Dynegy foresees loan covenant problems in third or fourth quarter

By Sara Rosenberg

New York, May 9 - Dynegy Inc. believes it will be unable to comply with one of the financial covenants under its synthetic letter-of-credit facility beginning in third or fourth quarter and is looking to amend or replace its credit facility, according to a 10-Q filed with the Securities and Exchange Commission on Monday.

As a result of the possible non-compliance, the company has reclassified $850 million of synthetic letter-of-credit facility borrowings as current debt.

In addition to the synthetic letter-of-credit facility debt, Dynegy has $68 million of term loan B borrowings and $439 million of issued letters of credit.

The company is discussing with lenders the terms under which an amendment to the credit facility or a new credit facility could be implemented, the filing said.

Dynegy went on to explain that it expects the capacity of any amended or new credit facility to be less than the current capacity of $1 billion and to be at a higher cost.

Dynegy is a Houston-based producer and seller of electric energy, capacity and ancillary services.

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