Consider the impending debt restructuring at Energy Future Holdings a high stakes game of Texas hold ’em. Energy Future, the former TXU, is the Texas utility that went private in a $45bn leveraged buyout during the heady days of 2007. The private equity firms behind the transaction, led by KKR and TPG, paid a seemingly modest 8.5 times operating cash flow for a company that sold a product (electricity) that everybody needed. But the two firms did not foresee the economic crisis that would curtail power demand and then the historic boom in US natural gas production that has depressed the prices they could charge for electricity. (The 2007 TXU management plan assumed natural gas prices of about $8/Mmbtu between 2008 and 2011. Actual average price: $5/Mmbtu.) Energy Future had already modified terms on $25bn of debt. But now comes the reckoning where equity and debt holders wrangle over an altered capital structure that the company can move forward with. And, of course, who gets how much of what.

In 2012, Energy Future had operating cash flow of $3.7bn but interest expense of $3.5bn, with total long-term debt totalling $38bn. The owners have proposed wiping off $32bn of senior debt in exchange for giving up 85 per cent of its equity. The debt holders, sophisticated hedge funds that specialise in buying distressed debt which they often negotiate into equity, have balked at this first offer. The question is how long this goes on. An actual default is probably avoidable until 2014. And while the equity holders dawdle, the eager-to-swap bondholders suffer disproportionately (the current equity holders are essentially wiped out) from the uncertainty in the business and the drip of fees paid to bankruptcy advisers. But with KKR and TPG still in control, look for this poker game to go on a while.