================================================================= DYNEGY BANKRUPTCY NEWS Issue Number 1 ----------------------------------------------------------------- Copyright 2011 (ISSN XXXX-XXXX) November 8, 2011 ----------------------------------------------------------------- Bankruptcy Creditors' Service, Inc. 215-945-7000 FAX 215-945-7001 ----------------------------------------------------------------- DYNEGY BANKRUPTCY NEWS is published by Bankruptcy Creditors' Service, Inc., 572 Fernwood Lane, Fairless Hills, Pennsylvania 19030, on an ad hoc basis (generally every 10 to 20 days) as significant activity occurs in the Debtors' cases. New issues are prepared by Neil U. Lim, Psyche A. Castillon and Peter A. Chapman, Editors. Subscription rate is US$45 per issue. Any re-mailing of DYNEGY BANKRUPTCY NEWS is prohibited. ================================================================= IN THIS ISSUE ------------- [00000] HOW TO SUBSCRIBE TO DYNEGY BANKRUPTCY NEWS [00001] BACKGROUND & DESCRIPTION OF DYNEGY HOLDINGS [00002] COMPANY'S PRESS RELEASE CONCERNING CHAPTER 11 FILING [00003] COMPANY'S BALANCE SHEET AS OF JUNE 30, 2011 [00004] DYNEGY HOLDINGS' CHAPTER 11 DATABASE [00005] DEBTORS' MOTION FOR JOINT ADMINISTRATION OF CASES [00006] DEBTORS' MOTION TO EXTEND TIME TO FILE SCHEDULES KEY DATE CALENDAR ----------------- 11/07/11 Voluntary Chapter 11 Petition Date 11/21/11 Deadline to File Schedules of Assets and Liabilities 11/21/11 Deadline to File Statement of Financial Affairs 11/21/11 Deadline to File Lists of Contracts and Leases 12/07/11 Deadline to Provide Utilities with Adequate Assurance 02/05/12 Deadline to Remove Actions Pursuant to F.R.B.P. 9027 03/06/12 Expiration of Debtors' Exclusive Plan Proposal Period 03/06/12 Deadline to Make Decisions About Lease Dispositions 05/05/12 Expiration of Debtors' Exclusive Solicitation Period 11/06/13 Deadline for Debtors' Commencement of Avoidance Actions Organizational Meeting to Form Creditors' Committees First Meeting of Creditors under 11 USC Sec. 341 Bar Date for filing Proofs of Claim ----------------------------------------------------------------- [00000] HOW TO SUBSCRIBE TO DYNEGY BANKRUPTCY NEWS ----------------------------------------------------------------- DYNEGY BANKRUPTCY NEWS is distributed to paying subscribers by electronic mail. New issues are published on an ad hoc basis as significant activity occurs (generally every 10 to 20 days) in the Debtors' cases. The subscription rate is US$45 per issue. Newsletters are delivered via e-mail; invoices, transmitted following publication of each newsletter issue, arrive by fax. Re-mailing of DYNEGY BANKRUPTCY NEWS is prohibited. Distribution to multiple individuals at the same firm is provided at no additional charge; folks outside of your firm should set-up and pay for their own subscriptions. Subscriptions may be canceled at any time without further obligation. To continue receiving DYNEGY BANKRUPTCY NEWS, please complete the form below and return it by fax or e-mail to: Bankruptcy Creditors' Service, Inc. 572 Fernwood Lane Fairless Hills, PA 19030 Telephone (215) 945-7000 Fax (215) 945-7001 E-mail: peter@bankrupt.com We have published similar newsletters tracking billion-dollar insolvency proceedings since 1990, starting with Federated Department Stores. 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Name: ---------------------------------------------- Firm: ---------------------------------------------- Address: ---------------------------------------------- ---------------------------------------------- Phone: ---------------------------------------------- Fax: ---------------------------------------------- E-Mail: ---------------------------------------------- (Distribution to multiple professionals at the same firm is provided at no additional cost.) DYNEGY BANKRUPTCY NEWS is distributed to paying subscribers by electronic mail. New issues are published on an ad hoc basis as significant activity occurs (generally every 10 to 20 days) in the Debtors' cases. The subscription rate is US$45 per issue. Newsletters are delivered via e-mail; invoices, transmitted following publication of each newsletter issue, arrive by fax. Re-mailing of DYNEGY BANKRUPTCY NEWS is prohibited. Distribution to multiple individuals at the same firm is provided at no additional charge; folks outside of your firm should set-up and pay for their own subscriptions. Subscriptions may be canceled at any time without further obligation. ----------------------------------------------------------------- [00001] BACKGROUND & DESCRIPTION OF DYNEGY HOLDINGS ----------------------------------------------------------------- Dynegy Holdings, LLC 1000 Louisiana, Suite 5800 Houston, Texas 77002 Tel: 713-507-6400 http://www.dynegy.com/ Dynegy Holdings, LLC and its subsidiaries' primary business is the production and sale of electric energy, capacity and ancillary services from a fleet of 10 operating power plants in six states totaling roughly 9,903 MW of generating capacity. Dynegy Holdings is a holding company and conducts substantially all of its business operations through its subsidiaries. Dynegy Holdings' direct operations consist of only two plants -- at Dynegy Danskammer and Dynegy Roseton -- which have a combined generating capacity of 1,693 MW, despite the size of Dynegy Holdings' footprint and generating capacity across its subsidiaries' enterprise. Dynegy Holdings is a direct subsidiary of Dynegy Inc., and is the direct or indirect parent of Dynegy Roseton, L.L.C., Dynegy Danskammer, L.L.C., Hudson Power, L.L.C., and Dynegy Northeast Generation, Inc. The business operations of Dynegy Northeast Generation and Hudson Power are wholly conducted through Dynegy Roseton and Dynegy Danskammer at their power generation facilities in New York. The DH Companies employ 152 full-time employees, of whom 126 are represented by Local Union 320 of the International Brotherhood of Electrical Workers, AFL-CIO. The remaining employees are not represented by a union and are predominantly administrative and managerial employees. All of these employees are employed in connection with the operation of the Danskammer and Roseton power generation facilities, and all but one are employees of Dynegy Northeast. Prepetition Indebtedness As of Nov. 7, Dynegy Holdings is a wholly-owned subsidiary of Dynegy Inc., with Dynegy Inc. holding 100% of the membership interests in Dynegy Holdings. The remaining Debtors are wholly- owned direct or indirect subsidiaries of Dynegy Holdings. Dynegy Holdings, as of Nov. 7, has roughly $3.570 billion in outstanding unsecured indebtedness arising under seven different series of notes, debentures, and subordinated capital income securities, with varying maturities. A. Senior Unsecured Notes/Debentures Dynegy Holdings has, from time to time, issued various series of senior unsecured notes under the Indenture dated September 26, 1996, as amended and restated as of March 23, 1998, as amended and restated as of March 14, 2001, and under the First through Sixth Supplemental Indentures, between Dynegy Holdings and Wilmington Trust Company (as successor to JP Morgan Chase Bank, N.A., successor to Bank One Trust Company, National Association). These series of notes issued under the Indenture are outstanding: -- 8.75% senior unsecured notes in the outstanding aggregate principal amount of $88.5 million, due February 15, 2012; -- 7.5% senior unsecured notes in the outstanding aggregate principal amount of $785 million, due June 1, 2015; -- 8.375% senior unsecured notes in the outstanding aggregate principal amount of $1.046 billion, due May 1, 2016; -- 7.75% senior unsecured notes in the outstanding aggregate principal amount of $1.1 billion, due June 1, 2019; -- 7.125% senior debentures in the outstanding aggregate principal amount of $175 million due May 15, 2018; and -- 7.625% senior debentures in the outstanding aggregate principal amount of $175 million due October 15, 2026. B. Subordinated Debentures In May 1997, NGC Corporation Capital Trust I issued Series A 8.316% Subordinated Capital Income Securities through a Rule 144A offering to qualified institutional buyers. In September 1997, Series B 8.316% SKIS were exchanged for the outstanding Series A 8.316% SKIS. The Series B 8.316% SKIS in the aggregate principal amount of $200 million due June 1, 2027 remain outstanding, and are an unsecured obligation of Dynegy Holdings. The SKIS rank subordinate and junior in right of payment to all senior indebtedness of Dynegy Holdings. C. Bilateral Contingent LC Facility On May 21, 2010, Dynegy Holdings executed a $150 million unsecured bilateral contingent letter of credit facility with Morgan Stanley Capital Group Inc. Availability under the facility is tied to increases in spark spreads and power prices for 2012 positions. The facility matures on December 31, 2012. A facility fee accrues on the unutilized portion of the facility at an annual rate of 0.6% and letters of credit availability accrue fees at an annual rate of 7.25%. There are currently no amounts outstanding under the facility. (ii) $1.25 Billion Intercompany Promissory Note On September 1, 2011, Dynegy Holdings issued a $1.25 billion promissory note to its non-debtor subsidiary, Dynegy Gas Investments, LLC, in exchange for DGIN transferring to Dynegy Holdings its rights in an undertaking in the same amount. The Promissory Note bears annual interest at a rate of 4.24%, payable upon the maturity date, September 1, 2027. (iii) Cash Collateralized Letter of Credit Facility On August 5, 2011, Dynegy Holdings and Credit Suisse AG, Cayman Islands Branch, entered into a Letter of Credit Reimbursement and Collateral Agreement for a $26,217,318 cash collateralized Letter of Credit Facility under which Credit Suisse Cayman would maintain five then-existing letters of credit, one of which expired on October 28, 2011. The letters of credit under the LC Facility are issued (i) to various New York state regulatory agencies for certain environmental liabilities related to Dynegy Danskammer and (ii) to backstop certain obligations under the Debtors' workers compensation insurance programs, as well as various surety bonds posted in connection with litigation matters. The LC Facility is collateralized by an account maintained by Bank of New York Mellon holding the sum of $27,003,837, which amount may be withdrawn only in accordance with the LC Agreement. (iv) Credit Agreement On April 2, 2007, Dynegy Holdings, Dynegy Inc. as guarantor, and certain of their direct and indirect subsidiaries entered into a Fifth Amended and Restated Credit Agreement. Under the Credit Agreement, Dynegy Holdings had access to a $1.15 billion revolving credit facility, an $850 million term letter of credit facility, and a $70 million senior secured term loan facility. The obligations under the Credit Agreement were secured by substantially all of the assets of Dynegy Holdings. The obligations under the Credit Agreement were guaranteed by Dynegy Inc. and by certain of their direct and indirect subsidiaries, and secured by substantially all of the assets of the guarantors. Dynegy Holdings repaid all obligations under the Credit Agreement in August 2011. (v) Danskammer and Roseton Leases In May 2001, in connection with the acquisition of the Roseton and Danskammer power generation facilities, Dynegy Danskammer and Dynegy Roseton each entered into a sale-leaseback transaction pertaining to, Danskammer power-generating Units 3 and 4 and Roseton power-generating Units 1 and 2. Owner Lessors purchased the Danskammer Facility and the Roseton Facility, and in each case an interest in the related common facilities. The Owner Lessors are subsidiaries of Resource Capital Management Corporation, an unrelated third party investor and a wholly-owned subsidiary of PSEG Resources Inc. The purchase price with respect to the Danskammer Leased Facility was approximately $300 million. The purchase price with respect to the Roseton Leased Facility was approximately $620 million. To fund their purchases of the Leased Facilities, the Owner Lessors used $138 million in equity funding from certain of the other PSEG Entities, and financed the remaining $800 million of the purchase price and the related transaction expenses through a private offering of pass-through trust certificates, which were sold to qualified institutional buyers. Each of the Owner Lessors simultaneously leased its Leased Facility to Dynegy Danskammer and Dynegy Roseton pursuant to a facility lease. The Danskammer Lease expires May 8, 2031 and the Roseton Lease expires on February 8, 2035. The Lessees must make periodic rent payments on May 8 and November 8 of each year, Dynegy Danskammer through 2030 and Dynegy Roseton through 2034. Any payments by the Lessees or the Guarantor are applied pro rata to the Facility Leases, and neither Facility Lease may be preferred over the other. The next three rent payments due for each Leased Facility, as well as the total rent payments remaining until the end of the Lease terms, are: 11/08/11 through end Facility 11/08/11 05/08/12 11/08/12 of term -------- -------- -------- -------- ----------- Danskammer $3,888,713 $3,888,713 $78,574,842 $102,991,141 Roseton $78,594,126 $51,629,366 $44,623,745 $691,030,741 ----------- ----------- ----------- ------------ Total $82,482,840 $55,518,080 $123,198,587 $794,021,882 Under the sale-leaseback arrangements, the rent payments paid by the Lessees are assigned to the Indenture Trustee for the respective Facility. The Indenture Trustee then pays a portion of that payment to each of two pass-through trusts, the Series A Pass-Through Trust and the Series B Pass Through Trust. The Pass- Through Trusts pay these amounts to the Pass-Through Certificate Holders. Amounts paid in excess of the amounts due to the Pass- Through Certificate Holders are paid by the Indenture Trustee to the Owner Lessor Entity for the respective Leased Facility. The Series A Trust certificates, representing a total obligation of $250 million, bore interest at 7.27%, and had a final distribution on November 8, 2010 and have been defeased. The Series B Trust certificates, representing a total obligation of $550.4 million, bear interest at 7.67%, and have a final distribution on November 8, 2016. The current total outstanding principal of the Series B Trust certificates as of Nov. 7 is $550.4 million. ROAD TO BANKRUPTCY Dynegy Holdings has faced a number of issues, including (i) decreasing liquidity due to declining revenues resulting from sustained low power prices over the past two years, (ii) an over- leveraged balance sheet, and (iii) economically unfavorable leases for the Leased Facilities. According to Kent R. Stephenson, executive vice president of DHI, sustained low power prices over the past two years have had a significant adverse impact on the Companies' business and continue to negatively impact their projected future liquidity. Specifically, Dynegy Holdings' annual consolidated revenue peaked in the year ending December 31, 2008 (FY08) at $3.324 billion, and has since declined to $2.468 billion in FY09 and $2.323 billion in FY10. As further illustration of the steep decline in revenue, for the six-month period ending June 30, 2010, Dynegy Holdings reported consolidated revenues of $1.097 billion, and for the six- month period ending June 30, 2011, Dynegy Holdings reported consolidated revenues of $831 million. In August 2010, Dynegy Inc. struck a deal to be acquired by an affiliate of The Blackstone Group at $4.50 a share or roughly $4.7 billion. That offer was raised to $5.00 a share in November. Through Carl Icahn and investment fund Seneca's efforts, shareholders thumbed down both offers. In December 2010, an affiliate of Icahn commenced a tender offer to purchase all of the outstanding shares of Dynegy common stock for $5.50 per share in cash, or roughly $665 million in the aggregate. In February 2011, Icahn Enterprises L.P. terminated the proposed merger agreement with the Company after it failed to garner the required number of shareholder votes. The Companies also eliminated approximately 135 positions across all functional and geographic areas, resulting in an expected annual savings of approximately $50 million, Mr. Stephenson related. Goldman, Sachs & Co. and Greenhill & Co., LLC, served as financial advisors and Sullivan & Cromwell LLP served as legal counsel to Dynegy on the sale efforts. Houlihan Lokey, according to a report by the Journal, is advising Dynegy creditors. In the past months, a finance and restructuring committee was created to undertake a comprehensive review of Dynegy's various restructuring alternatives, including, without limitation, if appropriate, reviewing and evaluating (i) possible changes to the capital structure of Dynegy, including the issuance, repurchase or prepayment of indebtedness or equity securities and (ii) possible sales of Dynegy's assets. The committee is chaired by Vincent J. Intrieri. Other directors on the committee are Thomas W. Elward, E. Hunter Harrison and Samuel Merksamer. August 2011 Reorganization On August 4, 2011, Dynegy Inc., Dynegy Holdings, and certain of their direct and indirect subsidiaries underwent a reorganization and restructuring to, among other things, facilitate certain credit facilities and maximize their flexibility to address leverage and liquidity issues and to preserve the value of their assets. As part of the reorganization, Dynegy Holdings and its subsidiaries effected transactions to cause: -- substantially all of the coal-fired power generation facilities to be held by Dynegy Midwest Generation, LLC, an indirect subsidiary of Dynegy Holdings; -- substantially all of the gas-fired power generation facilities to be held by Dynegy Power, LLC, an indirect subsidiary of Dynegy Holdings; and -- 100% of the ownership interests of Dynegy Northeast Generation, the entity that indirectly holds the equity interest in the subsidiaries that operate the Roseton and Danskammer power generation facilities, to be held directly by DHI. As a result of the reorganization, GasCo owns 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. CoalCo owns a portfolio of six primarily coal-fired baseload power generation facilities located in the Midwest, totaling 3,132 MW of generating capacity. GasCo and CoalCo are indirect wholly owned subsidiaries of DHI and were designed to be separately financeable. The Company said GasCo and CoalCo are bankruptcy remote in order to accommodate the financings reflected by the credit facilities and to provide the Company with greater flexibility in its efforts to address leverage and liquidity issues and to realize value of its assets. On September 1, 2011, Dynegy Inc. and DGIN, a direct wholly-owned subsidiary of Dynegy Holdings, entered into a Membership Interest Purchase Agreement whereby DGIN sold 100% of the outstanding membership interests of Dynegy Coal HoldCo, LLC, a Delaware limited liability company and wholly-owned subsidiary of DGIN, to Dynegy Inc. Coal HoldCo indirectly owns CoalCo. In exchange for DGIN's membership interests in Coal HoldCo, Dynegy Inc. issued an undertaking to DGIN pursuant to which Dynegy Inc. agreed to make certain specified payments over time which coincide in timing and amount to the payments of principal and interest that Dynegy Holdings is obligated to make under a portion of its Old Notes. DGIN assigned its right to receive payments under the Undertaking Agreement to Dynegy Holdings in exchange for a promissory note in the amount of $1.25 billion that matures in 2027. The Note bears annual interest at a rate of 4.24%, which will be payable upon maturity. As a condition to Dynegy Inc.'s consent to the assignment of the Undertaking Agreement, the agreement was amended and restated to be between Dynegy Holdings and Dynegy Inc. and to provide for the reduction of Dynegy Inc.'s obligations if the outstanding principal amount of any of Dynegy Holdings' $3.5 billion of outstanding notes and debentures is decreased as a result of any exchange offer, tender offer or other purchase or repayment by Dynegy Inc. or its subsidiaries. Mr. Stephenson said that by undertaking the corporate and financial restructuring steps in 2011, Dynegy Holdings and its affiliated entities were able to avoid defaults under their then- current financing arrangements, obtain additional liquidity and flexibility and refinance the obligations outstanding under the Credit Agreement. Exchange Offer In September, Dynegy Inc. offered to pay a combination of cash and its own new 10% Senior Secured Notes due 2018 in exchange for the tender of up to $1.25 billion of Old Notes. Total consideration would range from $400 to $720 per $1,000 principal amount of Old Notes, and the exact combination of cash and New Notes would vary, depending on the series of Old Notes being exchanged and the date of tender. The Exchange Offer, after being extended several times, was terminated on November 3, 2011. Holders of an insufficient amount of Old Notes tendered their notes, and the exchange offer was not consummated. In light of the failed Exchange Offer, Dynegy Holdings is facing a liquidity crisis with approximately $43.8 million of unpaid interest payments due and approximately $278.1 million of interest payments coming due in the next twelve months. In addition, approximately $82.48 million in payments are coming due under the Danskammer and Roseton Facility Leases on November 8, 2011. To address the issue of Dynegy Holdings' over-leveraged balance sheet, the Debtors engaged in discussions with holders of its public bond debt. After extensive negotiations, Dynegy Holdings was able to reach an agreement with holders of approximately $1.4 billion of Dynegy Holdings' outstanding public bond debt on the principal terms of a restructuring effectuated through a Chapter 11 plan of reorganization. As early as March, Dynegy warned shareholders it might be forced into bankruptcy if it is unable to renegotiate the terms of its existing debt. An Unusual Bankruptcy DHI and four subsidiaries delivered separate voluntary petitions for bankruptcy under Chapter 11 of the Bankruptcy Code on Nov. 7, 2011, to the U.S. Bankruptcy Court for the Southern District of New York. Mike Spector of The Wall Street Journal called DHI's bankruptcy "unusual" in a way that could cause losses for bondholders without harming parent-company shareholders that include Carl Icahn and hedge fund Seneca Capital. Dynegy's plan to eliminate billions of dollars owed to bondholders while sparing parent company shareholders flips usual bankruptcy rules on their head, Mr. Spector pointed out. Creditors are usually paid first during bankruptcy proceedings and shareholders often are left with nothing, he noted. But Dynegy has reorganized its corporate structure in a way that protects shareholders from a bankruptcy filing, he added. The Journal noted that the August restructuring left the holding company without a claim on the coal-powered plants and just holding Dynegy's bond debt. The Journal reported on July 29 that Dynegy's restructuring proposal was pushed by Mr. Icahn. The planned reorganization would give Dynegy a better chance "to obtain prospective financing and investment," a Dynegy official told the Journal at that time in an e-mail. The Journal noted in that July report that while shareholders of strong companies, like Liberty Media Corp., have used weak covenants to sell assets out from under bondholders, no one has tried the same tactic with a company as distressed as Dynegy for fear of inviting fraud litigation if it goes bankrupt. "If you buy bonds without protection, sooner or later the piper has to get paid," the Journal said, citing Chris Taylor an energy strategist at FBR Capital. As an architect of the leveraged-buyout craze in the 1980s, and as an activist shareholder in more recent decades, Mr. Icahn has shown himself uniquely willing to play the bond markets in aggressive ways, the Journal noted. In 2009, for instance, he played bondholders of CIT Group against each other in an effort to force a liquidation, even as the $71 billion lender with 5,000 employees struggled to save itself, the report noted. Mr. Icahn is seeking to salvage his investment in Dynegy after he blocked a $4.50-per-share buyout bid by Blackstone Group last year, then had his own $5.50 a share offer rejected. In July, certain holders of obligations with potential recourse rights to DHI initiated legal proceedings seeking to enjoin the parent's restructuring efforts. Plaintiffs in that lawsuit seek to enjoin the proposed reorganization based on purported breaches of guarantees issued by DHI in connection with two sale lease back transactions in which DHI's subsidiaries, Dynegy Roseton, L.L.C. and Dynegy Danskammer, L.L.C., leased certain power-generating facilities located in Newburgh, New York. Restructuring Support Agreement Mr. Stephenson related that the Debtors filed the Chapter 11 Cases to implement the Restructuring Support Agreement and the Term Sheet and address the burdensome lease obligations at Danskammer and Roseton. He said the RSA, together with the Term Sheet, lays a solid foundation for a consensual plan of reorganization to be filed by the Debtors in the Chapter 11 Cases and should significantly facilitate the proceedings and the Debtors' objective of preserving and enhancing value for the benefit of their stakeholders. The pre-arranged plan calls for, among other things, the exchange of all unsecured obligations of Dynegy Holdings, including all of the Old Notes (except for the SKIS), for (a) a $400 million cash payment; (b) $1 billion aggregate principal amount of senior secured notes to be issued by Dynegy Inc. or an additional cash payment of $1 billion, if Dynegy Inc. determines it can obtain the financing elsewhere on more favorable terms; and (c) $2.1 billion of convertible PIK notes to be issued by Dynegy Inc. The RSA contemplates these milestones: December 7, 2011 Negotiation of definitive documents March 15, 2012 Approval of Disclosure Statement explaining a Chapter 11 Plan June 15, 2012 Confirmation of a Chapter 11 Plan August 1, 2012 Plan effective date The parties may terminate the agreement if the definitive documents are not agreed to or if certain milestones to consummation are not achieved, Mr. Stephenson said. A full-text copy of the RSA, dated Nov. 7, 2011, is available for free at http://bankrupt.com/misc/dynegyrsa.pdf The bondholders that consented to the restructuring are: * AEGON USA Investment Management LLC 230 West Monroe, Suite 1450 Chicago, IL 60606 Fax: 800-454-2664 Attn: Jim Schaeffer E-mail: jschaeffer@aegonusa.com * Avenue Investments L.P. Avenue Special Situations Fund VI (Master), LP Avenue International Master LP Avenue CDP-Global Opportunities Fund L.P. c/o Avenue Capital Group 399 Park Avenue, 6th Floor New York, NY 10022 Fax: 212-850-7506 Attn: Stephen Burnazian Matthew Kimble E-mail: sburnazian@avenuecapital.com mkimble@avenuecapital.com * Marjner LDC * Caspian Capital Partners L.P. Caspian Select Credit Master Fund, Ltd. Caspian Alpha Long Credit Fund, L.P. Caspian Solitude Master Fund, L.P. c/o Caspian Capital L.P. 767 Fifth Avenue, 45th Floor New York, NY 10153 Fax: 212-826-6980 Attn: Adam S. Cohen Greg Saiontz E-mail: adam@caspianlp.com greg@caspianlp.com * Franklin Advisers Inc. One Franklin Templeton Investments Fax: 916-463-1902 Attn: Ed Perks E-mail: perksed@frk.com * Venor Capital Master Fund Ltd. Times Square Tower 7 Times Square, Suite 3505 New York, NY 10036 Fax: 212-703-2111 Attn: Harlan Cherniak Michael J. Wartell John Roth E-mail: hcherniak@venorcapital.com mwartell@venorcapital.com jroth@venorcapital.com ----------------------------------------------------------------- [00002] COMPANY'S PRESS RELEASE CONCERNING CHAPTER 11 FILING ----------------------------------------------------------------- * DYNEGY INC. ANNOUNCES RESTRUCTURING AGREEMENT WITH HOLDERS OF OVER $1.4 BILLION OF DYNEGY HOLDINGS, LLC SENIOR NOTES * Dynegy Holdings LLC and Four Subsidiaries File for Relief under Chapter 11 * Business continues as usual for Dynegy and All of its Other Subsidiaries HOUSTON, Texas -- Nov. 7, 2011 -- Dynegy Inc. (Dynegy) (NYSE:DYN) announced that it has reached an agreement with a group of investors holding over $1.4 billion of senior notes issued by Dynegy's direct wholly-owned subsidiary, Dynegy Holdings, LLC (DH), regarding a framework for the consensual restructuring of over $4.0 billion of obligations owed by DH. If this restructuring support agreement is successfully implemented, it will significantly reduce the amount of debt on the Company's consolidated balance sheet. DH and four of its wholly owned subsidiaries -- Dynegy Northeast Generation, Inc., Hudson Power, L.L.C., Dynegy Danskammer, L.L.C. (Danskammer) and Dynegy Roseton, L.L.C. (Roseton) (collectively, the Debtor Entities) --filed voluntary petitions for relief under Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for the Southern District of New York, Poughkeepsie Division in order to implement the agreement and to address the burdensome lease obligations at Roseton and Danskammer. Dynegy and all of its subsidiaries -- other than the Debtor Entities -- including those that own and operate the Company's coal-fired and gas-fired businesses that were separately financed earlier this year and those that provide ancillary services have not filed for Chapter 11. All such entities continue to operate their businesses in the ordinary course without any impact from the limited Chapter 11 filings of DH and its subsidiaries that are involved with the Roseton and Danskammer facilities. Robert C. Flexon, President and Chief Executive Officer of both Dynegy and DH, said, "This marks an important next step in the Company's ongoing effort to restructure its consolidated balance sheet and to position its assets in a fashion that will maximize our operational flexibility. We look forward to working with our stakeholders to complete and implement this restructuring support agreement as quickly and efficiently as possible." Under the restructuring support agreement entered into between Dynegy, DH and holders of over $1.4 billion of DH's senior notes, all unsecured obligations of DH, including $3.4 billion of senior notes, $200 million of subordinated notes, approximately $130 million of accrued interest, and the payments associated with the Roseton and Danskammer leases, will be exchanged for: -- a $400 million cash payment; -- $1.0 billion of new 7-year 11% secured notes to be issued by Dynegy and secured by the equity in the Company's separate coal and gas-fueled generating businesses (or an additional cash payment of $1.0 billion, if the Company determines it can obtain the financing elsewhere on more favorable terms); and -- $2.1 billion of Dynegy's new convertible PIK notes maturing on December 31, 2015. Dynegy will have the right to redeem the notes at varying discounts through the end of 2013, and can make open market purchases of the notes with excess cash from operations. At maturity, the notes would mandatorily convert into 97% of the common equity of Dynegy to the extent not previously redeemed or retired. The equity in the Company's separate coal and gas-fueled generating businesses will remain direct or indirect subsidiaries of Dynegy. The holders of DH's Series B 8.316% Subordinated Capital Income Securities due 2027 would participate in the restructuring as an unsecured note holder, but their recovery would be subject to enforcement of their contractual subordination to the senior unsecured notes. Alternatively, the subordinated note holders will be offered the opportunity to participate, without subordination, in the restructuring as an unsecured note holder at $0.25 for every dollar of claims. The restructuring support agreement contemplates the negotiation of definitive documents by December 7, 2011, and that the transaction will be implemented pursuant to a Chapter 11 plan for DH that must become effective by August 1, 2012. Interest will accrue under the new 11% secured notes and the new convertible PIK notes from the Chapter 11 petition date through the effective date. The parties may terminate the restructuring support agreement if the definitive documents are not agreed-to or if certain other milestones to consummation are not achieved. The Debtor Entities' only operations consist of those at the Roseton and Danskammer facilities, which are the subject of leases that the Debtor Entities are seeking to immediately reject pursuant to a motion filed in the Bankruptcy Court. The agreement is also conditioned on the claims against DH arising from the Roseton and Danskammer leases being fixed by the Bankruptcy Court at an amount not to exceed $300 million. The Debtor Entities are prepared to surrender the Roseton and Danskammer facilities upon entry of an order authorizing the rejection of the leases. However, applicable federal and state regulatory requirements may prevent the Debtors from doing so immediately. Therefore, the Debtor Entities intend to operate the facilities in accordance with prudent operating standards and to the extent necessary to comply with applicable federal and state regulatory requirements until the owners of the leased facilities, which are affiliates of Public Service Enterprise Group, Inc., are authorized to take operational control. The Debtor Entities have also sought customary first-day relief designed to ensure their smooth transition into Chapter 11 administration. Among other things, this relief, if granted by the Bankruptcy Court, will ensure that the Debtor Entities have sufficient cash and liquidity to fund their continuing operations and all administrative obligations incurred during the Chapter 11 process. The Company expects to file an 8-K with the SEC prior to market open on Tuesday, November 8, 2011. This filing will include the restructuring support agreement and the associated term sheet. The Debtor Entities are represented in the Chapter 11 proceedings by Sidley Austin LLP as their reorganization counsel. Dynegy and its other subsidiaries are represented by White & Case LLP, who is also special counsel to the Debtor Entities with respect to the Roseton and Danskammer lease rejection issues. Dynegy was advised by Lazard Freres & Co. LLC and the Debtor Entities' financial advisor is FTI Consulting. ABOUT DYNEGY Dynegy's subsidiaries produce and sell electric energy, capacity and ancillary services in key U.S. markets. The Dynegy Power, LLC power generation portfolio consists of approximately 6,771 megawatts of primarily natural gas-fired intermediate and peaking power generation facilities. The Dynegy Midwest Generation, LLC portfolio consists of approximately 3,132 megawatts of primarily coal-fired baseload power plants. The DNE portfolio consists of approximately 1,693 megawatts from two power plants which are primarily natural gas-fired peaking and baseload coal generation facilities. ----------------------------------------------------------------- [00003] COMPANY'S BALANCE SHEET AS OF JUNE 30, 2011 ----------------------------------------------------------------- Dynegy Inc. (Unaudited) Condensed Consolidated Balance Sheets (In millions) As of June 30, 2011 ASSETS Current Assets Cash and cash equivalents $399 Restricted cash and investments 878 Short-term investments 106 Accounts receivable, net 169 Accounts receivable, affiliates - Inventory 125 Assets from risk-management activities 989 Deferred income taxes 12 Broker margin account 202 Prepayments and other current assets 137 -------- Total Current Assets 3,017 Property, Plant and Equipment 8,700 Accumulated depreciation (2,499) -------- Property, Plant and Equipment, net 6,201 Other Assets Restricted cash and investments 9 Assets from risk-management activities 84 Intangible assets 116 Other long-term assets 436 -------- Total Assets $9,863 ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable $111 Accrued interest 51 Accrued liabilities and other current liabilities 86 Liabilities from risk-management activities 1,043 Notes payable and current portion of long-term debt 1,008 -------- Total Current Liabilities 2,299 Long-term debt 3,852 Long-term debt, affiliates 200 -------- Long-term Debt 4,052 Other Liabilities Liabilities from risk-management activities 123 Deferred income taxes 509 Other long-term liabilities 321 -------- Total Liabilities 7,304 Commitments and Contingencies Stockholders' Equity Common stock 1 Additional paid-in capital 6,071 Subscriptions receivable (2) Accumulated other comprehensive loss (51) Accumulated deficit (3,389) Treasury stock (71) -------- Total Stockholders' Equity 2,559 -------- Total Liabilities and Stockholders' Equity $9,863 ======== ----------------------------------------------------------------- [00004] DYNEGY HOLDINGS' CHAPTER 11 DATABASE ----------------------------------------------------------------- Debtor: Dynegy Holdings, LLC 1000 Louisiana, Suite 5800 Houston, Texas 77002 Tel: 713-507-6400 http://www.dynegy.com/ Bankruptcy Case No.: 11-38111 Debtor-affiliates that filed separate Chapter 11 petitions: Debtor Case No. ------ -------- Dynegy Roseton, L.L.C. 11-38107 Dynegy Danskammer, L.L.C. 11-38108 Hudson Power, L.L.C. 11-38109 Dynegy Northeast Generation, Inc. 11-38110 Chapter 11 Petition Date: Nov. 7, 2011 Bankruptcy Court: U.S. Bankruptcy Court Southern District of New York Debtors' Counsel: Matthew A. Clemente, Esq. Paul S. Caruso, Esq. Brian J. Lohan, Esq. SIDLEY AUSTIN LLP One South Dearborn Street Chicago, IL 60603 Tel: (312) 853-7000 Fax: (312) 853-7036 E-mail: mclemente@sidley.com pcaruso@sidley.com blohan@sidley.com Debtors' Special Litigation Counsel: WHITE & CASE LLP Debtors' Financial Advisor: FTI CONSULTING Debtors' Claims and Noticing Agent: EPIQ BANKRUPTCY SOLUTIONS Dynegy Inc.'s Counsel: Thomas E. Lauria, Esq. WHITE & CASE LLP Southeast Financial Center 200 South Biscayne Boulevard Miami, FL 33131 Fax: (305) 358-5744 E-mail: tlauria@whitecase.com Counsel to Noteholders that signed the RSA: Andrew N. Rosenberg, Esq. Alice Belisle Eaton, Esq. PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP 1285 Avenue of the Americas New York, NY 10019 E-mail: arosenberg@paulweiss.com aeaton@paulweiss.com Total Assets: $13.765 billion as of Sept. 30, 2011 Total Debts: $6.181 billion as of Sept. 30, 2011 The Debtor did not file a list of its largest unsecured creditors together with its petition. The petition was signed by Catherine B. Callaway, executive vice president and general counsel. ----------------------------------------------------------------- [00005] DEBTORS' MOTION FOR JOINT ADMINISTRATION OF CASES ----------------------------------------------------------------- Dynegy Holdings, LLC, and its debtor-affiliates ask the U.S. Bankruptcy Court for the Southern District of New York to enter an order directing the joint administration of their Chapter 11 cases for procedural purposes. Joint administration of the bankruptcy cases is warranted, Sophia P. Mullen, Esq., at Sidley Austin LLP, in New York, asserts. Joint administration, she says, will avoid the preparation, replication, service, and filing, as applicable, of duplicative notices, applications, and orders, thereby saving the Debtors considerable expenses and resources. Ms. Mullen assures the Court that the relief requested will not adversely affect creditors' rights, as the Motion requests only the administrative, not the substantive, consolidation of the estates. In fact, she points out, the reduced costs that will result from the joint administration of these cases will inure to the benefit of all creditors. She adds that the relief requested will relieve the Court of the burden of entering duplicative orders and maintaining duplicative files, as well as simplify supervision of the administrative aspects of the Chapter 11 cases by the Office of the United States Trustee. ----------------------------------------------------------------- [00006] DEBTORS' MOTION TO EXTEND TIME TO FILE SCHEDULES ----------------------------------------------------------------- The Debtors ask the Court to extend the time within which they may file their schedules of assets and liabilities, schedules of current income and expenditures, schedules of executory contracts and unexpired leases, and statements of financial affairs. Pursuant to Section 521 of the Bankruptcy Code and Rule 1007 of the Federal Rules of Bankruptcy Procedure, the Debtors are required to file, within 14 days after the Petition Date, their (i) schedules of assets and liabilities, (ii) schedules of executory contracts and unexpired leases, (iii) schedules of current income and expenditures, and (iv) statements of financial affairs. The Debtors ask that the 14-day period be extended by an additional 31 days, or until Dec. 22, to give the Debtors a total of 45 days from the Petition Date to file their Schedules and Statements. Sophia P. Mullen, Esq., at Sidley Austin LLP, in New York, asserts that cause exists to extend the deadline for the filing of the Schedules and Statements, based on the size and complexity of the Debtors' businesses, the number of the Debtors and the number of potential creditors of the Debtors, and the numerous burdens imposed by the Debtors' reorganization efforts, particularly in the early days of the Chapter 11 cases. The Debtors' management and employees, together with their outside legal and financial advisors, have been working diligently to compile the information necessary for the Schedules and Statements, Ms. Mullen tells the Court. The magnitude of that task, when taken together with the considerable effort involved in preparing for the filing of the Chapter 11 cases, the anticipated burdens of preparing the Debtors' transition into Chapter 11, and the ongoing burdens of operating the Debtors' businesses day-to-day, supports an extension of the deadline set forth in the Bankruptcy Rules for filing the Schedules and Statements, she maintains. *** End of Issue No. 1 ***