Moody’s: Energy Future Holdings in Danger of Bankruptcy


Moody’s: Energy Future Holdings in Danger of Bankruptcy

by Joel R. Glucksman on September 24, 2013

Energy Future Holdings Corp. is facing a "high probability" of being forced to seek protection due to the danger of bankruptcy, according to a recent report from credit ratings agency Moody's Investors Service.

The ratings agency said that the energy giant will likely seek bankruptcy protection and establish a reorganization plan by the end of the year, which would make it one of the top 10 largest nonfinancial corporate bankruptcies in the U.S. since the 1980s. In fact, the company is carrying one of the largest debt loads in recent history, ranking up there with Enron, WorldCom, General Motors, and Chrysler. In total, Energy Future Holdings is currently saddled with more than $41 billion in debt.

The company was purchased in a $45 billion leveraged buy-out in 2007 by a group of Wall Street companies that included Goldman Sachs, KKR, and TPG Capital. The investors appear to have hoped that the debt they took on to buy the company would be managed by a projected spike in natural gas prices. However, this backfired when the price of natural gas plummeted to record-low levels, leaving the group burdened with debt.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Joel Glucksman, Scarinci Hollenbeck | Attorney Advertising

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