In a near-abandoned 41st floor of Energy Plaza in downtown Dallas, Energy Future Holdings General Counsel Andy Wright dialed into a conference call Friday morning at 7:01 a.m. Two-dozen lawyers and corporate executives were on the line.
“All closing conditions have been met,” said David Moore, an associate for Kirkland & Ellis in Houston, who represents EFH in its historic $42 billion bankruptcy and sale of its 80 percent ownership of Oncor Electric to Sempra for $18.8 billion.
“EFH has signed off,” Wright said 7:03 a.m. “We release.”
Seconds later, Pat Villareal, a lawyer for Oncor, spoke up.
“Oncor releases,” she said.
Lawyers at White & Case in New York pushed a button and the certificate of merger was electronically filed with the Delaware Secretary of State’s office. The deal was done.
“Congrats to all,” Wright said.
The three-minute phone call ended.
At 9:17 a.m., Sempra Energy completed a wire transfer for $3,179,460,638.93. Seventeen minutes later, the California–based energy company completed a second wire transfer for $6,301,539,361.07. At 9:34 a.m., the sale of Oncor to Sempra was complete.
At that same minute, Dallas-based Energy Future Holdings, which only two years ago was the largest power company in Texas with 8,900 employees, ceased to exist.
“It’s officially done,” Wright said. “It is bittersweet, to be honest. I’m glad the deal is done, but I am kind of sad that the run is over. For being one of the largest, complex and expensive bankruptcies in history, it ended with a whimper.”
EFH was created in 2007 when private equity firms KKR and TPG Capital and Goldman Sachs acquired TXU Energy and its affiliated companies, Oncor and Luminant Energy for $42 billion in the largest leveraged buyout in U.S. history.
The deal went south in 2009 when the economy fell into a recession and the price of natural gas plummeted as the result of increased production from fracking. Suddenly, EFH found it difficult to service its huge debt.
EFH filed for Chapter 11 bankruptcy restructuring in April 2014.
“The plan was to be in and out of bankruptcy court in six months,” Wright said Friday. “But it did not go as planned.”
Several of the major creditors opposed EFH’s proposed reorganization plan and the company was forced to seek alternatives. Initially, the company agreed to sell its 80 percent ownership stake in Oncor to the Hunts for $18 billion, but the Texas Public Utility Commission killed the deal.
A year later, EFH reached an agreement with Florida-based NextEra Energy to sell Oncor for $18 billion. Again, the TPUC gave the thumbs down.
In the summer of 2017, EFH tried to sell Oncor for the third time – to Berkshire Hathaway. But as that deal was awaiting approval by the federal bankruptcy judge in Delaware, California-based Sempra made a better offer – $9.5 billion in case and the assumption of more than $9.3 billion in EFH debt.
On Thursday, the TPUC gave its approval. The transaction officially closed Friday morning.
Minutes after the money is transferred, the phone rings.
“What the hell are you going to do tomorrow?” Kirkland partner John Pitts asked.
“I have no idea,” responded Wright, who wore his Kansas City Royals jersey to merger negotiations during the 2014 and 2015 World Series. “I don’t know what I’m going to do next. It will be hard for me to top this experience.”
Wright, who is 50, joined TXU Energy in 2004 after practicing M&A law at Vinson & Elkins for several years. He represented businessman Tom Hicks in the acquisition of several radio stations.
At TXU, he handled corporate transactions.
“I’ve learned a lot here,” Wright said. “I got to go to Shanghai to buy $300 million in steel from the Chinese for our power plants.”
Wright has particular praise for Kirkland associate Aparna Yenamandra in New York.
“Aparna is the glue that held this whole thing together,” he said. “She was a brand new lawyer at Kirkland when the firm assigned her to our bankruptcy.
“Aparna has probably billed 10,000 hours on this case – certainly more than anyone else,” Wright said. “Even [U.S. Bankruptcy] Judge [Christopher] Sontchi came to realize that Aparna is running the show.”
Minutes later, the phone rings again.
“Andy, congratulations,” said Andy Calder, a partner at Kirkland in Houston and the lawyer who led Oncor’s sale to Sempra and the $20 billion spin-off of TXU and Luminant.
For 10 minutes, the two Andys – Wright and Calder – reminisced about their dealmaking prowess involving EFH.
Eleven years earlier, the two men were also on the conference call for the $42 billion sale of TXU to the private equity firms. Calder was then a lawyer at Simpson Thacher, which represented the private equity funds.
“I remember Calder, in that Scottish voice, yelling out on the phone call, ‘Morgan Stanley, where’s your fucking money?’ No yelling this time,” Wright said.
Calder had just moved his practice from Simpson to Kirkland in April 2014 when he got a call from New York bankruptcy partners asking him if he knew anything about EFH.
“Well, I do know something about it,” he said.
Wright said that only months after the bankruptcy was filed, he and then-EFH General Counsel Stacey Dore decided that they needed M&A lawyers to join the team.
The EFH legal team made it clear that they were looking at law firms other than Kirkland to handle the M&A activity that resulted from the restructuring.
“Kirkland realized we might hire another law firm and they quickly brought Andy [Calder] on as part of the team,” Wright said. “To be honest, Kirkland got the M&A work because they had just hired Andy Calder. If Andy had not been there, we probably would have gone with another law firm.”
Within minutes of the final payment being wired, Oncor General Counsel Allen Nye called Wright.
“Has the deal fallen apart yet?” asked Nye, who will take over as Oncor’s CEO.
Wright laughed, then sighed.
“If any deal could have something go wrong at the last second, it would be this one,” he said.