Dynegy Inc. (DYN:US)’s bankruptcy settlement with bondholders, a deal that will hand ownership of the power producer to creditors, was approved by a judge.
U.S. Bankruptcy Judge Cecelia Morris in Poughkeepsie, New York, approved the settlement at a hearing today after dissenting debtholders dropped their opposition and agreed to back the agreement. Dynegy rose 9.5 percent to 53 cents at 3:24 p.m. in New York.
“I do know it was a lot of hard work,” said Morris, who commended the company and creditors on the deal. “I do know it was very contentious.”
Approval of the settlement moves Houston-based Dynegy closer to completing the bankruptcy restructuring of its Dynegy Holdings LLC unit. Dynegy put the subsidiary and other units into bankruptcy last year after reaching a deal with bondholders on a debt restructuring plan.
Dynegy Chief Executive Officer Robert Flexon said in a statement that the court’s approval of the settlement “establishes the foundation” for the remainder of the restructuring. The company plans to complete the bankruptcy in the fall.
“We are pleased that all major creditor groups are now a part of the settlement agreement and look forward to their continued support,” he said.
Under the agreement, Dynegy and Dynegy Holdings will be combined, and unsecured creditors of the holdings unit, including holders of about $3.4 billion in senior notes, will receive 99 percent of the equity of the combined entity, according to the company. The remaining 1 percent plus warrants will go to Dynegy’s parent.
The deal was reached after a court-ordered investigation found that Dynegy moved assets away from creditors for the benefit of shareholders ahead of the bankruptcy filing. The probe found the transfer of coal-fired plants to the parent company was a so-called fraudulent transfer designed to hinder and delay creditors.
Creditors backing the deal include Franklin Advisers Inc., Oaktree Capital Management (OAK:US) and Avenue Capital Group, according to court filings. Holders of junior debt had initially opposed the settlement and then agreed to support it.
The case is In re Dynegy Holdings LLC, 11-38111, U.S. Bankruptcy Court, Southern District of New York (Poughkeepsie).
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