Energy Futures Seeks Suit's Dismissal

By Marc Castro

Jun 29, 2013 10:50 AM EDT

The directors of Energy Future Holdings Corp had sought federal court action for the dismissal of the lawsuit filed by Aurelius Capital Management against the firm. The suit alleges that the hedge fund purchased the power producer's debt as a means to generate profits from the current litigation.

Last March, Aurelius had filed a suit over loans that were undertaken within the company. The suit said that the financing extended to the parent company from its subsidiary had harmed the creditors. The directors, for its response, said that Aurelius is estopped from suing as it had 'ratified' the loans, thus making the claim superfluous.

According to legal documents filed in Dallas federal court, "Aurelius is not an innocent creditor that had the misfortune of making an investment only later to see that investment deteriorate. Just the opposite - Aurelius saw an opportunity to manufacture a contrived injury."

TXU Corp, which was rebranded as Energy Future, was bought out through a US$48 billion purchase back in 2007 by a consortium comprised of KKR & Co, TPG Capital and Goldman Sachs, A proposal made in April to place one part of the business which has an outstanding debt worth US$32 billion to be placed under bankruptcy protection had been rejected by its creditor group.

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