The perceived advantage of bank loans - their seniority in a firm’s capital structure - isn't necessarily playing out with the TXU Energy bankruptcy, says Gershon Distenfeld, Head of High Yield at AllianceBernstein. TXU is an example of how companies with fragile credit profiles have been able to borrow cheaply, dulling their incentive to protect lenders. The loans at Energy Future Holdings’ Ca-rated wholesale power distributor have lost about 25% in value, but high-yield bonds issued by a separate subsidiary of the company are trading at a premium.

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