TCEH emerges from bankruptcy, completes spinoff from Energy Future

By Caroline Salls

Pittsburgh, Oct. 4 – TCEH Corp. and subsidiaries, including operating businesses Luminant and TXU Energy, emerged from Chapter 11 bankruptcy as a stand-alone company effected through a tax-free spinoff from Energy Future Holdings Corp., according to a news release.

TCEH said the emergence follows satisfaction of all necessary conditions, including regulatory approvals required by Energy Future’s third amended plan of reorganization for its Texas Competitive Electric Holdings Co. LLC debtors, which was approved by the U.S. Bankruptcy Court for the District of Delaware on Aug. 29.

The company said it eliminated more than $33 billion of debt and other obligations through the Chapter 11 restructuring process.

Exit financing

At emergence, TCEH’s available liquidity position is estimated to be $1.65 billion, including $750 million of undrawn net borrowings available under the company's new $4.25 billion exit financing facility.

Interest on Base rate exit loans will accrue at the adjusted Base rate plus 300 basis points for term loans and adjusted Base rate plus 225 bps for revolving loans. Interest on Libor term loans will accrue at a rate of Libor plus 400 bps, and interest on Libor revolving loans will be Libor plus 325 bps.

Term loans will mature on Aug. 4, 2023, and revolving loans will mature on Aug. 4, 2021.

Concurrent with emergence, TCEH issued 427.5 million shares of its common stock, as well as other proceeds, to the pre-emergence first-lien creditors of Texas Competitive Electric Holdings. Beginning Tuesday, this common stock is publicly traded on the OTCQX market under the ticker symbol THHH.

Spinoff transactions

According to an 8-K filed with the Securities and Exchange Commission, the following transactions were completed as part of the tax-free spinoff:

• TCEH contributed all of its interests in its subsidiaries. Assets and liabilities related to the TCEH debtors’ operations were also contributed. In addition, Energy Future transferred sponsorship of some employee benefit plans, programs and policies to TEX Energy LLC, a recently formed limited liability company, in exchange for which TCEH received 100% of the TEX Energy LLC membership interests;

• TEX Energy contributed some of the TCEH Assets to TEX Intermediate Co. LLC, which in turn contributed TCEH assets to TEX Operations Co., LLC, which in turn contributed them to TEX Asset Co. LLC;

• TEX Preferred LLC converted to a Delaware corporation from a Delaware limited liability company;

• The asset company contributed some of the TCEH Assets to TEX Preferred in exchange for all of its preferred and common stock. The preferred stock was sold in exchange for cash, and the cash proceeds were distributed to TCEH to fund plan recoveries;

• TEX Energy LLC converted to a Delaware corporation from a Delaware limited liability company and changed its name to TCEH Corp.; and

• TCEH distributed $427.5 million shares of common stock and $370 million of cash to its former first-lien creditors in exchange for the cancellation of their allowed claims and the right to receive recoveries under the unsecured claim of TCEH against Energy Future in the amount of $700 million.

TCEH also deposited rights into an escrow account for subsequent distribution to eligible first-lien creditors.

Energy Future and Energy Future Intermediate Holding Co. LLC, which own an indirect 80% equity interest in Oncor, remain in Chapter 11 and are proceeding toward confirmation and emergence on a separate, standalone schedule.

New board

TCEH said it appointed a new board of directors consisting of Gavin Baiera, Jennifer Box, Jeff Hunter, Michael Liebelson, Cyrus Madon, Curt Morgan and Geoffrey Strong.

Morgan will assume responsibilities as chief executive officer of TCEH Corp., effective immediately.

“TCEH Corp. emerges from the restructuring process with a superb integrated business,” Morgan said in the release. “This includes TXU Energy and Luminant – both of which are competitive, well-resourced and positioned for continued operational excellence in the growing Texas market with a strong balance sheet and the potential for stable earnings and significant cash generation.”

Incentive plan

According to the 8-K, TCEH’s board adopted a 2016 omnibus incentive plan under which a total of 22.5 million shares of TCEH common stock are reserved for issuance as equity-based awards to employees, directors and other specified participants.

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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