Debt | 12 Months Ended |
Dec. 31, 2013 |
Debt Disclosure [Abstract] | ' |
Debt | ' |
DEBT |
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Debtor-In-Possession (DIP) Facilities |
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EFIH First Lien DIP Facility — EFIH has received a binding commitment and agreements to participate, subject to certain customary conditions, for $5.4 billion first-lien DIP facility described below (the EFIH First Lien DIP Facility). EFIH intends to file a motion with the Bankruptcy Court for approval of the EFIH First Lien DIP Facility. In general, the commitment from the financial institution would terminate (unless waived by the lenders) within 10 business days from the Petition Date in the event the Bankruptcy Court has not issued an interim order approving such financing. |
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The proposed EFIH First Lien DIP Facility is a Senior Secured, Super-Priority Credit Agreement by and among the EFIH Debtors, the lenders that are party thereto from time to time and an administrative and collateral agent. |
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See Note 2 for further discussion regarding the Restructuring Support and Lock-Up Agreement, the EFIH First Lien Settlement and the EFIH First Lien DIP Facility. |
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The principal amounts outstanding under the EFIH First Lien DIP Facility bear interest based on applicable LIBOR or base rates plus applicable margins as set forth in the EFIH First Lien DIP Facility. The EFIH First Lien DIP Facility also provides for certain additional fees payable to the agents and lenders, as well as availability fees payable with respect to any unused portions of the available EFIH First Lien DIP Facility. |
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The EFIH First Lien DIP Facility will mature on the twenty-fourth month after the closing date of the EFIH First Lien DIP Facility. The maturity date may be extended to the thirtieth month after the closing date of the EFIH First Lien DIP Facility subject to the satisfaction of certain conditions, including the payment of a 25 basis points extension fee, a requirement that an acceptable plan of reorganization has been filed on or prior to such extension and the availability of certain metrics of liquidity applicable to the EFIH Debtors. |
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EFIH's obligations under the EFIH First Lien DIP Facility will be secured by a first lien covering substantially all of EFIH's assets, rights and properties, subject to certain exceptions set forth in the EFIH First Lien DIP Facility. The EFIH First Lien DIP Facility provides that all obligations thereunder will constitute administrative expenses in the Chapter 11 Cases, with administrative priority and senior secured state under Section 364(c) and 364(d) of the Bankruptcy Code and, subject to certain exceptions set forth in the EFIH First Lien DIP Facility, will have priority over any and all administrative expense claims, unsecured claims and costs and expenses in the Chapter 11 Cases. |
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The EFIH First Lien DIP Facility provides for affirmative and negative covenants applicable to the EFIH Debtors, including affirmative covenants requiring the EFIH Debtors to provide financial information, budgets and other information to the agents under the EFIH First Lien DIP Facility, and negative covenants restricting the EFIH Debtors' ability to incur additional indebtedness, grant liens, dispose of assets, pay dividends or take certain other actions, in each case except as permitted in the EFIH First Lien DIP Facility. EFIH's ability to borrow under the EFIH First Lien DIP Facility is subject to the satisfaction of certain customary conditions precedent set forth therein. The Oncor Ring-Fenced Entities will not be restricted subsidiaries for purposes of the EFIH First Lien DIP Facility. |
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The EFIH First Lien DIP Facility provides for certain customary events of default, including events of default resulting from non-payment of principal, interest or other amounts when due, material breaches of representations and warranties, material breaches of covenants in the EFIH First Lien DIP Facility or ancillary loan documents, cross-defaults under other agreements or instruments and the entry of material judgments against EFIH. The EFIH First Lien DIP Facility also includes an event of default that may arise from its failure to meet a minimum liquidity test. Upon the existence of an event of default, the EFIH First Lien DIP Facility provides that all principal, interest and other amounts due thereunder will become immediately due and payable, either automatically or at the election of specified lenders. |
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EFIH Second Lien DIP Facility — The EFIH Second Lien DIP Facility provides for a secured, super-priority term loan in the amount of $1.9 billion. The proposed EFIH Second Lien DIP Facility is a Secured, Super-Priority Credit Agreement by and among the EFIH Debtors, the lenders that are party thereto from time to time and an administrative and collateral agent. On the Effective Date, the EFIH Second Lien DIP Notes will automatically convert (Equity Conversion) on a pro rata basis into approximately 64% of the equity interests of newly reorganized EFH Corp (Reorganized EFH Corp.) |
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See Note 2 for further discussion of the Restructuring Support and Lock-Up Agreement, the EFIH Second Lien DIP Notes Offering and the Backstop Commitment received from certain holders of the EFIH Unsecured Notes. |
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The principal amounts outstanding under the EFIH Second Lien DIP Facility bear interest based on applicable LIBOR or base rates plus applicable margins as set forth in the EFIH Second Lien DIP Facility subject to certain adjustments if the Bankruptcy Court has not approved the Oncor TSA Amendment within 90 days after the Petition Date. |
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The EFIH Second Lien DIP Facility will mature on the twenty-fourth month after the closing date of the EFIH Second Lien DIP Facility. |
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EFIH's obligations under the EFIH Second Lien DIP Facility will be secured by a second lien covering substantially all of EFIH's assets, rights and properties, subject to certain exceptions set forth in the EFIH Second Lien DIP Facility. The EFIH Second Lien DIP Facility provides that all obligations thereunder will constitute administrative expenses in the Chapter 11 Cases, with administrative priority and senior secured state under Section 364(c) and 364(d) of the Bankruptcy Code and, subject to certain exceptions set forth in the EFIH Second Lien DIP Facility, will have priority over any and all administrative expense claims, unsecured claims and costs and expenses in the Chapter 11 Cases. |
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The EFIH Second Lien DIP Facility provides for affirmative and negative covenants applicable to the EFIH Debtors, including affirmative covenants requiring the EFIH Debtors to provide financial information, budgets and other information to the agents under the EFIH Second Lien DIP Facility, and negative covenants restricting the EFIH Debtors' ability to incur additional indebtedness, grant liens, dispose of assets, pay dividends or take certain other actions, in each case except as permitted in the EFIH Second Lien DIP Facility. EFIH's ability to borrow under the EFIH Second Lien DIP Facility is subject to the satisfaction of certain customary conditions precedent set forth therein. The Oncor Ring-Fenced Entities will not be restricted subsidiaries for purposes of the EFIH Second Lien DIP Facility. |
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The EFIH Second Lien DIP Facility provides for certain customary events of default, including events of default resulting from non-payment of principal, interest or other amounts when due, material breaches of representations and warranties, material breaches of covenants in the EFIH Second Lien DIP Facility or ancillary loan documents, cross-defaults under other agreements or instruments and the entry of material judgments against EFIH. Upon the existence of an event of default, the EFIH Second Lien DIP Facility provides that all principal, interest and other amounts due thereunder will become immediately due and payable, either automatically or at the election of specified lenders. |
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Debt |
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The Bankruptcy Filing constituted an event of default under the indentures governing the debt instruments listed below and those debt obligations became immediately due and payable. As a result, the accompanying consolidated balance sheet as of December 31, 2013 presents all debt classified as current. Under the Bankruptcy Code, the creditors under these debt agreements are stayed from taking any action against the Debtors as a result of the default. |
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At December 31, 2013 and 2012, debt consisted of the following: |
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| December 31, | | | | | | | | | | | | | | | | | |
| 2013 | | 2012 | | | | | | | | | | | | | | | | | |
Debt issued by EFIH: | | | | | | | | | | | | | | | | | | | | |
6.875% Fixed Senior Secured First Lien Notes due August 15, 2017 | $ | 503 | | | $ | 503 | | | | | | | | | | | | | | | | | | |
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10% Fixed Senior Secured First Lien Notes due December 1, 2020 | 3,482 | | | 2,180 | | | | | | | | | | | | | | | | | | |
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11% Fixed Senior Secured Second Lien Notes due October 1, 2021 | 406 | | | 406 | | | | | | | | | | | | | | | | | | |
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11.75% Fixed Senior Secured Second Lien Notes due March 1, 2022 | 1,750 | | | 1,750 | | | | | | | | | | | | | | | | | | |
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11.25%/12.25% Senior Toggle Notes due December 1, 2018 | 1,566 | | | 1,304 | | | | | | | | | | | | | | | | | | |
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9.75% Fixed Senior Notes due October 15, 2019 | 2 | | | 141 | | | | | | | | | | | | | | | | | | |
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Unamortized premium | 284 | | | 351 | | | | | | | | | | | | | | | | | | |
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Unamortized discount | (146 | ) | | (131 | ) | | | | | | | | | | | | | | | | | |
Total debt issued by EFIH | 7,847 | | | 6,504 | | | | | | | | | | | | | | | | | | |
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Pushed down debt (a): | | | | | | | | | | | | | | | | | | | | |
9.75% EFH Corp. Fixed Senior Notes due October 15, 2019 | — | | | 57 | | | | | | | | | | | | | | | | | | |
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10% EFH Corp. Fixed Senior Notes due January 15, 2020 | — | | | 331 | | | | | | | | | | | | | | | | | | |
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10.875% EFH Corp. Fixed Senior Notes due November 1, 2017 | 17 | | | 32 | | | | | | | | | | | | | | | | | | |
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11.25%/12.00% EFH Corp. Senior Toggle Notes due November 1, 2017 | 13 | | | 30 | | | | | | | | | | | | | | | | | | |
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Total pushed down debt | 30 | | | 450 | | | | | | | | | | | | | | | | | | |
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Total debt | $ | 7,877 | | | $ | 6,954 | | | | | | | | | | | | | | | | | | |
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(a) | Represents 50% of the amount of these EFH Corp. securities guaranteed by EFIH and pushed down per the discussion below under "Guarantees and Push Down of EFH Corp. Debt." | | | | | | | | | | | | | | | | | | | | | | | |
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Debt Related Activity in 2013 |
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Principal amounts of debt issued in the year ended December 31, 2013 totaled $1.564 billion. These issuances consisted of $1.302 billion of EFIH 10% Notes issued in exchanges as discussed below, $173 million of EFIH Toggle Notes issued though the PIK election, in lieu of making cash interest payments, and $89 million of EFIH Toggle Notes issued in debt exchanges as discussed below. |
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EFIH Debt Exchanges and Distributions Involving EFH Corp. Debt — In exchanges in January 2013, EFIH and EFIH Finance issued $1.302 billion principal amount of EFIH 10% Senior Secured Notes due 2020 (New EFIH 10% Notes) in exchange for $1.310 billion total principal amount of EFH Corp. and EFIH senior secured notes consisting of: (i) $113 million principal amount of EFH Corp. 9.75% Senior Secured Notes due 2019 (EFH Corp. 9.75% Notes), (ii) $1.058 billion principal amount of EFH Corp. 10% Senior Secured Notes due 2020 (EFH Corp. 10% Notes), and (iii) $139 million principal amount of EFIH 9.75% Senior Secured Notes due 2019 (EFIH 9.75% Notes). The New EFIH 10% Notes have terms and conditions substantially the same as the existing EFIH 10% Notes discussed below. EFIH cancelled the EFIH notes it received in the exchanges. |
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In connection with these debt exchange transactions, EFH Corp. received the requisite consents from holders of the EFH Corp. 9.75% Notes and EFH Corp. 10% Notes and EFIH received the requisite consents from holders of the EFIH 9.75% Notes to certain amendments to the respective indentures governing such notes. These amendments, among other things, (i) eliminated EFIH's pledge of its 100% ownership of the membership interests it owns in Oncor Holdings as collateral for the EFIH 9.75% Notes, (ii) made EFCH and EFIH unrestricted subsidiaries under the EFH Corp. 9.75% Notes and EFH Corp. 10% Notes, thereby eliminating EFCH's unsecured and EFIH's secured guarantees of the notes, (iii) eliminated substantially all of the restrictive covenants in the indentures and (iv) eliminated certain events of default, modified covenants regarding mergers and consolidations and modified or eliminated certain other provisions in these indentures. |
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In additional exchanges in January 2013, EFIH and EFIH Finance issued $89 million principal amount of additional 11.25%/12.25% Toggle Notes due 2018 (EFIH Toggle Notes) in exchange for $95 million total principal amount of EFH Corp. senior notes consisting of: (i) $31 million principal amount of EFH Corp. 10.875% Senior Notes due 2017 (EFH Corp. 10.875% Notes), (ii) $33 million principal amount of EFH Corp. 11.25%/12.00% Senior Toggle Notes due 2017 (EFH Corp. Toggle Notes), (iii) $2 million principal amount of EFH Corp. 5.55% Series P Notes due 2014 (EFH Corp. 5.55% Notes) and (iv) $29 million principal amount of EFH Corp. 6.50% Series Q Notes due 2024 (EFH Corp. 6.50% Notes). The additional EFIH Toggle Notes have the same terms and conditions as the existing EFIH Toggle Notes discussed below. |
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In the first quarter 2013, EFIH distributed to EFH Corp. $6.360 billion principal amount of EFH Corp. debt that it previously received in debt exchanges, including $1.235 billion received in January 2013. EFH Corp. cancelled the notes, leaving $1.361 billion principal amount of affiliate debt still held by EFIH. The distribution included $3.474 billion principal amount of EFH Corp. Toggle Notes, $1.715 billion principal amount of EFH Corp. 10.875% Notes, $1.058 billion principal amount of EFH Corp. 10% Notes and $113 million principal amount of EFH Corp. 9.75% Notes. |
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Accounting and Income Tax Effects of the January 2013 Debt Exchanges — In consideration of the circumstances and terms of the exchanges, accounting rules require that the net loss on the exchanges, which totaled $21 million, be deferred and amortized to interest expense over the life of the debt issued. The deferred loss is reported as debt discount associated with the EFIH 10% Notes and EFIH Toggle Notes. The deferred loss and the related deferred tax liability were pushed down to EFIH as a membership interests transaction. |
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Debt Related Activity in 2012 |
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Principal amounts of debt issued in the year ended December 31, 2012 totaled $3.557 billion. These issuances consisted of $1.750 billion of EFIH 11.75% Notes as discussed below, $1.304 billion of EFIH Toggle Notes issued in exchanges as discussed below and $503 million of EFIH 6.875% Notes as discussed below. |
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Issuance of EFIH Toggle Notes in Exchange for EFH Corp. Debt — In exchanges in December 2012, EFIH and EFIH Finance issued $1.304 billion principal amount of EFIH Toggle Notes in exchange for $1.761 billion total principal amount of EFH Corp. debt consisting of $234 million of EFH Corp. 5.55% Notes, $510 million of EFH Corp. 6.50% Notes, $453 million of EFH Corp. 6.55% Series R Senior Notes due 2034 (EFH Corp. 6.55% Notes), $132 million of EFH Corp. 10.875% Notes and $432 million of EFH Corp. Toggle Notes. |
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In connection with the debt exchange transactions, EFH Corp. received the requisite consents from holders of the EFH Corp. 6.50% Notes and EFH Corp. 6.55% Notes applicable to certain amendments to the respective indentures governing such notes. These amendments, among other things, eliminated substantially all of the restrictive covenants, eliminated certain events of default, modified covenants regarding mergers and consolidations and modified or eliminated certain other provisions in such indentures, including the limitation on the incurrence of secured indebtedness. |
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In the fourth quarter 2012, EFIH distributed to EFH Corp. $158 million principal amount ($160 million carrying amount) of EFH Corp. debt that it previously received in debt exchanges. EFH Corp. cancelled the notes. The distribution included $119 million principal amount of EFH Corp. Toggle Notes and $39 million principal amount of EFH 10.875% Notes. |
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Accounting and Income Tax Effects of the December 2012 Debt Exchanges — In consideration of the circumstances and terms of the exchanges, accounting rules require that the gain on the exchanges, which totaled $336 million, be deferred and amortized to interest income over the life of the debt issued. The deferred gain is reported as debt premium associated with the EFIH Toggle Notes. The deferred gain and the related deferred tax asset were pushed down to EFIH as a membership interests transaction. |
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Issuances of EFIH 6.875% Senior Secured Notes — In October 2012, EFIH and EFIH Finance issued $253 million principal amount of 6.875% Senior Secured Notes due 2017 (EFIH 6.875% Notes). The offering was issued at a premium of $8 million, which will be amortized to interest expense over the life of the notes. In August 2012, EFIH and EFIH Finance issued $250 million principal amount of EFIH 6.875% Notes and $600 million principal amount of 11.75% Senior Secured Second Lien Notes due 2022 (EFIH 11.75% Notes). The EFIH 11.75% Notes are discussed further below. Of the net proceeds from the August 2012 issuances, $680 million was placed in escrow (and was reported as restricted cash in the balance sheet) and was issued as a distribution to EFH Corp. in January 2013, and EFH Corp. used the distribution and cash on hand to repay the balance of the TCEH Demand Notes, which totaled $698 million at December 31, 2012. Remaining proceeds from the August and October 2012 issuances were used for general corporate purposes. |
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Issuances of EFIH 11.75% Senior Secured Second Lien Notes — In February and August 2012, EFIH and EFIH Finance issued $1.150 billion and $600 million principal amount of EFIH 11.75% Notes, respectively. The February 2012 offerings were issued at a discount of $12 million, and the August 2012 offering was issued at a premium of $14 million, both of which will be amortized to interest expense over the life of the notes. The net proceeds from the February 2012 issuance were used to pay a $950 million distribution to EFH Corp., and the balance was retained as cash on hand. EFH Corp. used proceeds from the distribution to repay a portion of the demand notes payable by EFH Corp. to TCEH. Use of proceeds from the August 2012 issuance is discussed above in connection with the issuance of EFIH 6.875% Notes. |
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Guarantees and Push Down of EFH Corp. Debt |
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Merger-related debt of EFH Corp. and its subsidiaries consists of debt issued or existing at the time of the Merger. Debt issued in exchange for Merger-related debt is considered Merger-related. Debt issuances for cash are considered Merger-related debt to the extent the proceeds are used to repurchase Merger-related debt. EFCH and EFIH (excluding their subsidiaries) fully and unconditionally guarantee on a joint and several basis the Merger-related debt of EFH Corp. (parent). Such debt is subject to push down in accordance with SEC Staff Accounting Bulletin Topic 5-J, and as a result, a portion of such debt and related interest expense is reflected in EFIH's financial statements. Merger-related debt of EFH Corp. held by its subsidiaries is not subject to push down. |
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As a result of transactions in the first quarter 2013 discussed above and in Note 8, debt guaranteed and subject to push down at December 31, 2013 totals $60 million and consists of $33 million principal amount of EFH Corp. 10.875% Senior Notes and $27 million principal amount of EFH Corp. 11.25%/12.00% Senior Toggle Notes. The amount reflected in EFIH's balance sheet as pushed down debt ($30 million and $450 million at December 31, 2013 and December 31, 2012, respectively, as shown in the debt table above) represents 50% of the principal amount of the EFH Corp. Merger-related debt guaranteed. This percentage reflects the fact that at the time of the Merger, the equity investments of EFCH and EFIH in their respective operating subsidiaries were essentially equal amounts. Because payment of principal and interest on the debt is the responsibility of EFH Corp., EFIH records the settlement of such amounts as noncash capital contributions from EFH Corp. |
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Payments of interest by EFH Corp. on debt pushed down totaled $23 million, $53 million and $60 million in the years ended December 31, 2013, 2012 and 2011, respectively. |
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The following table presents an analysis of the total outstanding principal amount of EFH Corp. debt guaranteed by EFCH and EFIH at December 31, 2012 and December 31, 2013, respectively. |
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Securities Guaranteed (principal amounts) | | Held by EFIH | | Subject to Push Down | | Not Merger-Related | | Total Guaranteed | | Debt Cancelled in 2013 (c) | | Total Guaranteed December 31, 2013 (d) |
EFH Corp. 9.75% Senior Notes (a) | | $ | — | | | $ | 115 | | | $ | — | | | $ | 115 | | | $ | 113 | | | $ | — | |
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EFH Corp. 10% Senior Notes (a) | | — | | | 661 | | | 400 | | | 1,061 | | | 1,058 | | | — | |
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EFH Corp. 10.875% Senior Notes | | 1,685 | | | 64 | | | — | | | 1,749 | | | 1,715 | | | 33 | |
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EFH Corp. 11.25%/12.00% Senior Toggle Notes | | 3,441 | | | 60 | | | — | | | 3,501 | | | 3,474 | | | 27 | |
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Subtotal | | $ | 5,126 | | | $ | 900 | | | $ | 400 | | | 6,426 | | | $ | 6,360 | | | 60 | |
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TCEH Demand Notes (b) | | | | | | | | 698 | | | | | — | |
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Total | | | | | | | | $ | 7,124 | | | | | $ | 60 | |
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(a) | As a result of transactions completed in the first quarter 2013, as discussed above, the guarantees of the EFH Corp. 9.75% Notes and EFH Corp. 10% Notes were eliminated. | | | | | | | | | | | | | | | | | | | | | | | |
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(b) | The TCEH Demand Notes were settled in January 2013. See Note 9. | | | | | | | | | | | | | | | | | | | | | | | |
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(c) | See Note 8 for discussion of debt distributions and cancellations. | | | | | | | | | | | | | | | | | | | | | | | |
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(d) | These amounts are subject to push down. | | | | | | | | | | | | | | | | | | | | | | | |
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Information Regarding Other Significant Outstanding Debt |
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EFIH 6.875% Senior Secured Notes — At December 31, 2013, the principal amount of the EFIH 6.875% Notes totaled $503 million. These notes have a maturity date in August 2017, with interest payable in cash semiannually in arrears on February 15 and August 15 at a fixed rate of 6.875% per annum. The EFIH 6.875% Notes are secured on a first-priority basis by EFIH's pledge of its 100% ownership of the membership interests in Oncor Holdings (the EFIH Collateral) on an equal and ratable basis with the EFIH 10% Notes. |
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The EFIH 6.875% Notes are senior obligations of EFIH and rank equally in right of payment with all senior indebtedness of EFIH and are senior in right of payment to any future subordinated indebtedness of EFIH. The EFIH 6.875% Notes are effectively senior to all second lien and unsecured indebtedness of EFIH, to the extent of the value of the EFIH Collateral, and are effectively subordinated to any indebtedness of EFIH secured by assets of EFIH other than the EFIH Collateral, to the extent of the value of such assets. Furthermore, the EFIH 6.875% Notes are structurally subordinated to all indebtedness and other liabilities of EFIH's subsidiaries (other than EFIH Finance), including Oncor Holdings and its subsidiaries. The holders of the EFIH 6.875% Notes vote as a separate class from the holders of the EFIH 10% Notes. |
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There currently are no restricted subsidiaries under the indenture related to the EFIH 6.875% Notes (other than EFIH Finance, which has no assets). Oncor Holdings, the immediate parent of Oncor, and its subsidiaries are unrestricted subsidiaries under the indenture and, accordingly, are not subject to any of the restrictive covenants in the indenture. |
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The EFIH 6.875% Notes were issued in private placements and are not registered under the Securities Act. EFIH had agreed to use its commercially reasonable efforts to register with the SEC notes having substantially identical terms as the EFIH 6.875% Notes (except for provisions relating to transfer restrictions and payment of additional interest) as part of an offer to exchange freely tradable notes for the EFIH 6.875% Notes. Because the exchange offer was not completed, the annual interest rate on the EFIH 6.875% Notes increased by 25 basis points (to 7.125%) on August 15, 2013 and by an additional 25 basis points (to 7.375%) on November 15, 2013. |
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EFIH 10% Senior Secured Notes — At December 31, 2013, the principal amount of the EFIH 10% Notes totaled $3.482 billion. The notes have a maturity date in December 2020, with interest payable in cash semiannually in arrears on June 1 and December 1 at a fixed rate of 10% per annum. The notes are secured by the EFIH Collateral on an equal and ratable basis with the EFIH 6.875% Notes. |
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The EFIH 10% Notes are senior obligations of EFIH and rank equally in right of payment with all existing and future senior indebtedness of EFIH, including the EFIH 6.875% Notes. The EFIH 10% Notes have substantially the same terms as the EFIH 6.875% Notes. The holders of the EFIH 10% Notes vote as a separate class from the holders of the EFIH 6.875% Notes. |
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The $1.302 billion of EFIH 10% Notes issued in January 2013 were issued in private placements and are not registered under the Securities Act. EFIH had agreed to use its commercially reasonable efforts to register with the SEC notes having substantially identical terms as the EFIH 10% Notes (except for provisions relating to transfer restrictions and payment of additional interest) as part of an offer to exchange freely tradable notes for the EFIH 10% Notes. Because the exchange offer was not completed, the annual interest rate on the EFIH 10% Notes increased by 25 basis points (to 10.25%) on January 30, 2014 and will increase by an additional 25 basis points (to 10.50%) on April 30, 2014. |
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EFIH 11% Senior Secured Second Lien Notes — At December 31, 2013, the principal amount of the EFIH 11% Notes totaled $406 million. The notes have a maturity date in October 2021, with interest payable in cash semiannually in arrears on May 15 and November 15 at a fixed rate of 11% per annum. The EFIH 11% Notes are secured on a second-priority basis by the EFIH Collateral on an equal and ratable basis with the EFIH 11.75% Notes. |
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The EFIH 11% Notes are senior obligations of EFIH and EFIH Finance and rank equally in right of payment with all senior indebtedness of EFIH and are effectively senior in right of payment to all existing or future unsecured debt of EFIH to the extent of the value of the EFIH Collateral. The notes have substantially the same terms as the EFIH 11.75% Notes discussed below, and the holders of the EFIH 11% Notes will generally vote as a single class with the holders of the EFIH 11.75% Notes. |
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EFIH 11.75% Senior Secured Second Lien Notes — At December 31, 2013, the principal amount of the EFIH 11.75% Notes totaled $1.750 billion. These notes have a maturity date in March 2022, with interest payable in cash semiannually in arrears on March 1 and September 1 at a fixed rate of 11.75% per annum. The EFIH 11.75% Notes are secured on a second-priority basis by the EFIH Collateral on an equal and ratable basis with the EFIH 11% Notes. The EFIH 11.75% Notes have substantially the same covenants as the EFIH 11% Notes, and the holders of the EFIH 11.75% Notes will generally vote as a single class with the holders of the EFIH 11% Notes. |
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The EFIH 11.75% Notes were issued in private placements and are not registered under the Securities Act. EFIH had agreed to use its commercially reasonable efforts to register with the SEC notes having substantially identical terms as the EFIH 11.75% Notes (except for provisions relating to transfer restrictions and payment of additional interest) as part of an offer to exchange freely tradable notes for the EFIH 11.75% Notes. Because the exchange offer was not completed, the annual interest rate on the EFIH 11.75% Notes increased by 25 basis points (to 12.00%) on February 6, 2013 and by an additional 25 basis points (to 12.25%) on May 6, 2013. |
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EFIH 11.25%/12.25% Senior Toggle Notes — At December 31, 2013, the principal amount of the EFIH Toggle Notes totaled $1.566 billion. These notes have a maturity date in December 2018, with interest payable semiannually in arrears on June 1 and December 1 at a fixed rate of 11.25% per annum for cash interest and 12.25% per annum for PIK Interest. The terms of the Toggle Notes include an election by EFIH, for any interest period until June 1, 2016, to pay interest on the Toggle Notes (i) entirely in cash; (ii) by increasing the principal amount of the notes or by issuing new EFIH Toggle Notes (PIK Interest); or (iii) 50% in cash and 50% in PIK Interest. EFIH made its 2013 interest payments on the EFIH Toggle Notes by using the PIK feature of those notes. |
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The EFIH Toggle Notes were issued in private placements and are not registered under the Securities Act. EFIH had agreed to use its commercially reasonable efforts to register with the SEC notes having substantially identical terms as the EFIH Toggle Notes (except for provisions relating to transfer restrictions and payment of additional interest) as part of an offer to exchange freely tradable notes for the EFIH Toggle Notes. Because the exchange offer was not completed, the annual interest rate on the EFIH Toggle Notes increased by 25 basis points (to 11.50%) on December 6, 2013 and by an additional 25 basis points (to 11.75%) on March 6, 2014. |
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Material Cross Default/Acceleration Provisions — Certain of EFIH's financing arrangements contain provisions that result in an event of default if there were a failure under other financing arrangements to meet payment terms or to observe other covenants that could or does result in an acceleration of payments due. Such provisions are referred to as "cross default" or "cross acceleration" provisions. The Bankruptcy Filing triggered defaults on EFIH's debt obligations, but pursuant to the Bankruptcy Code, the creditors are stayed from taking any actions against the Debtors as a result of such defaults. |
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EFIH Collateral Trust Agreement — EFIH entered into a Collateral Trust Agreement, among EFIH, The Bank of New York Mellon Trust Company, N.A., as First Lien Trustee, the other Secured Debt Representatives named therein and the Collateral Trustee. The Collateral Trust Agreement governing the pledge of collateral generally provides that the holders of a majority of the debt secured by a first priority lien on the collateral, including the notes and other future debt incurred by EFH or EFIH secured by the collateral equally and ratably, have, subject to certain limited exceptions, the exclusive right to manage, perform and enforce the terms of the security documents securing the rights of secured debt holders in the collateral, and to exercise and enforce all privileges, rights and remedies thereunder. |
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Fair Value of Debt |
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At December 31, 2013 and December 31, 2012, the estimated fair value of EFIH's debt (including pushed down debt) totaled $7.849 billion and $7.258 billion, respectively, and the carrying amount totaled $7.877 billion and $6.954 billion, respectively. EFIH determines fair value in accordance with accounting standards and at December 31, 2013 its debt fair value represents Level 2 valuations. EFIH obtains security pricing from a vendor who uses broker quotes and third-party pricing services to determine fair values. Where relevant, these prices are validated through subscription services such as Bloomberg. |