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Dynegy warns of a possible bankruptcy filing

The company blames its troubles on low prices for the electricity it produces. It says it may be unable to make its debt payments by the third or fourth quarter.

March 09, 2011|By Steve Gelsi

New York — Dynegy Inc. warned that it may have to file for bankruptcy this year as it faces debt payments and low prices for the electricity it produces.

Dynegy said it may be unable to make debt payments by the third or fourth quarter of this year, according to a regulatory filing late Tuesday.

"This condition and its impact on Dynegy Inc.'s liquidity raises substantial doubt about Dynegy Inc.'s ability to continue as a going concern," the company said.

Dynegy said it's attempting to amend or replace its existing $1.8-billion credit facility.

"It may be necessary for us to seek protection from creditors under Chapter 11 of the U.S. Bankruptcy Code, or an involuntary petition for bankruptcy may be filed against us," the company said.

Dynegy cited low power prices for sparking the trouble with its business.

To help with the restructuring, the company said it elected four new directors who will search for a new chief executive and serve on its special committee for finance and restructuring.

Elected to the board were Thomas Elward, 63, former chief operating officer at CMS Enterprises, which operates CMS Energy; Hunter Harrison, 65, former CEO of Canadian National Railway Co.; Vincent Intrieri, 54, a former senior managing director at Icahn Capital; and Samuel Merksamer, 30, a former investment analyst at Icahn.

Last year, Dynegy tried to sell itself to Blackstone Group for $4.50 a share. That offer was raised to $5 a share, but shareholders rejected the deal.

Dynegy shareholder Carl Icahn, through Icahn Enterprises, then bid $5.50 a share, but that offer also failed to win enough votes.

Earlier Tuesday, Dynegy said it would not issue a 2011 forecast because of "recent management and board changes that may affect the company's strategic plans."

On Feb. 21, Dynegy named independent board member David Biegler as interim president and chief executive after the resignation of Bruce Williamson.

Dynegy also said Holli Nichols is resigning as chief financial officer March 11.

As of March 3, Dynegy said it had $448 million in cash on hand and $1.4 billion in its debt facility.

Gelsi writes for MarketWatch.com/McClatchy.

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