NEW YORK, May 11 (Reuters) - Hedge fund Elliott Management Corp filed a lawsuit against Energy Future Holdings Corp on Thursday, claiming that the bankrupt power company has prevented it from pursuing better options for it as its $18.7 billion deal with NextEra Energy Inc falters.
Energy Future’s plan to exit its three-year-long bankruptcy hinges on selling its majority stake in Oncor, Texas’ largest power distribution network, but that deal is in limbo since state regulators scuttled it over concerns it would not benefit ratepayers.
Elliott, Energy Future’s largest creditor, wants to lay the groundwork for a plan of reorganization for Energy Future that involves converting its significant debt holdings in the company to equity, eventually putting Oncor under the hedge fund’s control, according to the lawsuit, which was filed in U.S. Bankruptcy Court in Delaware. Other options include finding another buyer for Oncor.
“The precarious state of the NextEra transaction means that creditors and (Energy Future) must immediately consider and pursue other restructuring alternatives,” Elliott said in the lawsuit.
Energy Future, Elliott and NextEra all declined to comment.
NextEra’s bid for Oncor is the latest in a string of nixed deals to get Energy Future out of its lengthy bankruptcy.
Energy Future has stymied Elliott from seeking other plans for the company because it says that the fund must abide by the terms of an earlier agreement with bondholders, according to the lawsuit.
Energy Future is waiting to see if the Public Utility Commission of Texas chooses to re-hear NextEra’s application to acquire Oncor.
Elliott is a new player in the Energy Future case, having amassed since October enough of the company’s debt to give it a significant say in the bankruptcy process, according to the complaint. Its total holdings tally $2.9 billion, according to a person familiar with the matter.
To try to salvage its deal, NextEra held a meeting with the company’s debtholders in April asking for financial concessions so that it could meet demands made by the Texas regulators, including rate relief for ratepayers, but no agreement was reached, according to the lawsuit. (Reporting by Jessica DiNapoli; Editing by Leslie Adler)