Just In Case EFH Might Try Asking the Texas Lege To Bail Them Out and Stick Taxpayers With The CostSomervell County Salon-Glen Rose, Rainbow, Nemo, Glass....Texas

Vulture Capitalist Energy Future Holdings Like Bain

Just In Case EFH Might Try Asking the Texas Lege To Bail Them Out and Stick Taxpayers With The Cost

8 August 2012 at 3:17:37 PM

You, me, start a business. We don't do so well, and our business loses money. We immediately go to city council and ask that all the people in the town we live in cover our debt, even though we've already taken money out to buy ourselves a fancy house and car. Oh... You wouldn't do that? Then why is it okay for KKR and Energy Future Holdings to try to do that?

Saw the rumour, AGAIN, that, because EFH is circling the drain and is going to have to start making payments for that huge leveraged buyout they did of TXU, starting in 2014, that they may go to the Texas Legislature to get a bailout (read. YOU would be the ones bailing them out). The Fort Worth Star-Telegram called it a debt clock bomb

Today, the utility doesn't have the money -- or borrowing power -- to expand, even if it wanted to. Last year, interest payments consumed more than half of EFH's revenue. Some debt has an annual interest rate of 15 percent. About $15 billion in bonds carried an average rate of 10.3 percent last year, according to the 10-K filing with the Securities and Exchange Commission.

Investors have written off almost their entire stake in the utility. Almost $20 billion in goodwill has been wiped off the balance sheet. And since the buyout, EFH has reported net losses totaling $16 billion.

Moody's, a debt-rating agency, called EFH "a financially distressed company with an untenable capital structure." It even lowered the outlook for Oncor, the regulated distribution company that's supposed to be "ringed-off" from the profit-seeking side. Too much contagion risk from the parent, wrote Moody's.

Almost everyone agrees that a major restructuring is coming, because EFH is running out of money and big payments are on the horizon ($16 billion in the next three years).

Read more here: http://www.star-telegram.com/2012/06/13/4030928/debt-bomb-ticking-at-energy-future.html#storylink=cpy

Here's EFH's 2nd quarter 2012 results

For the second quarter 2012, EFH reported a consolidated net loss (in accordance with GAAP) of $696 million compared with a reported consolidated net loss of $705 million for the second quarter 2011. The second quarter 2012 net loss included (both after tax) $395 million in commodity-related unrealized mark-to-market net losses largely related to positions in EFH's natural gas hedging program and $68 million in unrealized mark-to-market net losses on interest rate swaps that hedge EFH's variable-rate interest expense.

Speaking of who profits. We already know that Bain, under Mitt Romney, made sure to pull out profits first regardless of what else was going on, if it forced the company into bankruptcy or people had to lose their pensions. Oops, I see a parallel, saw yesterday that EFH is going to take away some pensions from employees.

And, are there those that, DESPITE the mountain of debt, bad financials and bad credit risk, are still profitting? Of course, from the DMN of May 26 2012

Rather than selling for big profit, the owners are stuck with a company worth less than the $45 billion they paid, and hocked to the brim, with no obvious way out.

And while business contracts, losses continue and analysts warn that the company might face bankruptcy, EFH is making cash payments to private equity holders and handing executives multimillion-dollar retention bonuses.

Even Rick Perry called Mitt Romney a vulture capitalist.

What DO Vulture Capitalists do? Eat their own losses? Why, no, they are rewarded-from Bloomberg

As a result, the world now knows that in 2011, Kravis was awarded $30 million in salary and other compensation by KKR’s board, Bloomberg Markets magazine reports in its July issue.

That makes him No. 1 in the Finance 50, the magazine’s annual ranking of the best-paid CEOs at the largest U.S.-based financial companies by market capitalization.

Kravis, 68, is followed in the ranking by George Roberts, his cousin and co-chief executive officer, who earned $29.9 million. The two men founded the firm with Jerome Kohlberg in 1976. The trio first worked together more than 40 years ago at Bear Stearns & Co.

Since it was founded, KKR has done more than 200 buyouts with a combined value of more than $465 billion, according to company data. The cousins’ stake in the firm was $1.22 billion in mid-April, according to corporate filings.

Looks like, as Mitt Romney did, KKR gets paid regardless.

Among KKR’s holdings is Texas power producer Energy Future Holdings Corp., which it bought with TPG Capital LLP in 2007 for $43.2 billion, making it the largest leveraged buyout ever. Energy Future, called TXU Corp. prior to the LBO, reported a 2011 net loss of $1.91 billion as gas prices fell and Texas power prices also dropped.

Kravis and Roberts’ pay, as detailed in the government filings, includes salary and carried interest, the share of profits -- usually 20 percent -- that managers take from buyout funds after distributing earnings to the pensions, endowments and sovereign funds known as limited partners.

Now YOU? Guess what, just like what happened with Bain, EFH is going to cut some pensions.

Gee. Vulture Capitialsm pays. But what thinking taxpayer is going to allow US to get stuck with the bill? One more comment from that great article by the S-T

Texas doesn't need a presidential election to spark a debate about private equity. The biggest bust ever is brewing here, and it already upends the notion that business knows better.

Read more here: http://www.star-telegram.com/2012/06/13/4030928/debt-bomb-ticking-at-energy-future.html#storylink=cp

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