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UPDATE: 5/16/14, 12:35 p.m. EDT. Energy Future Holdings has paid $23.5 million to Sidley Austin and Kirkland & Ellis in the prelude to its Chapter 11 case, according to reports by Bloomberg and The Wall Street Journal.
Kirkland & Ellis, which over the past year has been helping EFH restructure more than $40 billion in debt from that ill-fated deal, is serving as lead debtor’s counsel in the company’s bankruptcy case, whose First State venue has already drawn protests from creditors wanting it to be removed to the Lone Star State.
EFH’s Chapter 11 filing was not unexpected. The company has watched its annual revenues fall and long-term debt obligations rise in every year since its 2007 buyout. A $109 million interest payment due to creditors on April had been delayed by EFH.
James Sprayregen and Richard Cieri, the twin pistons that power Kirkland’s vaunted bankruptcy group, are leading a team of lawyers from the firm advising the Dallas-based debtor. Kirkland had not yet filed its application for employment in EFH’s bankruptcy case by the time of this story. That filing will likely detail the amount in legal fees Kirkland has reaped for its EFH-related work over the past year. (A bankruptcy database run by UCLA law professor Lynn LoPucki estimates that EFH’s Chapter 11 case will generate roughly $213.6 million in professional fees and expenses.)
Delaware’s Richards, Layton & Finger is serving as local bankruptcy counsel to EFH through corporate restructuring chair Mark Collins, partner Daniel DeFranceschi and counsel Jason Madron. The firm has also not yet filed billing statements with the bankruptcy court in Wilmington, which already has seen restructuring lawyers from nearly a dozen Am Law 100 firms file appearances for various clients with interests in the EFH proceedings.
Bloomberg reports that junior creditors facing the potential loss of their investments in the entity—which went private seven years ago when it was sold to a group led by Goldman Sachs Capital Partners, KKR and TPG Capital (advised by Simpson Thacher & Bartlett and Vinson & Elkins)—are seeking to have the bankruptcy case removed to Dallas, where the local bankruptcy court is a mere nine-minute walk from EFH’s headquarters.
Court filings show that Kramer Levin Naftalis & Frankel and national bankruptcy boutique Pachulski Stang Ziehl & Jones are representing aggrieved second-lien noteholders that claim they’ve been shut out of a deal that will see the debtors’ power generation and retail unit Texas Competitive Electric Holdings (TCEH) break away from its parent in exchange for $23 billion in debt relief.
TCEH, which includes EFH’s unregulated power business Luminant and retail provider TXU Energy, will now be taken over by an investor group led by Apollo Global Management and Oaktree Capital Management via a tax-free spinoff. Luminant’s general counsel is Stephanie Zapata Moore, while former Vinson partner Stacey Doré serves as EFH’s general counsel. (Doré replaced former Vinson partner and ex–EFH legal chief Robert Walters, who joined Gibson Dunn in early 2011 when the firm opened an office in Dallas.)
EFH and TCEH together have arranged approximately $11.8 billion in debtor-in-possession loans to fund their operations, according to Reuters. Milbank, Tweed, Hadley & McCloy and Shearman & Sterling are counseling Citigroup and Deutsche Bank, respectively, in their roles as lead arrangers for the DIPS for TCEH and EFH.
The Deal reports that Wachtell, Lipton, Rosen & Katz is advising the debtor’s equity holders, Brown Rudnick and Delaware’s Ashby & Geddes are representing the Wilmington Savings Fund Society as successor indenture trustee and Akin Gump Strauss Hauer & Feld has taken the lead for unsecured creditors supporting EFH’s restructuring. TCEH’s first-lien creditors have tapped Paul, Weiss, Rifkind, Wharton & Garrison and Delaware’s Young Conaway Stargatt & Taylor for counsel, as White & Case and Fox Rothschild line up for TCEH’s unsecured noteholders.
While EFH’s whopping buyout price has changed how private equity firms structure their deals, the company’s descent into bankruptcy has been attributed to the U.S. shale gas boom, which drove down the price of U.S. energy and the electricity that TXU sold to its customers.
And though the fees earned by bankruptcy professionals touting their expertise in EFH’s Chapter 11 proceedings have yet to be determined, some of the company’s expenditures on Am Law 100 firms are already available. U.S. Senate records show that EFH has paid $400,000 to Arnold & Porter; $250,000 to Bracewell & Giuliani; $320,000 to Hunton & Williams; and $100,000 to McGuireWoods Consulting for lobbying work on climate change regulation and legislation since January 2013. (Lobbyists were key players in obtaining regulatory approval of TXU’s transformation into EFH.)
David Bonderman, the billionaire cofounder of TPG who serves as a member of EFH’s board of directors, is a former Arnold & Porter partner. TPG, KKR, and Goldman put up $8.3 billion of their own capital to buy EFH back in 2007. The company currently lists $36.4 billion in assets against $49.7 billion in liabilities in its Chapter 11 filing, making it the fifth-largest non-financial bankruptcy filing in U.S. history, according to BankruptcyData.com.