Illinois Power Generating to use exchange offer to restructure notes

By Angela McDaniels

Tacoma, Wash., Nov. 7 – Dynegy Inc. and subsidiary Illinois Power Generating Co. launched a restructuring transaction for the latter’s outstanding debt, according to a company news release.

The restructuring consists of an out-of-court offer to exchange Illinois Power’s $300 million 7% series H senior notes due 2018, $250 million 6.3% series I senior notes due 2020 and $275 million 7.95% series F senior notes due 2032 for up to $210 million principal amount of new Dynegy seven-year senior notes, 10 million new Dynegy warrants and $130 million of cash and a solicitation of consents to proposed amendments to the indenture governing the notes.

If the conditions to the exchange offer are not satisfied or waived, Illinois Power will instead pursue an in-court restructuring via a pre-packaged plan of reorganization, the votes for which are being solicited concurrently with the exchange offer.

The restructuring reflects the terms of a restructuring support agreement reached with the holders of 69.9% of the notes.

The supporting noteholders agreed, among other things, to tender their notes, deliver consents and vote in favor of the pre-packaged plan of reorganization; to not support any other plan or restructuring transaction or take any other action that is inconsistent with the restructuring; and to not direct the trustee under the indenture governing the notes to take any action inconsistent with their obligations under the support agreement.

Dynegy and Illinois Power may not modify certain terms of the exchange offer, including increasing the minimum participation threshold, or the pre-packaged plan without the consent of some or all of the supporting noteholders.

Exchange offer

In the exchange offer, eligible noteholders who tender their notes by 11:59 p.m. ET on Dec. 6 will receive $254.55 principal amount of new notes, 12.12 warrants and $114.32 of cash per $1,000 principal amount of notes exchanged.

They will also receive accrued interest up to but excluding Dec. 7, which is the earliest potential settlement date for the exchange offer. No additional amounts will be paid in the exchange offer for accrued interest whether or not the exchange offer is extended or the settlement date is later than Dec. 7.

Illinois Power plans to make the interest payment due on Dec. 1 on the 7.95% notes.

The interest rate for the new Dynegy notes will be the lesser of (1) the average of (a) the volume-weighted average yield of Dynegy’s 5 7/8% senior notes due 2023 for the 15 business days prior to the applicable pricing date and (b) the volume-weighted average yield of Dynegy’s 7 5/8% senior notes due 2024 for the 15 business days prior to the applicable pricing date or (2) the volume-weighted average yield of the 7 5/8% notes.

The applicable pricing date means, for Dynegy notes issued in the exchange offer, the date on which the exchange offer begins and, for Dynegy notes issued pursuant to the plan, the effective date of the plan.

Accordingly, if the Dynegy notes are issued through the exchange offer, the interest rate will be 8.48%.

Each of the Dynegy warrants will be exercisable for one share of Dynegy’s common stock at an exercise price of $35.00 per share.

Completion of the exchange offer is subject to the receipt of tenders from eligible holders representing 97% or more of the notes.

If the amendments are approved, restrictive covenants and other provisions of the indenture governing the Illinois Power notes will be amended or eliminated.

Holders who consent to the proposed amendments must tender their notes in the exchange offer and vice versa.

The tender of Illinois Power notes will constitute a release and discharge of certain claims the eligible holder may have against Dynegy, Illinois Power and some of their affiliates and other parties. The plan contains a substantially identical release and discharge of such claims by all holders.

Plan solicitation

If the exchange offer is not consummated for any reason but holders of Illinois Power notes voting to accept the plan constitute a majority in number of the noteholders who have voted on the plan and hold at least 66.7% of the amount of noteholder claims held by noteholders voting on the plan, then, subject to approval by Illinois Power’s board of directors, Illinois Power intends to file for Chapter 11 bankruptcy.

If the Chapter 11 case begins and the pre-packaged plan becomes effective, noteholders who tender their Illinois Power notes (in a process subsequent to the expiration of the exchange offer) and certify that they are eligible holders will receive, in exchange for their claim (the principal amount of their Illinois Power notes plus the accrued interest as of the filing date of the Chapter 11 case), their pro rata share (across all noteholder claims) of $100,693,750 of cash consideration, $210 million of Dynegy notes and 10 million Dynegy warrants.

Noteholders who tender their Illinois Power notes in the process subsequent to the expiration of the exchange offer and who are not eligible holders will receive, in exchange for their claim, an amount in cash equal to their pro rata share of $100,693,750 of cash consideration plus the principal amount of Dynegy notes that such non-eligible holder would receive under the plan if they were an eligible holder plus their pro rata share of $15 million, representing the estimated value of the Dynegy warrants that eligible holders will receive under the plan.

The information agent is D.F. King & Co., Inc. (212 269-5550 or 800 697-6975).

Dynegy is a Houston-based energy company.

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