September 6, 2012
Court approves Dynegy Chapter 11 bankruptcy plan
The independent power producer Dynegy Inc DYNIQ.PK said it has won court approval of its bankruptcy plan and expects to emerge from Chapter 11 by October 1, capping a reorganization marked by allegations of fraud and favoritism.
The plan was approved on Wednesday by U.S. Bankruptcy Judge Cecelia Morris in Poughkeepsie, New York, Dynegy spokeswoman Katy Sullivan said.
It calls for a combination of Houston-based Dynegy and its Dynegy Holdings unit into a new company led by current Chief Executive Robert Flexon, and in which creditors would take a 99 percent stake.
Shareholders would get a claim for the other 1 percent, plus warrants that could boost their stake to 13.5 percent in five years. Unsecured creditors would recover 59 cents to 89 cents on the dollar, and existing shareholders would recover nothing.
Dynegy Holdings filed for protection from creditors last November 7, burdened by costly power plant leases and amid a dispute over whether its parent had acted properly two months earlier in taking about $1.25 billion of its coal-powered plant assets.
Creditors of Dynegy Holdings complained that the asset transfer benefited shareholders including Carl Icahn, the Seneca Capital Investments LP hedge fund and a Franklin Resources Inc (BEN.N) unit at their expense.
Court-appointed examiner Susheel Kirpalani later called the transaction an "actual fraudulent transfer," and that some Dynegy officials and directors either did not understand it or had apparent conflicts of interest in approving it.
The dispute was settled in April, and Dynegy itself filed for Chapter 11 in July as part of a joint reorganization.
Dynegy is the same company that in 2001 canceled plans to buy Enron Corp as its larger rival hurtled toward collapse.
Shares of Dynegy fell 6 cents to 41 cents in afternoon trading on the Pink Sheets.
The cases are In re: Dynegy Holdings LLC, U.S. Bankruptcy Court, Southern District of New York, No. 11-38111; and In re: Dynegy Inc in the same court, No. 12-36728.
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