Bloomberg News

Dynegy Reduced to ‘Underperform’ by Macquarie on Bankruptcy Risk

October 06, 2011

Oct. 6 (Bloomberg) -- Dynegy Inc. was downgraded to “underperform” from “neutral” by Macquarie Group Ltd. on the risk that the third-largest independent U.S. power producer may file for bankruptcy.

Macquarie reduced its estimate for Dynegy’s earnings before interest, taxes, depreciation and amortization to $444 million in 2011 from $475 million, according to a report today. Macquarie also cut the company’s 12-month price target to $3 from $5.

Dynegy was sued by Avenue Investments LP over claims the Houston-based company stole assets from holders of $3.6 billion in notes in a restructuring, according to a lawsuit filed Sept. 21 in New York State Supreme Court. While the suit may take months to resolve, Dynegy is facing $220 million in bond interest and lease payments in November and December, Macquarie said.

“In early September, the company launched an exchange offer for $1.25 billion of its bonds,” Macquarie analysts led by Angie Storozynski wrote in the report. “Since then, the Euro credit crisis has moved to the U.S. high-yield market and Dynegy’s bondholders have sued the company for fraudulent conveyance. With November bond interest and lease payments looming, we are downgrading Dynegy to Underperform from Neutral.”

Macquarie also expects Dynegy’s ratio of net debt to equity to increase in 2011 to 180 percent, 197.4 percent in 2012 and 208.5 percent in 2013.

A message left with the company seeking comment wasn’t immediately returned.

Dynegy’s stock fell 9 cents to $3.68 at 9:40 a.m. in New York Stock Exchange composite trading. The shares have fallen 33 percent since the beginning of the year.

NRG Energy Inc. and Calpine Corp. are the two largest U.S. independent power producers.

--Editors: Chapin Wright, Pierre Paulden

To contact the reporter on this story: Richard Bravo in New York at

To contact the editor responsible for this story: Faris Khan at

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