(Updates with bankruptcy talks in fourth paragraph.)
Oct. 31 (Bloomberg) -- Energy Future Holdings Corp. creditor negotiations failed and the power producer seeking to restructure almost $44 billion in debt will make an interest payment due tomorrow, said people familiar with the situation.
Talks fell apart after different creditor groups couldn’t reach a consensus, said the people, who asked not to be named because the deliberations were private. Adam McGill, a representative for Dallas-based Energy Future, declined to comment.
Avoiding default by paying the $270 million coupons due to junior bondholders at Energy Future’s Texas Competitive unit tomorrow buys the company and its creditors several months to try and negotiate a fresh bankruptcy deal with broader support, the people said.
The former TXU Corp., the subject of the largest leveraged buyout ever, was debating whether to make the payment or file for bankruptcy, depending on the progress made in confidential creditor talks. Senior lenders wanted Energy Future to file for Chapter 11 without paying the coupons to boost their recoveries. Creditors have been negotiating for months over how to divide ownership and new debt in a restructuring of the biggest power plant owner in Texas.
KKR & Co., Goldman Sachs Capital Partners and TPG Capital led the $48 billion takeover in 2007. The investment was predicated on rising gas prices. Instead, they fell as the development of hydraulic fracturing created a surge in U.S. gas supplies, triggering 10 straight quarterly losses at the company since 2011.
Texas Competitive’s $1.83 billion of 10.25 percent bonds maturing in November 2015, which are due to pay interest on Nov. 1, jumped 2.7 cents today to 5.063 cents on the dollar at 2:34 p.m. in New York, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.
--With assistance from Mark Chediak in San Francisco. Editors: Julie Alnwick, Alan Goldstein