Elliott Sues to Open Up Energy Future Bankruptcy

Paul Singer's Elliott Associates LP, a hedge fund in control of more than $2.8 billion worth of Energy Future Holdings Corp.'s debt, is suing for the right to propose a chapter 11 exit plan for the Dallas power company.

A lawsuit filed Thursday in the bankruptcy court where Energy Future sought chapter 11 protection in 2014 says Elliott is ready to talk about a new plan for the company, which has twice tried and failed to exit bankruptcy by selling its Oncor power-transmissions business.

An investor that has picked up stakes in several different classes of Energy Future debt, Elliott is positioned to quell some of the intercreditor strife that has made the bankruptcy of the former TXU Corp. a difficult proceeding.

Whether Elliott can monetize Oncor, a valuable business, remains to be seen. One of the largest electricity transmission businesses in the country, Oncor is being watched over carefully by the Public Utility Commission of Texas. So far, the state PUC has killed two deals for the company, Energy Future's sole remaining asset.

On May 18, Texas regulators will hear a plea from the latest failed buyer, NextEra Energy Inc., for reconsideration of their ruling that rejected its effort to buy Oncor.

NextEra says a finding by the Public Utility Commission of Texas that its $18.7 billion deal for Oncor is not in the public interest is fraught with error and should be reversed. It's seeking a rehearing, and possibly contemplating legal action, according to regulatory filings.

For now, however, there is no deal for Oncor, and no way out of bankruptcy for Energy Future, the former TXU Corp. That has Elliott worried, according to Thursday's filing.

"The precarious state of the NextEra transaction means that creditors and the Debtors must immediately consider and pursue other restructuring alternatives that will enable the Debtors to exit these Chapter 11 cases as soon as possible," lawyers for Elliott wrote.

Energy Future could not immediately be reached for comment.

Energy Future has been in bankruptcy so long it no longer has the exclusive right to file a chapter 11 plan. However, Elliott says the company is trying to tie its hands with a "plan support agreement" that investors that owned Energy Future debt entered into before the Oncor deal fell through.

While NextEra attempts to salvage its deal, big creditor Elliott is watching the professional fee meter ticking and casting about for a solution that offers certainty.

Elliott didn't sign the deal and shouldn't be held to it, lawyers for the hedge fund say.

Write to Peg Brickley at peg.brickley@wsj.com

(END) Dow Jones Newswires

May 11, 2017 16:44 ET (20:44 GMT)