Dynegy Bonds Jump as Power Producer Puts Units in Bankruptcy

Nov. 8 (Bloomberg) -- Bonds of a Dynegy Inc. unit jumped after the third-largest independent U.S. power producer put a group of businesses into bankruptcy to complete a restructuring.

Dynegy Holdings LLC’s $1.05 billion of 8.375 percent notes due in May 2016 rose 6 cents to 76 cents on the dollar at 9:19 a.m. in New York, according to Trace, the bond price reporting system of the Financial Industry Regulatory Authority. The notes have risen from 58 cents on Oct. 4 and are at the highest level since July.

Dynegy Holdings listed assets of $13.8 billion and debt of $6.18 billion in a petition for Chapter 11 reorganization filed yesterday in U.S. Bankruptcy Court in Poughkeepsie, New York. Four units of the holding company also filed petitions. Dynegy earlier reorganized to create one unit owning natural gas-fired power generation facilities and another that owns coal-fired plants, prompting a lawsuit by debt investors.

“This is a bet on a successful defense in court of an aggressive restructuring,” Brandon Blossman, a Houston-based analyst for Tudor Pickering Holt & Co. wrote today in a note to clients.

The company said in a statement it reached an agreement with investors holding more than $1.4 billion of senior notes to restructure about $4 billion in debt. The transaction would be completed through a court-approved bankruptcy plan that must become effective by Aug. 1, Dynegy said.

To contact the reporters on this story: Tim Catts in New York at tcatts1@bloomberg.net; Jim Polson in New York at jpolson@bloomberg.net

To contact the editor responsible for this story: Pierre Paulden at ppaulden@bloomberg.net