S. Bankruptcy Court Judge Christopher Sontchi ordered both sides into mediation over the plans, and blocked all trial preparations on either side in order to impose a focus on the mediation process.
If the mediation fails to secure a settlement the trial will go forward, and is expected to take about a month to complete.