Energy Future Holdings Corp. Tuesday successfully fended off questions from creditors anxious to probe the financial health of a company division that is the target of deal talks.
The questions arose in a brewing court fight over whether Energy Future owes of millions of dollars of premiums on $4 billion worth of debt attached to the division, which owns an 80% stake in the Texas transmission business, Oncor. At some point, that fight may turn on the question of whether the division is solvent. The answer to that question is in the works, as Energy Future engages in talks aimed at selling the Oncor stake, probably by way of a complex transaction worked into a Chapter 11 restructuring plan.
“The case is dynamic,” commented Judge Christopher Sontchi, at a court session where he said investors pressing the premium litigation could ask questions later about the solvency of the Energy Future division, Energy Future Intermediate Holding. By the time those questions are asked, the judge said, the “extraordinary” course of the Texas power company’s bankruptcy case may have made the answers obvious.
When Energy Future filed for Chapter 11 protection in April, it had a predetermined pathway out of bankruptcy. Some leading creditors had agreed to split the company in two, with one division to be spun out, and the other, Energy Future Intermediate, reorganized.