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Energy Future Holdings Plan Filed

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According to the U.S. Bankruptcy Court docket, Energy Future Holdings (EFH) filed with the U.S. Bankruptcy Court a Joint Chapter 11 Plan of Reorganization and related Disclosure Statement.

The Disclosure Statement explains, “The Plan is premised on the following structure: The highest or otherwise best form of transaction available to the Debtors that will include either a taxable deconsolidation or tax-free spin-off of TCEH (the ‘Tax-Free Spin-Off’) combined with one of three forms of transaction for Reorganized EFH: a merger, an equity investment, or a standalone reorganization (the ‘EFH/EFIH Transaction’). Importantly, the Tax-Free Spin-Off is intended to avoid a significant potential tax liability that the Debtors believe would, if triggered, materially reduce creditor recoveries at all of the Estates.  Under the Tax-Free Spin-Off, TCEH will spin off from the Debtors to form a standalone reorganized entity, Reorganized TCEH, and the tax attributes of the EFH Group will be substantially used to provide Reorganized TCEH with a partial step-up in tax basis in certain of its assets, valued at approximately $1.0 billion. As a result, the Holders of TCEH First Lien Secured Claims will receive Reorganized TCEH Common Stock (subject to dilution by the New Reorganized TCEH Warrants and the Reorganized TCEH Management Incentive Plan) and 100% of the net cash proceeds of the New Reorganized TCEH Debt, in addition to recoveries on account of the TCEH Settlement Claim and potentially, the TCEH Equity Sharing Recovery.”

The Disclosure Statement explains, “In particular, the Plan contemplates the settlement of all Intercompany Claims and provides for the following (the ‘Disinterested Director Settlement’): TCEH shall have an allowed unsecured non-priority claim of $700,000,000 against EFH, which claim shall receive the same form of distributable value as all other unsecured non-priority EFH creditors under any plan of reorganization (the ‘TCEH Claim’). After full satisfaction of all allowed administrative, priority and secured claims against EFH, the next $1,410,000,000 of distributable value from the EFH estate shall be distributed as follows: (a) EFH shall retain 49.645% for distribution on account of allowed unsecured claims and interests (other than the TCEH Claim); (b) TCEH shall receive 49.645% on account of the TCEH Claim (i.e. up to $700,000,000 million of the first $1,410,000,000 of distributable value for unsecured creditors from the EFH estate); and (c) the EFH equity holders shall receive 0.709%. Distributable value from the EFH estate in excess of $1,410,000,000 shall be distributed as follows: (a) TCEH shall receive 50%, until TCEH receives an additional $105,000,000, for a total distribution to TCEH of $805,000,000; and (b) EFH shall retain 50% for distribution on account of allowed unsecured claims and interests (other than the TCEH Claim).”

Read more about the EFH Chapter 11 bankruptcy.