Kravis, Bonderman appeal to Texas lawmakers

Henry Kravis and David Bonderman addressed Texas legislators’ concerns over their firms’ proposed $45 billion buyout of US utility TXU, as rival private equity firms are reportedly close to submitting a competing bid.

Kohlberg Kravis Roberts founder Henry Kravis and Texas Pacific Group co-founder David Bonderman attempted Tuesday to assuage Texas lawmakers’ concerns over their firms’ $45 billion (€34 billion) bid for Dallas, Texas-based utility TXU, as a rival consortium reportedly finalises a competing bid.

The largest-ever proposed buyout has legislators worried that Texas consumers would be harmed via eventual rate increases, allocation of debt used to finance the deal, and the short-term ownership associated with private equity portfolio companies. As a result, a bill was passed giving the state’s Public Utility Commission the power to review the bid, while still pending is legislation that would force TXU to be broken up.

Appearing Tuesday before the Texas House Committee on Regulated Industries, Kravis and Bonderman worked to dispel doubts.

“We understand that some members of this committee have concerns about debt as it relates to this investment,” Kravis said. “There will be no new borrowing, not one dollar, at the regulated utility, TXU Electric Delivery, to finance this acquisition.”

He added, “There is no basis for rates at TXU Electric Delivery to increase as a result of this investment, and we will continue to invest heavily in the system to assure continuing reliability and quality of service.”

Echoing the five-year commitment previously promised by KKR partner Fred Goltz, Kravis said: “Mr. Chairman, David and I want to say it again today under oath – to you, to the members of this committee, to TXU’s customers, and employees, and to the people of Texas – that we reaffirm that commitment. We are here for the long term.”

Bonderman said the firms would voluntarily file a report on the buyout by April 25, even though the law doesn’t required it to be filed until within 30 days following the transaction’s close.

“Transparency is important,” he said. “This voluntary filing will allow the PUC to conduct a full review of the transaction as it relates to the electric utility. It will allow those with an interest in asking questions about the transaction to have a forum in which to do so.”

Both men also highlighted their firms’ links to Texas: Kravis noted KKR represents organisations like Texas Teachers and the University of Texas endowment fund, and Bonderman called attention to his own residency in the state, as well as his firm’s Fort Worth headquarters.

The Financial Times reported Monday that The Blackstone Group, Hellman & Friedman and The Carlyle Group are close to submitting a rival bid for the Texas utility company. TXU’s acquisition agreement with KKR and TPG allowed it 50 days to solicit alternative offers.