Last of the Dinosaurs

It was the finale of the longest, slow-motion credit tumble ever witnessed, and certainly the most anticipated spectator event since the long-awaited Family Guy movie. On April 29, Energy Future Holdings filed for bankruptcy creating the largest default – $19.5 billion – in the history of leveraged loans.

Creditors have been jostling for position for many months, a dance that will only intensify now that the restructuring has hit the courts. Whatever the outcome, the size of this transaction remains impressive. The debtor-in-financing for EFH of $11.775 billion represents the largest DIP in history. (Lyondell Basell’s $8 billion deal from March, 2009 comes in a distant second.)

Known in its better days as TXU, the electric utility was bought by KKR, TPG, and Goldman Sachs Capital Partners in October, 2007. At $45 billion it was, and remains, the biggest LBO ever. But almost out of the gate, the company stumbled.

Created on the concept that its coal-supplied plants would benefit competitively amid higher natural gas prices, the company was helpless when prices instead plummeted. TXU then struggled to carry its immense debt load on declining cash flows.