Reuters: Money: Dynegy settles most disputes over bankrupt unit

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Dynegy settles most disputes over bankrupt unit Apr 4th 2012, 19:48 By Caroline Humer and Jonathan Stempel NEW YORK | Wed Apr 4, 2012 3:48pm EDT NEW YORK (Reuters) - Power producer Dynegy Inc said it has resolved major disputes with creditors that could put one of its units a step closer to emerging from bankruptcy. Dynegy said in a statement that it reached an agreement in principle with creditors holding more than $2.5 billion of claims against Dynegy Holdings LLC, which filed for bankruptcy protection on November 7. The creditors had complained that Dynegy shielded assets from them before putting the unit into bankruptcy. A bankruptcy examiner last month issued a scathing report that bolstered their position, criticizing steps the company took ahead of filing. Some noteholders have not signed onto the agreement and other issues remain for Dynegy, including a U.S. Trustee motion to appoint a Chapter 11 trustee to manage the bankruptcy. Still, the company's CEO predicted the unit will emerge from bankruptcy protection this year. "The parties have taken a pragmatic approach and have the company back on track to put the Dynegy Holdings Chapter 11 case behind it during the third quarter," Robert Flexon, chief executive of Dynegy and Dynegy Holdings, said in a statement. The settlement resolves claims that resulted from a dispute over whether Dynegy acted properly last September 1 in taking coal-powered plant assets, valued at $1.25 billion, from Dynegy Holdings. The court-appointed examiner, Susheel Kirpalani, said in his March 9 report that the move was a "fraudulent transfer" that harmed Dynegy Holdings, and that many directors who approved the swap did not understand it or had conflicts of interest. Dynegy Holdings creditors argue the company protected its equity investors, including billionaire Carl Icahn and Seneca Capital, at their expense. Dynegy Inc's stock has fallen since that report was issued. Shares fell 23 percent on Wednesday, or 12 cents, at 39 cents on the New York Stock Exchange. AGREEMENT RESOLVES CLAIMS Dynegy said that the agreement, which is not final and requires court approval, would resolve legal disputes between the unit and the parent company, which is not under bankruptcy protection. The settlement includes Public Service Enterprise Group Inc, U.S. Bank N.A., and certain holders of notes related to leases on two power plants that are part of the bankruptcy. The agreement also covers Dynegy Inc shareholders. In addition to Icahn and Seneca, shareholders include Franklin Resources Inc. Franklin is also a bondholder. Icahn, Seneca and Franklin Resources were not immediately available for comment. The agreement does not include a group of subordinated noteholders who say it is unfair that shareholders are being paid back before they are. The group, whose notes mature in 2027, supports a motion made last month by the U.S. trustee to appoint a Chapter 11 trustee to take over managing the bankruptcy. U.S. Bankruptcy Judge Cecilia Morris, during a hearing on Wednesday morning, set a May 2 hearing on that motion. The case is in re: Dynegy Holdings LLC et al, U.S. Bankruptcy Court, Southern District of New York, No. 11-38111. (Reporting By Caroline Humer and Jonathan Stempel in New York; Editing by Gerald E. McCormick, Matthew Lewis, John Wallace and Gunna Dickson) Link this Share this Digg this Email Reprints

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