Would Berkshire Hathaway Back Out of Oncor Deal After Bankruptcy Court Delays?

A bankruptcy judge has extended a crucial deadline in the sale of Texas' largest regulated utility, potentially setting the stage for billionaire Warren Buffett to walk away from his offer to buy Oncor Electric Delivery Company.The Delaware court delayed its decision on Berkshire Hathaway's offer so a competing offer -- from New York hedge fund Elliott Management -- has more time to arrange funding.Judge Christopher Sontchi decided Wednesday evening to postpone his decision about Berkshire's $18.1 billion offer by 11 days from Aug. 10 to Aug. 21. That gives Elliott more time to prove their $18.5 billion proposal is solid. Elliott had asked for an additional 35 to 40 days.A lawyer representing Oncor's bankrupt parent company told the judge earlier in the day that a delay would cause Berkshire to back out of the deal, according to a Reuters story. The comments didn't specify how much of a delay would threaten the deal.The news agency reported that Chad Husnick, a lawyer for Energy Future Holdings, told the judge that Berkshire Hathaway "may not go away forever, but they have told us and we have no reason to doubt them, that they will go away.""They may come back but it's ... going to be for a lower price," Husnick said.This was the latest twist in the efforts to find a new owner for Oncor, which supplies power to more than 3 million Texas homes and businesses. The sale is meant to help pay off the creditors of parent company EFH, which filed for bankruptcy in 2014 with more than $40 billion in debt. Two previous attempts to sell Oncor, most valuable asset owned by EFH, have failed.An offer from Dallas' Hunt family was approved by Texas regulators last year, but there were conditions attached that the Hunts couldn't immediately meet. A subsequent offer from Florida-based NextEra Energy was rejected earlier this year by the Texas Public Utility Commission, which did not think it was in the public interest. NextEra is currently suing over that decision.Two companies are now pursuing Oncor, which continued to thrive despite its parent company's troubled finances.Berkshire Hathaway, the widely respected company run by Warren Buffett, announced its offer first and has a tentative endorsement from PUC staff. The deal must still get formal PUC approval.Elliott Management officials said they have a superior offer that gives creditors more money. The hedge fund bought much of EFH's debt recently and is now its largest creditor, holding nearly $3 billion in unsecured debt. In court filings, EFH has said the Berkshire Hathaway offer is closer to a sure thing. The company has support from the PUC and the ability to pay cash for Oncor, which would end the bankruptcy more quickly.An EFH court filing said it's now "clear that any path to exit would require developing as much consensus as possible (and as early as possible) on regulatory commitments with the PUCT staff and key intervenors. In the absence of regulatory support, it does not matter whether the Debtors (or any other party) are able to obtain financing in the amount of $9.00 or $9,000,000,000.00."An attorney for Elliott wrote in a letter to EFH that pursuing the Berkshire Hathaway deal to the exclusion of Elliott's offer "reflects a fundamental failure to discharge the fiduciary duties owed to all creditors." The letter also criticized EFH for jumping immediately from the failed NextEra Energy offer to Berkshire Hathaway without considering other options.In court filings, Elliott has said it would turn Oncor into an independent, stand-alone company and meet or exceed all the Berkshire Hathaway commitments made to the PUC.  Continue reading...

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