Dynegy launches $1.7 billion senior secured term loans to investors

By Sara Rosenberg

New York, July 11 - Dynegy Inc. held a bank meeting on Monday to launch $1.7 billion of new senior secured term loans, according to a market source.

Credit Suisse Securities (USA) LLC and Goldman Sachs & Co. are the joint lead arrangers on the deal, and Barclays Capital Inc. is a co-manager.

The debt is comprised of a $1.3 billion six-year term loan at GasCo and a $400 million six-year term loan at CoalCo.

Price talk on the loans is expected to come out on Tuesday when the decision is made on whether to get the transaction rated, the source said.

Through a concurrent reorganization, GasCo will be a subsidiary that owns a portfolio of eight primarily natural gas-fired intermediate and peaking power generation facilities, and CoalCo will be a subsidiary that owns a portfolio of six primarily coal-fired baseload power generation facilities.

The reorganization is being done to align the company's asset base and maximize flexibility to address additional potential debt restructuring activities.

Proceeds from the GasCo loan will be used to repay Dynegy Holdings Inc.'s existing senior secured credit facility, repay existing debt relating to Sithe Energies Inc., make a $400 million restricted payment to a parent holding company of GasCo, and fund cash collateralized letters of credit and cash collateral for existing collateral requirements.

The CoalCo loan will be used to fund cash collateralized letters of credit and cash collateral for existing collateral requirements, and for general working capital and general corporate purposes.

"These restructuring actions will provide a solid foundation for Dynegy to begin addressing the financial challenges that have been magnified by an environment of low commodity prices," said Robert C. Flexon, president and chief executive officer, in a news release.

"The new financings, accompanied by the modification of the company's asset ownership structure, will create an on-going platform intended to improve Dynegy's financial condition and more efficiently align the operation and management of the company's assets, which will serve as a step to reestablish Dynegy as an energy industry leader," Flexon added.

Closing on the term loans is expected at the end of this month.

Dynegy is a Houston-based producer and seller of electric energy, capacity and ancillary services.

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