Energy Future (TXU) 8-K Regulation FD Disclosure

DRAFT; SUBJECT TO MATERIAL REVISION; PREPARED

AT THE REQUEST OF COUNSEL; SUBJECT TO F.R.E. 408

October 7, 2013

ILLUSTRATIVE TERM SHEET RELATING TO

ENERGY FUTURE HOLDINGS,

ENERGY FUTURE INTERMEDIATE HOLDING COMPANY,

AND TEXAS COMPETITIVE ELECTRIC HOLDINGS COMPANY

Exhibit 99.1

2

DRAFT; SUBJECT TO MATERIAL REVISION; PREPARED

AT THE REQUEST OF COUNSEL; SUBJECT TO F.R.E. 408

Confidential  –

Subject to F.R.E. 408

SITUATION OVERVIEW

Energy Future Holdings (“EFH”) has engaged in extensive negotiations with its stakeholders; however, it has yet to

reach agreement on the terms of an orderly restructuring

[Significant Creditor] is aware of the significant benefits of a

consensual agreement that will allow EFH to avoid the

significant cost, expense, and business risk due to a protracted

Chapter 11 and material breakage costs associated with a

deconsolidation of the structure, including:

–

Operational dissynergies;

–

Significant tax cost;

–

Value degradation of the retail business;

–

Regulatory uncertainty; and

–

Professional fees

[Significant Creditor] is a significant long-term investor in EFH with material holdings in the indebtedness of EFH,

Energy Future Intermediate Holding Company (“EFIH”), and Texas Competitive Electric Holdings Company

(“TCEH”)

[Significant Creditor], together with its advisors, has developed a restructuring proposal focused on the following key

tenets:

–

Avoid unnecessary business risk, transaction costs and tax inefficiencies 

–

Bridge constituent demands on EFIH and TCEH sides of the EFH structure

Balance relative value

Balance form of recovery

Maintain relative priority

Provide for sufficient deleveraging to avoid future restructuring risk

EFH and its advisors

have engaged in extensive

discussions with the

various stakeholders;

however, a consensual

resolution has not yet

been achieved

As a result of its

significant holdings at

various EFH entities,

[Significant Creditor] is

in a unique position to

help bridge the differences

between stakeholders at

EFH, EFIH, and

TCEH to achieve a

consensual restructuring

transaction and avoid

the significant costs and

value leakages associated

with a protracted and

contentious free fall

Chapter 11

3

DRAFT; SUBJECT TO MATERIAL REVISION; PREPARED

AT THE REQUEST OF COUNSEL; SUBJECT TO F.R.E. 408

Confidential  –

Subject to F.R.E. 408

TRANSACTION OVERVIEW

[Significant Creditor]’s term sheet provides for significant deleveraging of EFIH and TCEH, including:

–

EFIH: Refinancing of First Lien Debt, equity claw of 35% of Second Lien Debt and equitization of Unsecured Debt 

–

TCEH: Equitization of significant portion of First Lien Debt and

cancelation of all junior debt (with value

protection through new warrants)

–

EFH: Equitization of EFH Unsecured Debt

The EFIH equitization will be completed through an offering of New Tracking Stock at EFH which will track the value

and business of EFIH and its subsidiaries

–

The New Tracking Stock will provide for distributions to current

holders of EFIH Unsecured Notes up to par value

plus accrued interest plus an annual return

–

The EFIH Unsecured Noteholders will backstop a rights offering for ~$0.8 billion of New Tracking Stock, the

proceeds of which will be used to claw 35% of the Second Lien Notes 

–

To provide for additional cash flow, the EFIH First Lien Debt will be refinanced at market rates (while providing

existing lenders with a premium over par)

Holders of TCEH First Lien Debt will exchange into substantially

all of the New EFH Equity

–

TCEH First Lien Lenders will receive 94.2%

(1)

of the New EFH Equity and approximately $8.0 billion of cash

(from proceeds of the issuance of new First Lien Debt at TCEH)

Holders of the EFH Unsecured Debt will receive 11.8% of the New Tracking Stock and 3.8%

(1)

of the New EFH

Equity

The existing equity Sponsors will receive 2.0% of the New EFH Equity and 2.0% of the New Tracking Stock

–

Other junior TCEH creditors will receive short duration warrants

in New EFH Equity to provide value at in-the-

money enterprise valuation levels

-

TCEH First Lien

lenders to receive

control of EFH and

substantially all of

the value of TCEH

-

EFIH Unsecured

Debt Holders to

receive a par recovery

over time

-

EFH debt and

equity to continue to

participate in the

value of EFH assets

-

Other claimants to

participate in EFH

value through

warrants

Notes:

(1)

Pro

forma

EFH

equity

allocations

based

on

market-implied

value

of

TCEH

of

approximately

$16.5

billion

The illustrative term

sheet provides for:

4

DRAFT; SUBJECT TO MATERIAL REVISION; PREPARED

AT THE REQUEST OF COUNSEL; SUBJECT TO F.R.E. 408

Confidential  –

Subject to F.R.E. 408

ILLUSTRATIVE TRANSACTION RATIONALE

TCEH FIRST

LIEN LENDERS 

Receive substantially all of the value attributable to TCEH assets

Receive control of EFH without paying for control premium

Obtain expeditious control of TCEH assets 

Receive upside value of Oncor assets, after redemption of the New Tracking Stock 

Benefit from delevered EFIH with virtually no future restructuring risk

Avoid costs of contentious Chapter 11

Avoid diminution in value of the retail business associated with a potentially lengthy and contentious Chapter 11 process

EFIH FIRST

LIENS

Receive cash in excess of par value in near term

EFIH SECOND

LIENS

35% of holdings repaid at par plus coupon through utilization of equity claw

At each holder's election, may tender additional Notes for cash equal to equity claw price

Reinstated holders benefit from delevered capital structure and improved liquidity profile

EFIH

UNSECURED

NOTES

Receive New Tracking Stock designed to capture par plus accrued interest of EFIH Unsecured Notes plus an annual

return

Provides unlimited timeframe to recapture Oncor value through New Tracking Stock

Benefit from delevered EFIH, improved liquidity profile, and removal of bankruptcy overhang 

Benefit from potential incremental value that may be generated through amending Oncor ring-fenced structure

Ability to prove value and backstop / participate in rights offering for New Tracking Stock

Protected from any future volatility of TCEH earnings

OTHER TCEH

CREDITORS

Receive limited duration warrants at appropriate strike prices to capture value at in-the-money enterprise valuation levels

Potential to participate in Oncor valuation upside as well

EFH

UNSECURED

DEBT

Continue to receive benefit of EFH and EFIH value through ownership of New Tracking Stock and New EFH Equity

SPONSORS

Continue to receive benefit of EFH and EFIH value through ownership of New Tracking Stock and New EFH Equity

Granted full releases

MANAGEMENT

To receive new incentive plan to ensure alignment of interests with new ownership of EFH

The table below illustrates certain potential benefits associated with the proposed transaction

A consensual

restructuring would

provide significant

benefits to all parties

by, among other things,

avoiding the significant

costs in money and

time associated with a

protracted and

contentious process

5

DRAFT; SUBJECT TO MATERIAL REVISION; PREPARED

AT THE REQUEST OF COUNSEL; SUBJECT TO F.R.E. 408

Confidential  –

Subject to F.R.E. 408

AMOUNT ($BN)

TREATMENT, PRIOR TO DILUTION FROM MANAGEMENT INCENTIVE PLAN

EFH

Building Financing & First

Lien Debt

$0.1

Reinstated

Unsecured Notes

$0.6

Exchanged into 11.8% of New Tracking Stock and 3.8% of New EFH Equity

Inter-Company Debt

$1.7

Canceled

SPONSORS

Equity

-

2.0% of New EFH Equity

2.0% of New Tracking Stock 

EFIH

First Lien Debt

$4.0

Refinanced 

Existing First Lien Debt Holders receive cash at [105.2%]; proceeds of New EFIH First Lien Debt

Second Lien Debt

$2.2

$0.8 million / 35% clawed at average price of 111.6% with proceeds of offering of New Tracking Stock

Remaining principal provided option to receive:

     Reinstatement, or

     Repayment at equity claw price; proceeds of New EFIH First Lien Debt

Unsecured Debt

$1.5

Exchanged for 54.9% of New Tracking Stock 

Holders to backstop rights offering for issuance of no less than $0.8 billion of New Tracking Stock (31.3%),

the proceeds of which will be used to claw Second Lien Notes

Providers of New Tracking Stock backstop to receive fee TBD

TCEH

Revolving Credit Facility

TBD

New revolving credit facility to be obtained on market terms

First Lien Debt  

$24.4

Exchanged for  pro rata share of:

      $8.0 billion cash; proceeds of New First Lien TCEH Bank Debt

     94.2% of EFH equity

Capital Leases and Fixed

Secured Facility Notes

$0.1

[Reinstated]

Second Lien Debt

$1.6

Warrants for TBD of pro forma equity of EFH, set at a TBD strike price (with limited duration)

Unsecured Debt

$4.9

Warrants for TBD of pro forma equity of EFH, set at a TBD strike price (with limited duration)

EFCH

EFCH Debt

$0.1

Warrants for TBD of pro forma equity of EFH, set at a TBD strike price (with limited duration)

MGMT

PLAN

Equity

-

Terms TBD

SUMMARY ILLUSTRATIVE TERM SHEET

The table below highlights key terms of the illustrative term sheet

Notes:

(1)

All

equity

amounts

illustrated

are

prior

to

dilution

from

a

new

management

incentive

plan

and

warrants

to

TCEH

junior

creditors.

Pro

forma

equity

allocations

based

on market-

implied

TCEH

First

Note

trading

value

of

approximately

$16.5

billion

(2)

Amount

excludes

Pollution

Control

Bonds,

which

are

assumed

to

be

reinstated

(1)

(1)

(1)

(2)

6

DRAFT; SUBJECT TO MATERIAL REVISION; PREPARED

AT THE REQUEST OF COUNSEL; SUBJECT TO F.R.E. 408

Confidential  –

Subject to F.R.E. 408

ILLUSTRATIVE TERMS OF NEW TRACKING STOCK

INITIAL

REDEMPTION

PRICE

~$2.6 billion

REFERENCE

ENTITY

Tracks the value of EFIH 

DIVIDEND

POLICY

To the extent EFIH dividends funds to EFH, a dividend will be paid on the New Tracking Stock 

  Subject to capital surplus at EFH; otherwise funds to be reinvested into EFIH

  Dividends will reflect an annual return of [TBD]% on the initial value of the New Tracking Stock

REDEMPTION

Redeemable by EFH at a price equal to the initial value plus accrued but unpaid dividends. Initial value of

New Tracking Stock will reflect:

a)Par plus accrued interest on converted EFIH Unsecured Debt; plus

b)Proceeds of the New Tracking Stock rights offering

GOVERNANCE 

/ OTHER

New Tracking Stock to receive voting rights at EFH only

Restrictions on issuances by EFH of securities senior to the New Tracking Stock and other customary

protections

Tax Sharing Agreements amended to provide that Oncor tax payments are made directly to EFIH

PRO FORMA

OWNERSHIP

New Tracking Stock issued for EFIH Second Lien Claw: 31.3%

EFIH Unsecured Debt Holders: 54.9%

EFH Unsecured Debt Holders: 11.8% 

Sponsors: 2.0%

The New Tracking

Stock provides for

deleveraging of EFIH,

through unsecured debt

exchange and new

money to fund an

equity claw of EFIH

Second Lien Debt

The New Tracking

Stock would act

similar to preferred

equity in EFIH,

without risk of

triggering adverse tax

consequences for the

broader EFH group

The table below illustrates certain key terms of the New Tracking Stock

7

DRAFT; SUBJECT TO MATERIAL REVISION; PREPARED

AT THE REQUEST OF COUNSEL; SUBJECT TO F.R.E. 408

Confidential  –

Subject to F.R.E. 408

SUMMARY CORPORATE STRUCTURE

Source:

Company

filings

Note:

Debt

amounts

illustrated

prior

to

unamortized

premium

/

discount

Deconsolidated and Ring-fenced entities

The chart below summarizes the corporate structure of EFH, TCEH,

EFCH, and EFIH

8

DRAFT; SUBJECT TO MATERIAL REVISION; PREPARED

AT THE REQUEST OF COUNSEL; SUBJECT TO F.R.E. 408

Confidential  –

Subject to F.R.E. 408

SUMMARY OF PROPOSED RESTRUCTURING PROPOSAL

The chart below summarizes the illustrative proposed restructuring transaction of EFH, TCEH, EFCH, and EFIH

Notes:

All

equity

amounts

illustrated

are

prior

to

dilution

from

a

new

management

incentive

plan

and

warrants

9

DRAFT; SUBJECT TO MATERIAL REVISION; PREPARED

AT THE REQUEST OF COUNSEL; SUBJECT TO F.R.E. 408

Confidential  –

Subject to F.R.E. 408

SUMMARY OF PRO FORMA STRUCTURE

The chart below summarizes the illustrative proposed restructuring transaction of EFH, TCEH, EFCH, and EFIH

Notes:

All

equity

amounts

illustrated

are

prior

to

dilution

from

a

new

management

incentive

plan

and

warrants

(1)

For

illustrative

purposes

only,

assumes

100%

of

Second

Lien

Notes

outstanding

subsequent

to

equity

claw

decline

cash

redemption

10

DRAFT; SUBJECT TO MATERIAL REVISION; PREPARED

AT THE REQUEST OF COUNSEL; SUBJECT TO F.R.E. 408

LEGAL DISCLAIMER

Confidential

–

Subject

to

F.R.E.

408