KKR & Co. and TPG Capital Face The Largest LBO Bankruptcy Since Chrysler

“Five years after their record- setting leveraged buyout of Energy Future Holdings Corp., KKR & Co. and TPG Capital are moving closer to a possible new milestone: the biggest bankruptcy of a private equity-backed company since the failure of Chrysler Group LLC.

Texas Competitive Electric Holdings, the utility’s wholesale power unit, faces an October 2014 deadline on the maturity of a portion of its loans. Informal restructuring talks already have taken place, according to two people with knowledge of the matter. Senior lenders — including Franklin Resources Inc., Apollo Global Management LLC, Oaktree Capital Group LLC and GSO Capital Partners — probably would seek to seize the unit if there is a bankruptcy, said one creditor, who asked not to be identified because the process is private.

The buyout of Energy Future, the Dallas-based company formerly known as TXU Corp., in 2007 for $48 billion marked the peak of a private-equity boom that went bust a year later with the onset of the financial crisis. A bankruptcy would wipe out much of the $8.3 billion investment made by buyers including KKR, TPG and Goldman Sachs Capital Partners in what was the biggest LBO in history. It would be the highest-profile private equity-backed company to go under since Chrysler was bailed out by the U.S. government in 2009….”

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