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Dynegy Preparing to Refinance $1.36 Billion of its Debt by March

Dynegy Inc., the U.S. independent power producer that exited from bankruptcy protection last year, is preparing to refinance $1.36 billion of debt as early as March to capitalize on low borrowing costs.

That schedule would be disrupted should the impasse between President Barack Obama and Congressional Republicans over raising the U.S. debt ceiling trigger higher interest rates, Chief Executive Officer Robert Flexon said today in a New York interview.

The company currently has $1.7 billion of term loans that expire in August 2016, according to data compiled by Bloomberg.

Dynegy is cutting costs to endure an electricity glut expected to end about 2015, Flexon said. The Houston-based company can reduce the interest rate on its term loans to about 3.25 percentage points more than the London interbank offered rate from the current 7.75 percentage points, Chief Financial Officer Clint Freeland told investors yesterday in New York.

The power producer received a $150 million, 364-day revolving line of credit this week that pays 3.25 percent more than Libor, according to a Jan. 16 regulatory filing.

“We could really benefit from the refinancing,” Flexon said. “If the markets suddenly close on us, then we will wait. The timing of the national debt thing is not ideal for us.”

The company’s $1.1 billion term loan that matures August 2016 was quoted at 104.8 cents on the dollar today, according to prices compiled by Bloomberg.

Dynegy, the owner of natural-gas and coal-fired power plants, put a group of units into bankruptcy in November 2011 after electricity prices tumbled in the wake of the 2008 economic slump. The corporation sought bankruptcy protection in July 2012, and completed its Chapter 11 reorganization in October.

The company is the third-largest U.S. independent power producer behind Calpine Corp. and NRG Energy Inc. Independent power producers sell their output on wholesale markets or under contract to utilities.

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