Cha-ching! A Billion-dollar Payday for the Hedge Funds That Took TXU Energy and Luminant Out of Bankruptcy

Texas’ largest power company has a new name, a new CEO and new growth opportunities, thanks to a long-running bankruptcy that wiped out $33 billion in debt.So here’s what Vistra Energy, parent company for TXU Energy and Luminant, did after emerging from Chapter 11 in October. First, it cut 500 jobs, primarily in Dallas, and slashed other overhead by more than 50 percent. Then it borrowed $1 billion to pay a one-time cash dividend to the hedge funds that own the company.You read that right: Last month, it paid out a $1 billion special dividend with borrowed money.Vistra’s debt load rose by 35 percent, to over $3.8 billion. While the burden remains manageable and the annual interest expense is a far cry from earlier years, that doesn’t justify such a self-serving move. Especially when you’re trying to create a new upbeat narrative about the future.Call me old-fashioned, but aren’t big-time companies supposed to borrow bigly for more important things? Say, investing in the business, making acquisitions or keeping valued employees on the payroll?The optics would be bad for any organization, and more so for Vistra. This is the company that used to make up two-thirds of the once-proud TXU Corp., one of the country’s leading utilities before private equity guys wrecked it.  Continue reading...

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