Energy Future Holdings Files for Bankruptcy

Energy Future Holdings Corp. filed for chapter 11 bankruptcy Tuesday, after months of negotiations with creditors aimed at speeding the restructuring of the private-equity-backed utility's debt load of more than $49 billion, as reported in WSJ.

After months of on-again, off-again talks between the company, its owners and a dizzying hierarchy of creditors, the company went into chapter 11 protection with a plan intended to stave off months of potentially rancorous fighting in court over pieces of the power company.

Energy Future will probably be split between its regulated electricity arm, Oncor, and its unregulated power-generation business. The talks had long been stymied by an array of issues, including whether such a split would create a tax bill of more than $7 billion. - NYT DealBook

This bankruptcy filing will be one of the biggest in history. KKR, TPG and Goldman Sach's PE group took the electricity company - formerly known as TXU - public in 2007, making this deal the biggest buyout in history ($44.37 Billion).

Indeed, while it faced a total debt load of about $38 billion, much of which was taken on to complete the buyout in 2007, its underlying business – the generation and sale of electricity – deteriorated sharply. In the deregulated Texas market, electricity prices are strongly related to those of natural gas. That fact, essentially, made the buyout of Energy Future Holdings a towering bet on the price of natural gas.

But instead of rising, natural gas prices fell. And kept falling. That led to billions of dollars in losses at the company. - NYT DealBook

So, especially for those of you who were already in the world of finance when the buyout took place in 2007, did you think at the time that this was a good deal and why? Additionally, why at the time did the buyout firms think that this was a deal worth doing? I see that 2007 was the peak of the PE boom and PE firms might have been overly optimistic, but this deal went terribly wrong.