Good news for creditors is they struck a deal. Bad news for creditors is the assets are of dubious value.
Judge OKs Dynegy bankruptcy pact with creditors
6/1/2012 COMMENTS (0)
June 1 (Reuters) - Dynegy Inc on Friday won a U.S. bankruptcy judge's approval of a settlement with creditors, putting the power producer's Dynegy Holdings LLC unit one step closer to emerging from Chapter 11 protection.
Chief Judge Cecelia Morris of the U.S. Bankruptcy Court for the Southern District of New York approved the settlement at a hearing in Poughkeepsie, New York. Some creditors this week dropped their opposition to the accord.
Robert Flexon, chief executive of Dynegy and Dynegy Holdings, said the settlement has support from all major creditor groups. Creditors who joined hold more than $2.7 billion of claims against Dynegy Holdings, the company said.
Under the settlement, Dynegy and Dynegy Holdings would be combined, the Houston-based company said.
Dynegy Holdings' unsecured creditors, including holders of about $3.4 billion of senior notes, would receive a 99 percent equity stake in the combined company, while the Houston-based parent would receive the remaining 1 percent plus warrants.
Katy Sullivan, a spokeswoman, said Dynegy Holdings hopes to emerge from Chapter 11 in the early fall.
Dynegy Holdings plans to soon file an amended reorganization plan, which must be voted on by creditors and approved by the judge before it can emerge from Chapter 11.
The April 4 settlement resolved a dispute among creditors over whether Dynegy had acted properly last September in taking $1.25 billion of coal-powered plant assets from Dynegy Holdings.
Creditors of that unit said the transfer unfairly benefited shareholders, including billionaire financier Carl Icahn and the Seneca Capital Investments LP hedge fund and Franklin Resources Inc's Franklin Advisers unit at their expense.
A court-appointed examiner, Susheel Kirpalani, in March called the move a "fraudulent transfer" that harmed Dynegy Holdings.
Dynegy is the same company that in 2001 set and then canceled plans to buy Enron Corp as the business and finances of its larger rival deteriorated quickly.
Dynegy shares closed up nearly 5.5 cents to 53.5 cents on the New York Stock Exchange.
The case is In re: Dynegy Holdings LLC et al, U.S. Bankruptcy Court, Southern District of New York, No. 11-38111.
For Dynegy: Brian Lohan, Paul Caruso and Sophia Mullen of Sidley Austin.
(Reporting By Jonathan Stempel)
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