Even Buffett got burned by Energy Future Holdings

This deal was 'done during the times of hysterical optimism by everybody,' one private equity expert says.

By MSN Money Partner Apr 29, 2014 11:49AM
Power station © mimmopellicola.com, Flickr, Getty ImagesBy Linette Lopez, Business Insider

The biggest private equity deal in history has been put out of its misery as Energy Future Holdings has filed for Chapter 11 bankruptcy.

The $45 billion deal to take the 132-year-old Texas utility company private marked a peak in the leveraged-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 $2 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 others -- were sitting down to discuss how to restructure the company's $40 billion debt.

A debt payment due in October 2014 loomed large.

"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 $100 million in skipped debt payment coming due this week.

The negotiation included over $11 billion in loans, exchanging subsidiary Texas Competitive Electric Holdings for $25 billion in debt forgiveness, and enough details to fill up the Lone Star State.

More from Business Insider

Apr 29, 2014 12:02PM
Where's the bailout?  Guess they didn't donate enough cash to the rats in Washington.  

But there's still time.  Maybe the feds could step in create a new version of EFH and give it all the assets of the old company.  Then they could leave all the liabilities with the old EFH and just dissolve it, leaving bondholders high and dry.  Worked out so great for GM, why not EFH?
Apr 29, 2014 12:52PM
Again, who will wind up going to jail over this................. No One!!!!!!!!!
Apr 29, 2014 1:15PM
The government could take it over and we could pay. Then just think our government would have power because Valdimur has proven they have none now.
Apr 29, 2014 4:03PM

Scott uh, huh....

You might want to check some maps on pipelines that come out of Canada, and other associated pipelines that come South to Oklahoma, to the Mississippi, Texas and the Gulf; Plus go East and West at junction points....There are a whole bunch of them..10's of thousands of miles..

As far as Canadian Shale oil, I think there is a lot more Canadian Tar Sands (heavy/dirty) Oil that will flow through the K-Line, if and when built..?

Most of the Shale oil is in the Dakotas and Bakkian (sp) Regions...

Buffet/Berkshire bought the BNSF Railroad, for more reasons then to just haul oil, although it does give them freight..

Either way Keystone Extension or not, Warren Buffet is going to make plenty of money, because he is extensively invested in the Oil business on many fronts.

I don't think we have to worry about Buffet...?

Apr 29, 2014 1:46PM
I think we should all leverage ourselves to the max and file bankruptcy. ah, the beauty of the system.
Apr 29, 2014 12:41PM
stupid, ignorant money grabbing pukes
Apr 29, 2014 4:19PM

Maybe all Democrats on there way to the Polls should run anyone off the road that has a bumper sticker that says, "I voted for Bush 3 times."

Of course, most of them are taking a bus....And lost their homes, plus don't have jobs.

Apr 29, 2014 3:48PM
Starting to get the "picture" about the "Oracle"?  He is a treasonous" piece of excrement. 
Apr 29, 2014 2:45PM

he'll be burned again when the Keystone pipeline is installed XD

currently he owns the BNSF railway the only way for that Canadian shale oil to get down to Texas is via that very railroad! think about that!

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