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3 Companies Not Going Public Anytime Soon

Hot IPO market or not, public trading isn't in the cards


Energy Future Holdings

EnergyFutureHoldings185In 2007, KKR, TPG Capital and Goldman Sachs (GS) pulled off a $48 billion buyout of TXU Energy, which later became Energy Future Holdings. It was the largest leveraged buyout ever, but also one of history’s worst — and now it looks as if the company could be on the verge of bankruptcy.

Energy Future had a storied history, reaching back to 1882. The company would eventually become the biggest owner of power plants in Texas, with a customer base of about 3 million.

However, the PE firms believed Energy Future would benefit from deregulation. This calculation was proved to be erroneous amid the collapse of natural gas prices, which made the company’s coal-based energy much less competitive.

True, Energy Future still generates healthy cash flows ($3.7 billion in 2012). But keep in mind that this has been the result of hedging contracts. When they expire next year, cash flows will plunge, and it probably will be impossible to meet the debt obligations — meaning the private equity investors could potentially lose everything.

Even famed investor Warren Buffett, whose Berkshire Hathaway (BRK.B) owns a slug of low-rated bonds, could take a hit.

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