The biggest private equity deal in history has been put out of its misery, and Energy Future Holdings has filed for Chapter 11 bankruptcy.
The $US45 billion deal to take the 132-year-old Texas utility company private marked a peak in the leverage buyout boom in 2007, right before cash dried up all over the world. At that point it seemed like everyone was doing deals, and even Warren Buffett made a $US2 billion bond investment — an investment he called a “big mistake.”
As early as February 2013, however, the major players in the deal — Leon Black of Apollo Global Management, Blackstone’s GSO Capital Partners, KKR, TPG Capital and more — were sitting down to discuss how to restructure the company’s $US40 billion debt.
A debt payment, due in October 2014, loomed large even then.
“This deal never made sense,” Erik Gordon, a private equity and law professor at the University of Michigan, told Bloomberg back in 2013. “It could only have been done during the times of hysterical overoptimism by everybody — by KKR and TPG and by all the lenders who put up the money.”
Reports about the urgency of the bankruptcy deal conflicted in the weeks before it was done. The New York Times reported that there was “little pressure on the company to act immediately as it has ample cash on its balance sheet to make its next round of interest payments,” according to Wall Street analysts.
But on Tuesday evening, as the news broke that the bankruptcy had been filed, the Wall Street Journal reported that the company had $US100 million in skipped debt payment coming due this week.
The negotiation included over $US11 billion in loans, exchanging subsidiary Texas Competitive Electric Holdings for $US25 billion in debt forgiveness.