By Tom Hals
WILMINGTON, Del. Fri May 16, 2014 2:25pm EDT
WILMINGTON, Del. May 16 (Reuters) - Texas' largest power company, the bankrupt Energy Future Holdings Corp, was sued by a representative for noteholders who said they are owed $665 million in return for refinancing their securities, a key part of the company's bankruptcy plan.
Energy Future filed for bankruptcy in April with a complex plan to restructure its $42 billion in debt. Part of that plan involves offering a new loan in return for $3.5 billion of secured 10 percent notes issued by a subsidiary known as Energy Future Intermediate Holding.
A majority of holders of the secured notes oppose the plan, according to the lawsuit filed late on Thursday in the U.S. Bankruptcy Court in Wilmington by CSC Trust Co of Delaware, the secured notes trustee.
The dispute turns on whether the holders of those secured notes are owed an added payment to compensate for early redemption of their securities through the bankruptcy refinancing. Energy Future has said they are not, and had warned when it filed for bankruptcy it was prepared to litigate with noteholders who demand the early redemption payment, known as a make-whole payment.
Energy Future has said it entered bankruptcy with the support of 30 percent of the holders of the secured notes.
The EFIH subsidiary owns the Oncor power transmission business, which is not bankrupt. The restructuring plan anticipates EFIH will emerge from bankruptcy owned by lower-ranking unsecured creditors.
The company has commenced a tender offer for the notes in two stages. Investors who tender in the first stage receive better terms, according to Energy Future. The first stage expires at 5 p.m. EDT (2100 GMT) on Monday.
The notes trustee also asked the court to hold a hearing by the end of Monday to determine if Energy Future needed court approval for its tender offer. The trustee said the tender offer does not comply with the Bankruptcy Code or securities laws and is based on misleading information.
As of mid-Friday, the U.S. Bankruptcy Court had not scheduled a hearing for Monday.
Energy Future was created in the 2007 record leveraged buyout of TXU Corp, led by KKR & Co, TPG and the private equity arm of Goldman Sachs. The buyout firms are likely to recover next to nothing in the bankruptcy.
A company spokesman and an attorney for the trustee did not immediately respond to requests for comment.
The case is In Re Energy Future Holding, U.S. Bankruptcy Court, District of Delaware, No. 14-10979 (Editing by Matthew Lewis)
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