TXU debt trades as key hearing progresses over 2nd-lien recoveries


Energy Future debt was on the move as a key hearing progressed.

EFIH 10.25% second-lien notes due 2015 rose roughly three points, to a 15 bid.

Bids for the company’s $1.75 billion of 11.75% second-lien notes due 2022 were at 123.75 today, off a market of 126/127 hit late last week, sources said. These bonds were at 118.5/119.5 at the time of the April 2014 bankruptcy filing.

The company’s bank debt was more or less unchanged. The power producer’s extended term loan due 2017 (L+450) was at 82/82.5. The company’s non-extended term loan due 2014 (L+350) was bid at 81.875, sources said.

The hearing scheduled for today in Wilmington, Del., will likely determine, to a large extent, the ultimate treatment of both creditor classes in the company’s eventual reorganization plan. It is worth noting that while the issues at today’s hearing each present distinct upsides for each creditor class, the potential downside recovery risks are somewhat muted, perhaps explaining how levels on each would rise despite the creditors being in conflict with one another.

At issue in the hearing is whether to approve a proposed $1.9 billion second-lien DIP for Energy Future Intermediate Holding (EFIH) from the company’s unsecured creditors, primarily holders of the so-called EFIH toggle notes. As reported, EFIH controls the company’s 80% interest in regulated utility Oncor.

Together with the already-approved $5.4 billion first-lien EFIH DIP, the second-lien DIP would be used to roll-up second-lien debt and provide the company with additional liquidity.

The proposed second-lien DIP is part of the company’s pre-arranged reorganization plan that would, in effect, see the toggle noteholders, together with Fidelity, a holder of the unsecured debt at parent Energy Future Holdings, acquire nearly 100% of the equity in the reorganized company (following the spin-off of Texas Competitive Energy Holdings), with the DIP converting into about 62% of the equity in reorganized Energy Future Holdings, EFIH’s parent (creditors would acquire the remaining 38% of the equity via direct distributions under a reorganization plan).

Further, under the proposal the company’s current second-lien lenders, owed roughly $2.1 billion, would be repaid in full, including accrued and unpaid interest, but excluding any make-whole amount that holders have asserted is due on the debt as a result of early repayment. Rather, second-lien holders have been offered a settlement of 50% of the asserted make-whole claim via a tender offer that expires on July 3 (early participation in the proposed settlement drew holders of only 43% of the notes).

As reported, however, second-lien lenders have joined with NextEra Energy to propose a rival $2.3 billion second-lien DIP as part of a larger plan under which NextEra would acquire EFIH in order to bring it out of Chapter 11. Under that plan, second-lien lenders would be repaid in full, including the entire make-whole claim. Toggle noteholders, meanwhile, would receive a combination of cash and equity that would repay them in full.

Among other things, the second-lien/NextEra proposal is at a lower interest rate, and charges lower fees. – Abby Latour/Alan Zimmerman

Follow Abby on Twitter @abbynyhk for middle-market deals, leveraged M&A, distressed debt, private equity, and more


LightSquared reaches deal on plan; mediator slams holdout Ergen

lightsquared logo

The bankruptcy court judge overseeing the mediation in LightSquared’s Chapter 11 case reported that all of the parties in the case, with the exception of Charles Ergen and his investment vehicle, SPSO, “have agreed on the key business terms of a Chapter 11 plan for the debtors that should be confirmable without the support of the one party, SPSO, which has not agreed.”

According to a June 27 report filed by the mediator, Bankruptcy Court Judge Robert Drain, Ergen and SPSO did not participate in the mediation “in good faith” and “wasted the parties’ and the mediator’s time and resources.”

Drain’s report detailed neither the terms of the Chapter 11 plan nor the reason for his determination that Ergen did not participate in good faith, except to state that Ergen left the last of three scheduled day-long mediation sessions, specifically the one held on June 23 that Drain had specified would be the final session, without Drain’s “permission.”

Drain said that after Ergen left, Drain told Ergen’s counsel that he would be willing to continue the mediation despite his earlier ruling that June 23 would be the final session “if SPSO made a certain proposal by 5:00 p.m. on June 24, 2014.”

Drain added, however, “Such proposal was not made.”

Drain said that since June 23, he has participated in several phone calls regarding the details of the agreements reached during mediation, and was willing to “continue in that role if the parties seek it,” but he also stated, “[t]he global mediation … has ended.”

As previously reported, SPSO is the investment vehicle Ergen used to purchase some $844 million of LightSquared’s senior lender claims prior to the company’s Chapter 11 filing. Whether Ergen fraudulently acquired those claims on behalf of DISH, however, to sidestep non-compete provisions of the debt indentures has been a hotly contested issue in the case. A trial was held in March, with Bankruptcy Court Judge Shelley Chapman ruling in early May that while Ergen’s claims would be allowed in the case, they would be subject to equitable subordination in an amount to be determined.

As a consequence of those findings, however, Chapman denied confirmation of the company’s proposed reorganization plan (see “LightSquared plan denied; judge gives lawyers 2 weeks to make deal,” LCD, May 8, 2014). Chapman gave the parties two weeks to work out a revised reorganization plan, after which she appointed Drain as a mediator.

Drain’s calling out Ergen by name in the mediation report as acting in bad faith is unusual, to say the least. “I understand the seriousness of this assertion,” Drain said in his report, adding, “[i]t is unique in my experience as a mediator in a field where the parties are known to assert their positions aggressively and sharp elbows in negotiations, although not welcome, are tolerated.” – Alan Zimmerman


CLO roundup: June marks banner month for Europe, US CLO issuance

It has been quite the month for the CLO markets in June with issuance in both the U.S. and Europe breaking records and global volume pushing up to $69.66 billion. The summer’s onset could see supply tail off over the coming weeks, but pipelines are still bulging with arrangers booking new managers through to 2015.

CLO roundup 2014-06-30 chart 1










LCD subscribers can click here to access full story and analysis, including charts:

  • CLOs prices in US last week
  • US arbitrage CLO issuance and institutional loan volume
  • YTD European CLO issuance, deals and details
  • Deal pipleline
  • European arbitrage CLO issuance and institutional loan volume

. – Sarah Husband




New CLO managers start to appear in Europe, continue to ramp in US

Printing a new CLO may be more challenging than in the past, but the lure of locking up $500 million plus of loan assets continues to tempt new managers to market. Last week Covenant Credit Partners joined the list of debut CLOs managers stateside, while Europe is also gearing up for a much needed expansion in the manager ranks.

In Europe, the €6.92 billion of CLO 2.0 issuance in 2014 has been concentrated among a total of just 12 managers – only 2 of which are considered new 2.0 managers by LCD – so investors looking for more diversity in the manager pool remain largely out of luck.

To access full story and detailed analysis, LCD subscribers please click here.

– Sarah Husband 


Jefferies Finance prices $562.5M CLO via Citi; US issuance YTD $60.01B across 111 deals

Citi has priced an upsized $562.525 million CLO for Jefferies Finance, according to market sources. The transaction was increased from $459.75 million.

The CLO is structured as follows:

As previously reported, the transaction is expected to be 100% ramped at pricing and the manager will hold the equity.

The reinvestment period ends on July 20, 2018 and the stated maturity is July 20, 2026.

JFIN 2014-II will be the seventh CLO 2.0 managed by Jefferies Finance.

With Jefferies’s deal, CLO issuance in the year to date grows to $60.01 billion across 111 deals, according to LCD. In June, 23 deals have priced totaling $13.22 billion. – Sarah Husband