By Susanna Moon
Chicago, Nov. 3 - Dynegy Inc. said it terminated the offer to exchange up to $1.25 billion of Dynegy Holdings' securities for new notes, which was set to end at midnight ET on Nov. 3.
The move comes after a low turnout by holders and a missed coupon by its subsidiary due Nov. 1 on its 8 3/8% senior notes due 2016.
The company did not include a reason for ending the offers in the press release announcing the termination, but the exchange offers were dependent on a number of conditions.
Dynegy first announced plans for the exchange offers on Sept. 2 and extended the offers three times, which was originally set to end Oct. 13.
As previously reported, Dynegy was offering new 10% senior secured notes due 2018 and cash in exchange for up to $1.25 billion of Dynegy Holdings' notes, debentures and capital income securities.
The securities to be covered by the offers, the amount of securities tendered as of 5 p.m. ET on Oct. 27 and the payments that were on offer are listed in the tables below.
Holders who tendered by 5 p.m. ET on Sept. 28 were to receive the early tender payment. Holders who tendered after that time but prior to the offer expiration were to receive the exchange payment. In each case, the early tender payment is $50 more than the exchange payment.
The company also planned to pay accrued interest.
Dynegy also extended the withdrawal deadline for its exchange offers to midnight ET on Nov. 3 from 5 p.m. ET on Oct. 18.
Missed interest payment
Dynegy announced on Nov. 1 that its subsidiary Dynegy Holdings, LLC elected not to make the $43.8 million interest payment due Nov. 1 on its 8 3/8% senior notes due 2016.
This constituted an event of default after a 30-day cure period.
This missed interest payment would not trigger any significant cross-default provisions associated with other outstanding Dynegy Holdings debt prior to the expiration of the cure period, according to a company news release.
Low participation
As of Oct. 14, holders had tendered and not withdrawn $100.5 million, or 2.8%, of the $3.57 billion of outstanding securities. As of Oct. 27, that had fallen to $90.91 million.
As previously reported, an informal group of Dynegy Holdings' bondholders filed a complaint on Sept. 21 in the Supreme Court of the State of New York, County of New York to challenge the recent transfer of Dynegy Coal Holdco, LLC to Dynegy by Dynegy Gas Investments, LLC.
"Simply put, despite the parent company's repeated and unambiguous calls of distress and gloomy outlooks, the company has pilfered one of the most valuable assets of the operating subsidiary that issued the notes, and removed it from the reach of creditors, for no reason other than to benefit the parent's equity holders, prominent among them Carl C. Icahn," the bondholders said in their complaint.
Dynegy concluded that the fair value of the acquired equity stake in Dynegy Coal is about $1.25 billion. To provide this value to Dynegy Gas Investments, Dynegy issued an "undertaking" in which it agreed to make payments in the amounts and at the times when Dynegy Holdings is obligated to make principal and interest payments on its 2019 notes and 2026 notes.
Dynegy Gas then assigned the undertaking to Dynegy Holdings in exchange for a $1.25 billion intercompany note due 2027. Dynegy's obligations will be reduced if it acquires or retires any of Dynegy Holdings' notes. So if Dynegy acquires enough notes in the exchange offer, its obligations can be reduced to zero.
The bondholder group said this would mean the holding company will have sold Dynegy Coal for no cash and instead received in return only a reduction in its debt that was already trading at highly distressed prices.
Credit Suisse Securities (USA) LLC was the lead dealer manager (800 820-1653 or 212 538-2147), and Barclays Capital Inc., Deutsche Bank Securities Inc., Jefferies & Co., Inc. and Lazard Capital Markets LLC ware the co-dealer managers. The exchange agent and information agent was D.F. King & Co., Inc. (212 269-5550 for brokers and banks, others call 800 697-6975).
Dynegy is a Houston-based producer and seller of electric energy, capacity and ancillary services.
Dynegy exchange offers
| Notes | Outstanding amount | Tendered as of Oct. 27 | Priority Level
|
| 7 | 5/8% senior debentures due 2026 $175 million | $1.1 million | 1
|
| 7¾% senior notes due 2019 | $1.1 billion | $900,000 | 2
|
| 7 | 1/8% senior debentures due 2018 $175 million | $5,000 | 2
|
| 8 | 3/8% senior notes due 2016 | $1,046,800,000 | $1.8 million | 3
|
| 7½% senior notes due 2015 | $785 million | $2.8 million | 3
|
| 8¾% senior notes due 2012 | $88.5 million | $200,000 | 4
|
| 8.316% series B subordinated | $200 million | $84.1 million | 5
|
| capital income securities due 2027
|
|
|
| Total | $3,570,300,000 | $90,905,000
|
| Payment per $1,000 principal amount tendered
|
|
|
| Notes | Early tender payment | Exchange payment
|
| 7 | 5/8% senior debentures due 2026 | $120 cash and $480 of notes | $550 of notes
|
| 7¾% senior notes due 2019 | $120 cash and $565 of notes | $635 of notes
|
| 7 | 1/8% senior debentures due 2018 | $120 cash and $560 of notes | $630 of notes
|
| 8 | 3/8% senior notes due 2016 | $120 cash and $580 of notes | $650 of notes
|
| 7½% senior notes due 2015 | $120 cash and $600 of notes | $670 of notes
|
| 8¾% senior notes due 2012 | $120 cash and $600 of notes | $670 of notes
|
| 8.316% series B subordinated | $450 of notes | $400 of notes
|
| capital income securities due 2027
|
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