Goldman Sells $53 Million of Bankrupt Texas Utility Claims

Goldman Sachs Group Inc. auctioned off around $53 million of claims it held against a bankrupt Texas power cooperative as distressed debt traders bet the government will foot the bill for the state’s energy crisis, according to people with knowledge of the matter.

Goldman sold its claim on Brazos Electric Power Cooperative Inc. this week at 80 to 85 cents on the dollar, said the people, who asked not to be identified because details of the auction are private.

The bank is one of Brazos’s largest unsecured creditors. It’s owed the money for interest rate swaps and other power derivatives contracts that its commodities trading unit J. Aron & Co. signed with Brazos before a winter storm in February upended the Texas power market, saddling the electricity provider with billions in liabilities it couldn’t repay.

A representative for New York-based Goldman Sachs declined to comment. Waco-based Brazos didn’t immediately respond to requests for comment.

Claims Prices

The price Goldman received is similar to other unsecured claims have changed hands and suggests traders are expecting the Texas government will cover at least some of Brazos’s losses, according to some market watchers.

“The market is assigning an over 50% probability that there will be claims forgiveness and socialization of losses,” said Bradley Max, a director of Cherokee Acquisition, a New York firm that specializes in trading of bankruptcy claims and has bid for some of the Brazos receivables.

A $30 million piece of the roughly $480 million unsecured bank revolver was sold at auction last week for around 80 cents on the dollar, the people said. Bank of America Corp. is the administrative agent on the revolver, though the identity of the seller wasn’t revealed.

The fate of Brazos, which is the largest power generation and transmission cooperative in Texas, and its multibillion-dollar debt to Ercot is still the subject of political wrangling.

A bill in the state legislature that would have wiped out more than $4 billion of electricity overcharges from last month’s blackouts appeared dead on Friday, after lawmakers left town without taking final action on the proposal.

©2021 Bloomberg L.P.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.