Dynegy, PSEG settle lease rejection issues and case dismissal motion

By Caroline Salls

Pittsburgh, Dec. 14 - Dynegy Holdings, LLC entered into a binding term sheet with Resources Capital Management Corp. and affiliates (PSEG) to settle issues related to the company's Dynegy Roseton LLC and Dynegy Danskammer LLC leases and a motion to dismiss the Dynegy debtors' bankruptcy cases, according to an 8-K filed Wednesday with the Securities and Exchange Commission.

The agreement also settles Dynegy's motion to reject the Roseton and Danskammer leases and a complaint filed by PSEG in the New York Supreme Court.

According to the 8-K, the parties have asked the U.S. Bankruptcy Court for the Southern District of New York to approve the rejection of the leases in question as of Nov. 7.

In addition, all of PSEG's rights and claims under the TIA will be settled in exchange for a $110 million allowed unsecured claim against Dynegy Holdings and $7.5 million in cash to be paid to Resources Capital Management by Dynegy or a non-debtor subsidiary within five days of the effective date of the rejection order.

Dynegy said it has also agreed to amend its plan of reorganization to implement the agreement and provide PSEG with specified releases, exculpations and injunctions.

In exchange, PSEG will support confirmation of the plan, withdraw its motion to dismiss the Chapter 11 cases, drop the lawsuit disputing Dynegy's pre-bankruptcy internal restructuring and transfer to Dynegy its right to any recovery on its equity interests in the leased Roseton and Danskammer power plants.

Dynegy will also receive the right to any claims PSEG has against indenture trustee U.S. Bank for damages stemming from the trustee's efforts to recharacterize the leases as financings.

The Dynegy debtors will continue to operate the leased facilities until they obtain regulatory authority to stop, the 8-K said. The company said it will not claim that PSEG has an obligation to operate the leased facilities.

Dynegy Holdings LLC and four subsidiaries filed for bankruptcy on Nov. 7. The Chapter 11 case number is 11-38111.

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