Tags: Dynegy Bankruptcy

Dynegy Warns it May Have to File for Bankruptcy

Wednesday, 09 Mar 2011 10:09 AM

Dynegy Inc. may have to seek bankruptcy protection if it can't meet certain earnings requirements by its creditors this year, the power producer said in a regulatory filing.

Dynegy also announced Wednesday that it has elected four new board members, two of whom were nominated by billionaire investor Carl Icahn's company and one by Seneca Capital — one of Dynegy's biggest shareholders. The two groups have wrestled for more control over the company.

A $665 million takeover offer from Icahn, which was opposed by Seneca, expired last month after it failed to get enough support from shareholders. At the same time, Dynegy's chairman and CEO agreed to step down and the company said its directors would be replaced. In announcing its plan, Dynegy said Seneca and Icahn's group would each be offered one seat on the new board. But last week, Icahn said his representatives were in discussions with the company for the appointment of two directors instead of just one.

The company said the new directors will pick the rest of the new Dynegy board and a permanent CEO.

The four directors are E. Hunter Harrison, the former president and CEO of Canadian National Railway Co., who was nominated by Seneca; Vincent J. Intrieri and Samuel Merksamer, who work for Icahn's investment company; and Thomas W. Elward, the president and COO of CMS Enterprises.

"Today's director elections demonstrate the board's commitment to an expeditious and orderly transfer of leadership at Dynegy," said Patricia A. Hammick, Dynegy's new chairman. "The Board has recognized the desire of our stockholders to pursue a different path for the company."

The Houston company has been an acquisition target for months. An offer of $5 per share by private equity firm The Blackstone Group was rejected in November. Icahn then offered $5.50 per share. But Seneca, in opposing that offer, said Dynegy is worth $6 to $7 a share and believes its value could rise to $16 to $18 a share as the economy recovers.

Lower power prices over the last two years have hurt earnings and led to a diminished credit rating, which has made Dynegy's efforts to establish and maintain credit more difficult. The company said it won't likely meet its threshold for earnings before taxes, debt and amortization, particularly in the third and fourth quarters of this year.

For 2010, the company posted a loss of $234 million, or $1.95 per share. That compares with a loss of $1.25 billion, or $7.60 per share in 2009.

Dynegy shares were flat in Wednesday morning trading at $5.79.

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Dynegy Inc. may have to seek bankruptcy protection if it can't meet certain earnings requirements by its creditors this year, the power producer said in a regulatory filing. Dynegy also announced Wednesday that it has elected four new board members, two of whom were...
Dynegy Bankruptcy
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2011-09-09
Wednesday, 09 Mar 2011 10:09 AM
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