Power generator Alinta Energy Group (ASX: AEJ) said on Monday that it has struck a deal with its lenders that would see the company's $3.5 billion debt being wiped out by sale of its assets to a company controlled by the lending consortium.

The agreement, according to Alinta Energy, would detach Alinta Energy Ltd (AEL) shares from the units of Alinta Energy Trust (AET) while an Alinta subsidiary controlled by the syndicate lenders would then proceed and offer an acquisition bid of 10 cents per unit for all AET units held by shareholders.

The energy company said that deal forged with its lender would be submitted for credit approvals, court approval and securityholder approval.

Alinta Energy said that its board of directors were under the impression that the company would cease its trading activities in the absence of announced sale of its assets and in order to pay its current liabilities that run into $3.5 billion, the company needs to resort into a successful deleveraging transaction.

The company said that funds for buying the AET units would be sourced from the combined resources of the syndicate lenders and Alinta Group as it noted that due to the transaction deal, the AEL shares vested as holdings in Redbank Power Station would be rendered worthless.

In that light, Alinta Energy said that following the payment of 10 cents per security, AEL shareholders could no longer expect further available equity in the company as Redbank share values were largely reduce to zero owing to its "financing debt levels, recent plant performance issues and trade bid interest."

Also, the company clarified that the deal with syndicate lenders is still a work in progress as work to push the agreement into its final phase is now underway while Alinta gave assurance that "appropriate announcements will be made to the market in due course."

As of 1050 AEST On Tuesday, Alinta Energy shares were trading at 8.7 cents, gaining by 2.9 cents from previous trading sessions.