Court: Energy Future debtor’s allocation unaffected by plan changes

By Caroline Salls

Pittsburgh, April 28 – A federal judge ruled Thursday that Energy Future Holdings Corp. debtor Texas Competitive Electric Holdings Co. LLC’s (TCEH) filing of a new plan in its Chapter 11 cases did not change a March 2016 order establishing an allocation method for sharing plan distributions and adequate protection payments, according to an order filed with the U.S. Bankruptcy Court for the District of Delaware.

According to the previous ruling, the allocation will be based on amounts owed on the date the company filed for bankruptcy.

First-lien indenture trustee Delaware Trust Co. asked the court to vacate the previous allocation order after changes were made to the TCEH plan.

According to judge Christopher J. Sontchi’s ruling, there are three different types of Texas Competitive Electric Holdings debtor first-lien creditors in the case in question, each with a different interest rate. The judge said first-lien noteholders have the highest interest between the TCEH first-lien creditors.

“Even though the first-lien creditors, as a whole, are undersecured and not entitled to post-petition interest from TCEH,” the first-lien noteholders claim post-bankruptcy interest should accrue on the first-lien debt for purposes of allocating payments between and among the first-lien holders under a post-bankruptcy interest allocation method, the March 2016 opinion said.

Meanwhile, the other two groups of first-lien creditors believed that the money should be shared based on the amounts owed as of Energy Future’s bankruptcy filing date under the petition date allocation method.

Sontchi said the parties estimated that “there is up to a $90 million delta” between the post-petition interest allocation method and the petition date allocation method.

As of the bankruptcy filing date, the TCEH debtors had $25.6 billion in principal amount of first-lien debt.

“DTC has not raised any new issues or any meaningful differences between the first plan and the new plan to warrant revising the court’s allocation opinion,” Sontchi said in Thursday’s ruling.

“The court finds that the petition date allocation method is the appropriate method for distributing the new plan distributions.”

Energy Future, a Dallas-based power generation company and utility operator, filed for bankruptcy April 29, 2014. The Chapter 11 case number is 14-10979.

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