Dynegy files second amended plan to tweak subordinated notes treatment

By Caroline Salls

Pittsburgh, March 7 - Dynegy Holdings, LLC filed a second amended plan of reorganization and related disclosure statement on Tuesday with the U.S. Bankruptcy Court for the Southern District of New York, according to an 8-K filed Wednesday with the Securities and Exchange Commission.

In accordance with an amended and restated restructuring support agreement dated Dec. 26, Dynegy said the second amended plan reflects a modification of the classification of subordinated notes claims.

Under the second amended plan, holders of subordinated notes claims will be paid in full in cash, provided that their rights to receive plan distributions will be subject to subordination provisions under which all plan distributions for these creditors will be automatically distributed to holders of senior notes claims.

However, holders of subordinated notes claims can agree to an alternative treatment under which a subordinated noteholder can elect to reduce the amount of its allowed claim to 35% of the allowed principal amount and receive a share of plan distributions under the general unsecured claims class without subordination, according to the filing.

In the event of an impairment controversy in which the bankruptcy court determines that the subordinated notes class is impaired under the plan, each subordinated noteholder that makes the alternative election will be deemed to have voted to accept the plan in the full amount of its allowed subordinated notes claim.

The previous version of the plan did not include a separate class for the subordinated notes claims.

Plan terms

Creditor treatment will include the following:

• General unsecured creditors, including senior noteholders, will receive a $400 million cash payment, subject to adjustment, plan preferred stock and either plan secured notes or a plan secured notes alternative payment, at Dynegy's discretion.

In addition to the $400 million of cash, these creditors will receive an amount equal to the interest that would have accrued on $1.015 billion of plan secured notes if those notes would have been issued on the bankruptcy filing date.

The unsecured creditors will receive $1.015 billion of new 11% senior secured notes.

Dynegy said the plan is conditioned on a provision that lease guaranty claims are allowed or estimated in an amount not to exceed $300 million.

If the lease guaranty claims are less than $300 million, the total principal amount of plan secured notes will be reduced by an amount to be determined for every dollar the guaranty claims are less than $300 million.

If there are more than $300 million of lease guaranty claims and a condition to occurrence of the effective date is waived, the total amount of notes will be increased by an amount to be determined for every dollar the lease guaranty claims exceeds $300 million.

General unsecured creditors will also receive Dynegy's new convertible preferred stock, which will accrue dividends at an annual rate of 4% through Dec. 31, 2013, 8% on or after Jan. 1, 2014 through Dec. 31, 2014 and 12% thereafter.

The plan preferred stock will not be convertible at the option of the holder, but based on the capital structure of Dynegy expected on the plan effective date, the preferred stock will be convertible into 97% of Dynegy's fully diluted common stock.

Dynegy may redeem the preferred stock at a total price equal to $1.95 billion if redeemed before May 8, 2013, $2 billion if redeemed on or after May 8, 2013 through Dec. 31, 2013 and $2.1 billion if redeemed on or after Jan. 1, 2014 through the Dec. 31, 2014 mandatory conversion date.

However, if Dynegy redeems less than all of the shares of plan preferred stock, the first two amounts will be replaced with $2.1 billion;

• Holders of administrative claims, and priority tax claims will be paid in full in cash;

• Holders of priority claims and convenience claims will be paid in full on the plan distribution date;

• Holders of secured claims will be paid in full on the plan distribution date or when the payment is due;

• Holders of subordinated notes claims will be paid in full in cash, subject to subordination provisions under which their distribution will go to holders of senior notes claims. If they elect the alternative treatment, these creditors will be treated under the general unsecured claims class without subordination; and

• Holders of equity interests will retain all legal, equitable and contractual rights.

Dynegy Holdings LLC and four subsidiaries filed for bankruptcy on Nov. 7. Its Chapter 11 case number is 11-38111.

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