Judge Issues Temporary Restraining Order in Energy Future-Vistra Tax Fight
A bankruptcy judge Thursday issued a temporary restraining order barring Vistra Energy Corp. from filing a tax return that runs afoul of an agreement reached as it exited from bankruptcy last year.
The temporary restraining order, or TRO, stands until Friday at 5 p.m. Eastern, maintaining the status quo in a feud between Vistra and its former parent, Energy Future Holdings Corp.
At stake are tax breaks growing out of the allocation of earnings and profits between the two companies, which were split apart in bankruptcy. Judge Christopher Sontchi is slated to hear arguments in the dispute over the tax agreement on Friday. The TRO could be dissolved or extended before 5 p.m. Friday, if the judge issues a ruling.
At the time of the split, Energy Future and its former business agreed on a plan to divide the tax attributes. According to Energy Future, Vistra is preparing to file tax returns Monday that will strip value from Energy Future, allegedly in violation of the agreement. Energy Future wants a TRO to prevent that.
Vistra, a reorganized company made up of the former TXU Corp.'s power retailing and generating business, is fighting the TRO. A spokesman for Vistra declined to comment Thursday.
Mark Thomas, lawyer for Energy Future, said at a hearing Thursday in the U.S. Bankruptcy Court in Wilmington, Del., that the dispute erupted about 30 days ago, and hasn't been resolved by talks.
Taxes were a key issue throughout Energy Future's contentious chapter 11 proceeding. The restructuring of $42 billion in debt was premised on dividing the company in two and spinning off the retailing and power-producing businesses as a separate company. That company, later named Vistra, left bankruptcy last year.
Done incorrectly, the spinoff of Vistra threatened to leave Energy Future stuck with a multibillion-dollar tax bill, which it would be unable to pay. Hence, Energy Future and the Vistra businesses came to terms on a complex agreement that spells out how each would treat tax attributes.
Now the two companies are at odds about how to deal with the allocation of earnings and profits, according to the TRO. The order bars Vistra from filing a tax return that runs afoul of the agreement, at least until 5 p.m. on Friday, unless Vistra manages to get the TRO lifted earlier. It also bars Vistra, temporarily, from one-sided communications with the Internal Revenue Service to promote its view of how the tax agreement should be read.
Energy Future has been in bankruptcy since April 2014, cleaning up debt left from the 2007 leveraged buyout of the former TXU. It has backing in the tax fight from Elliott Management Corp., a New York hedge fund that is its largest creditor.
Energy Future is hoping to sell its 80% stake in Oncor, a Texas power transmission company, to California's Sempra Energy Inc., in a $9.45 billion deal. Texas regulators must approve the transaction first, a process that could take months. Assuming Sempra gets the nod from the Public Utility Commission of Texas, Energy Future will seek confirmation of its chapter 11 exit plan.
Write to Peg Brickley at email@example.com
(END) Dow Jones Newswires
October 12, 2017 17:21 ET (21:21 GMT)