Dynegy creates separate coal, gas power generation units; closes $1.7B refinancing

Source: Dynegy Inc.

Dynegy Inc. (the Company) (NYSE: DYN) announced that it has completed an internal restructuring to create separate coal-fueled power generation and gas-fueled power generation units and that its new "CoalCo" and "GasCo" subsidiaries have closed on new senior secured credit facilities in the aggregate amount of $1.7 billion. The new facilities consist of a $1.1 billion, five-year senior secured term loan facility available to Dynegy Power, LLC (the GasCo Facility) and a $600 million, five-year senior secured term loan facility available to Dynegy Midwest Generation, LLC (the CoalCo Facility). 

"The completion of our internal restructuring and the successful closing of the new separate credit facilities were designed to facilitate and give us the operational and financial flexibility to be able to seize value whenever the opportunity presents itself," said Robert C. Flexon, President and Chief Executive Officer of Dynegy. "We will now turn our efforts to determining what additional restructuring steps we can take to improve our overall leverage and to improve stockholder value. I would also like to thank our employees for their continued dedication and hard work in completing these restructuring and refinancing transactions." 

The proceeds of borrowings under the new credit facilities have been or may be used to: (i) repay certain outstanding indebtedness under Dynegy Holding Inc.'s senior secured credit agreement, (ii) cash collateralize letters of credit and provide cash collateral for existing and future collateral requirements, (iii) at the option of Dynegy Power, LLC, repay certain debt related to subsidiaries of Sithe Energies, Inc., (iv) make up to an aggregate of $400 million of distributions to parent holding companies, (v) pay related transaction fees and expenses and (vi) fund general working capital and liquidity requirements. 

On July 10, 2011, Dynegy announced its intention to reorganize its operations to facilitate obtaining the new credit facilities, align the Company's asset base and maximize its flexibility to address additional potential debt restructuring activities. The Company has now reorganized its operations into three segments: Gas, Coal and Other. Dynegy Power, LLC owns and operates the Gas segment, a portfolio of eight primarily natural gas-fired intermediate (combined cycle) and peaking (combustion and steam turbines) power generation facilities diversified across the West, Midwest and Northeast regions of the United States, totaling 6,771 MW of generating capacity. Dynegy Midwest Generation, LLC owns and operates the Coal segment, a portfolio of six primarily coal-fired baseload power generation facilities located in the Midwest, totaling 3,132 MW of generating capacity. 

Dynegy's remaining assets (including leasehold interests in the Danskammer and Roseton facilities) constitute the Company's third business segment. The Company expects to report its results in these new segments commencing with the quarter ending September 30, 2011. 

The new credit facilities are an important step for Dynegy. Under the strategic direction of the Finance and Restructuring Committee of Dynegy's Board of Directors, Dynegy may participate in additional debt restructuring activities, which may include direct or indirect transfers of its subsidiaries' equity interests, refinancing of existing debt and lease obligations, further reorganizations of its subsidiaries or similar initiatives. 

As of August 5, 2011, Dynegy's liquidity on a consolidated basis was approximately $1.0 billion. This consisted of approximately $1.0 billion in cash and cash equivalents and approximately $30 million in unused availability under the new letter of credit facilities. Dynegy's net debt and other obligations, on a consolidated basis, totaled approximately $4.4 billion, which included the new facilities offset by cash and cash equivalents of approximately $1.0 billion and restricted cash of approximately $660 million. 

A description of the new credit facilities will be included in a report on Form 8-K filed with the Securities and Exchange Commission and will be made available on the Company's website. Credit Suisse and Goldman Sachs acted as joint lead arrangers and Barclays Capital acted as co-manager for the new facilities.

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