Dynegy enlists familiar advisory duo to tackle Genco restructuring

10 August 2016

by Madalina Iacob

 

Dynegy is working with legal counsel White & Case and financial advisor Lazard to hash out a restructuring plan for ring-fenced subsidiary Illinois Power Generating (Genco), said two sources familiar with the matter.

 

Dynegy created the Genco subsidiary in March 2013 when it acquired a 2,895 MW portfolio of coal fired plants from Ameren Corp, housed at Ameren Genco, while keeping USD 825m in debt then at Genco ringed-fenced and non-recourse to Dynegy, with the exception of a USD 25m guarantee.

 

The White & Case/Lazard duo also represented Dynegy through an eventful Chapter 11 process in the 2011-2012 timeframe. The workout eliminated USD 4bn of pre-petition debt, but along the proceedings were contentious, and an examiner was appointed to review the pre-petition seizing of coal-powered assets by the parent entity from subsidiaries.

 

This time around, Dynegy is attempting to do an “efficient out-of-court” transaction, but if such a deal can’t be reached the company may opt to put the ring-fenced Genco subsidiary through Chapter 11, said the first source. “Dynegy doesn’t get any upside value from managing these plants,” said the first source. “The bondholders will own them or they could sell them to another operator.”

 

In the company’s recent 10-Q from 4 August, management alluded to a slew of options to address Genco’s capital structure, including a debt restructuring at the subsidiary, transitioning ownership of Genco’s assets to Genco bondholders, continued shutdown of uneconomic plants or bankruptcy protection.

 

On their part, Genco bondholders are working with Houlihan Lokey and Wilkkie Farr, as reported by Debtwire on 12 July.

 

Genco has been under pressure from weak commodity and power prices and ongoing required maintenance and environmental expenditures, which continue to drain its liquidity. While Genco has enough liquidity to cover its obligations through the end of 2016, it won’t be able to address a USD 300m unsecured note when it matures in 2018, the sources noted.

 

Genco had USD 88m of liquidity as of 30 June, based on USD 76m of cash and cash equivalents and USD 12m available under its USD 39m revolving credit.

 

A Dynegy spokesperson declined to comment. Calls to Lazard and White & Case were not returned.