Energy Future ends Q3 with $40 billion debt; creditor talks continue

By Paul Deckelman

New York, Nov. 5 - Energy Future Holdings Corp. and its various subsidiaries ended the 2013 third quarter with about $2 billion of total liquidity - and around $40 billion of consolidated short- and long-term debt.

And the Dallas-based power generation company and utility operator's chief financial officer said Tuesday that talks on what to do about all of that debt were still in progress.

Paul Keglevic said that "over the past several months, we have been engaged in discussions with various creditor groups concerning our capital structure. While these conversations have not yet led to a consensual deal, we remain in discussion with certain of the creditors' advisers to further explore whether we can reach an agreement on the terms of a consensual restructuring."

Keglevic, who also is the company's executive vice president, said that Energy Future Holdings "will continue to consider and evaluate a range of future changes to our capital structure," which could include filing a voluntary Chapter 11 case for some or all of the company and subsidiaries, although he specifically excluded the ring-fenced entities of Oncor Electric Delivery Co. LLC, the largest regulated electric delivery business in Texas. Energy Future Holdings is Oncor's majority owner, but it is not involved in the utility's management, and the company is considered to be bankruptcy-remote.

After reading a short statement to that effect at the top of his formal presentation on the conference call with analysts following the release of financial results for the 2013 fiscal third quarter ended Sept. 30, Keglevic warned that neither he nor Energy Future Holdings' president and chief executive officer, John F. Young, who was also on the call, would have anything further to say about the company's liability management efforts.

For instance, during the question-and-answer portion of the call that followed the formal presentations by Keglevic and Young, the CFO point-blank declined to give a specific answer to an analyst who asked about what kind of unencumbered assets the company has that could be pledged as collateral for future financings.

$2 billion of liquidity

Keglevic did talk about liquidity. He said that as of Sept. 30, Energy Future Holdings and its subsidiaries had available liquidity of nearly $2 billion and had used some of that to make about $270 million of interest payments on unsecured debt of subsidiary Texas Competitive Electric Holdings Co. LLC when the payments came due on Nov. 1.

Slides prepared for use with the conference call presentations indicated that the company had total cash and equivalents of $1.99 billion, consisting of $1.82 billion of unrestricted cash plus another $171 million of restricted cash at the Texas Competitive Electric level, which would be used to support letters of credit.

According to those support materials, the Texas Competitive Electric letter-of-credit facility has total capacity of $1.06 billion; however, after reducing that by $115 million for a letter of credit drawn in 2009 related to a building financing, the $947 million of remaining capacity would be further reduced by $776 million of outstanding letters of credit, leaving $171 million.

Texas Competitive Electric's $2.05 billion revolving credit facility was meantime fully drawn as of Sept. 30; that was unchanged from earlier in the year.

$40 billion of debt

According to the company's latest 10-Q filing with the Securities and Exchange Commission, which was made in late October and covered the third quarter, Energy Future Holdings' consolidated balance sheet showed $38.09 billion of long-term debt as of Sept. 30.

The company has an extremely complex capital structure with several dozen series of bonds issued at either the parent Energy Future Holdings level or else by one of several direct or indirect subsidiaries that include Energy Future Intermediate Holding Co. LLC, Energy Future Competitive Holdings Co. LLC and Texas Competitive Electric. There were also numerous smaller pollution-control bond issues in conjunction with various Texas governmental entities.

The balance sheet also showed $38 million due as the current portion of that long-term debt and another $2.23 billion of outstanding short-term borrowings, including the $2.05 billion under the Texas Competitive Electric revolver at a weighted average interest rate of 4.68%, excluding customary fees, and $172 million under an accounts receivable securitization program.

On Oct. 29, the company terminated that A/R securitization program and repaid all outstanding obligations.

Keglevic explained during the call that "it was a facility that was going to terminate as of July 1, 2014 anyway. We had a substantial amount of cash that's not earning for us, so we just made a decision that the $125 million of liquidity, given the other things that we have, it wasn't worth continuing to pay the interest. So we just terminated the whole program, recognizing that that amount will get smaller as we go forward as we hit the spring."

The company's debt load in the latest quarter compared with $37.82 billion of long-term debt at Dec. 31, 2012, plus another $103 million of current portion and $2.14 billion of short-term debt.

The vast bulk of the company's debt was incurred during its 2007 leveraged buyout by Kohlberg Kravis Roberts & Co., TPG and Goldman Sachs Capital Partners.

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