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Energy Future Holdings Could Find New Life Through Bankruptcy

Today energy giant Energy Future Holdings—parent company of TXU Energy and Luminant, and Oncor—filed for Chapter 11 bankruptcy protection after reaching a restructuring deal that will break up the company and eliminate more than $26 billion of its $40 billion in debt.

In the March issue of D CEO, Steve Kaskovich wrote that the company should take heart from the case histories of General Motors, Six Flags, and American Airlines, and not fear bankruptcy:

Energy Future Holdings has similar problems. The electricity company is smothered by debt from a $48 billion leveraged buyout engineered in 2007 by dealmakers TPG Capital, KKR, and Goldman Sachs. The company put off its day of reckoning in November by making a $270 million interest payment. But if GM, American Airlines, and Six Flags offer any lessons, employees should be hoping it files soon.

EFH has a solid business, producing and selling power in North Texas, that should thrive when freed from the weight of a crushing debt. And while top executives may be losers, there will be winners.

Consider James Reid-Anderson. The Six Flags CEO has received pay packages worth nearly $30 million since taking over after the bankruptcy in 2010, most in stock. Last year, he exercised options worth nearly $20 million and his shares have soared in value, to more than $50 million, as the stock has appreciated. That’s new life indeed.

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    I got an offer in the mail to buy some of my prepetition invoices from Pioneer Funding Group. I actually sold some of my invoices in another bankruptcy case to them so maybe I’ll do it again. They paid me in 2 days last time.