A large power company called Energy Future Holdings has filed for bankruptcy. The business bankruptcy filing comes seven years after the energy company went through a leveraged buyout, which left it laden with debt. The buyout happened before the natural gas boom in the United States resulted in a large-scale reduction of electricity prices. These shifting economic forces affected business operations across New Jersey and the rest of the nation.
Energy Future Holdings, which is based in the southwestern United States, owes approximately $49.7 billion. Most of that debt is owed to investment firms and hedge funds. The bankruptcy filing for this company, which reports assets of over $36.4 billion, makes it equal in scope to the 10th biggest Chapter 11 bankruptcy filing in history.
The company has assured its customers that bankruptcy proceedings will not threaten power availability. Energy Future Holdings says it has already arrived at various creditor agreements to restructure approximately $40 billion of its debt. Numerous investors, including Warren Buffet, are said to have suffered losses relating to bonds in Energy Future Holdings. However, bankruptcy proceedings should serve to limit investor losses as much as possible.
As a part of the business bankruptcy proceedings, Energy Future Holdings has obtained a loan of $11.8 billion to continue its operations throughout the proceedings, which it believes will take almost a year to complete. Like many large and small companies in New Jersey who file for bankruptcy, however, Energy Future Holdings investors and creditors will be in a better financial position following its bankruptcy. Also, customers of the firm will not suffer from power outages or other ill effects related to the company's current insolvency challenges.
Source: Reuters, "Texas power company Energy Future files for bankruptcy", Nick Brown and Billy Cheung, April 29, 2014