UPDATE 1-Energy Future wins court approval to exit bankruptcy

Fri Aug 26, 2016 1:53pm EDT
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(Adds judge's comments and background)

By Tracy Rucinski and Jim Christie

Aug 26 (Reuters) - Energy Future Holdings Corp , Texas' biggest power company, won U.S. court approval on Friday for a plan that will allow the bulk of its operations to exit Chapter 11 after two years of battling creditors.

"I am going to overrule all of the remaining objections, U.S. Bankruptcy Judge Christopher Sontchi said in court in Wilmington, Delaware. "I am prepared to confirm."

Dallas-based Energy Future filed for bankruptcy in April 2014 when weak electricity prices left it unable to service $42 billion in debt, mostly related to the company's creation through a 2007 leveraged buyout.

It was the largest U.S. bankruptcy since that of General Motors Co in 2009.

The reorganized company will own TXU Energy, the state's largest retail electric utility, and Luminant, Texas' largest power plant operator and largest coal miner. The spinoff of the two divisions into the new company avoids a tax liability that had worried creditors.

The potential for a "massive" tax liability was the "elephant in the room," Sontchi said on Friday, adding he believed the plan "was the best possible deal" to push the company out of bankruptcy.

"A tax-free separation was a critical component to maximizing the value of the estate," Energy Future spokesman Allan Koenig said in an email.   Continued...