The chief executive officer of Dynegy Inc. (NYSE: DYN) said he expects subsidiaries of the company to exit bankruptcy in 2012 despite a reported loss of $75 million in the third quarter 2011, compared to a net loss of $24 million in the same quarter in 2010. Net loss for the nine months ended Sept. 30, 2011 totaled $268 million, the company said in a press release.
The news comes two weeks after five subsidiaries of Dynegy Inc. filed for bankruptcy. U.S. Bank NA, as an indentured trustee, sued Dynegy on Nov. 14 and filed a motion asking the U.S. Bankruptcy Court in Poughkeepsie, N.Y. to appoint an examiner to conduct an investigation into the Nov. 7 Chapter 11 filing. Bondholders that have debts associated with leases for two power plants that Dynegy owns asked for an examiner to investigate Dynegy’s transferring of coal- and gas-fired assets in August to entities outside of Dynegy Holdings, one of the units that filed for bankruptcy.
Dynegy also said in the release that it reached an agreement with some of its bondholders on Nov. 7 - prior to the bankruptcy filing - to restructure $1.4 billion of senior notes held by the units that filed for bankruptcy. Dynegy Holdings owns about $4 billion of debt, the release said. The holders are expected to receive $400 million cash, $1 billion in seven-year, 11 percent secured notes, and an additional $2.1 billion in convertible pay-in-kind notes mandatorily convertible at maturity in December 2015 into 97 percent of the equity.
Dynegy Chief Executive Officer Robert Flexon was quoted as saying in the Wall Street Journal that he predicts Dynegy Holdings would be approved for its debt reorganization plan and exit bankruptcy by summer 2012.
In August, the company started a cost and performance initiative called Dynegy Producing Results through Innovation by Dynegy Employees, or PRIDE. The initiative aims to streamline costs and improve performance and could result in a decrease of combined general and administrative and cash operating expenses by $49 million from 2010 to 2011.
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