Fitch lowers Energy Future; toggle notes CCC+

Fitch Ratings said it deemed the recently concluded exchange offer to exchange a portion of the leveraged buyout notes and legacy notes at Energy Future Holdings Corp. for new 11.25%/12.25% senior toggle notes due 2018 at Energy Future Intermediate Holding Co. LLC (EFIH) as a distressed-debt exchange.

As a result, Fitch said it lowered the company's issuer default rating to restricted default from CC.

The agency said it assigned a CCC+ rating with a recovery rating of RR3 to the senior toggle notes.

Fitch has also lowered the issuer default ratings of Energy Future Intermediate, Energy Future Competitive Holdings Co. (EFCH) and Texas Competitive Electric Holdings Co. LLC (TCEH) to restricted default from CC. Those ratings were simultaneously upgraded to CCC.

The agency subsequently downgraded Energy Future Holdings' senior unsecured guaranteed notes to CC with a recovery rating of RR3 from CCC- with a recovery rating of RR3; upgraded its senior secured first-lien debt to B with a recovery rating of RR1 from CCC+ with a recovery rating of RR1; and affirmed its senior unsecured non-guaranteed notes at C with a recovery rating of RR6.

Fitch also upgraded Energy Future Intermediate's senior secured first-lien debt to B with a recovery rating of RR1 from CCC+ with a recovery rating of RR1 and senior secured second-lien debt to B with a recovery rating of RR1 from CCC+ with a recovery rating of RR1.

Energy Future Competitive's senior unsecured notes were affirmed at C with a recovery rating of RR6.

Texas Competitive Electric's senior secured first-lien debt also was downgraded to CC with a recovery rating of RR3 from CCC- with a recovery rating of RR3 and its lease facility bonds were downgraded to CC with a recovery rating of RR3 from CCC with a recovery rating of RR3. Its senior secured second-lien debt was affirmed at C with a recovery rating of RR6, senior unsecured notes at C with a recovery rating of RR6 and unsecured pollution control bonds at C.

Energy Future Intermediate announced Dec. 5 that it will be issuing $1.145 billion of new 11.25%/12.25% senior toggle notes due 2018 in exchange for $1.6 billion of Energy Future Holdings' debt. Those notes consist of $234 million of 5.55% series P senior notes due 2014; $510 million of 6.50% series Q senior notes due 2024; $453 million of 6.55% series R senior notes due 2034; $94 million of 10.875% senior notes due 2017; and $313 million of 11.25%/12.00% senior toggle notes due 2017.

Fitch said it deemed the debt exchange as default given the material reduction in the principal amount for the exchanges notes and change from a cash pay basis to pay-in-kind. The new notes carry a three-year PIK feature.

The material reduction in terms for the exchanged notes is only partially offset by increase in interest rates on the new notes and a higher seniority in the capital structure for the legacy notes, the agency said.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.