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Dynegy Said to Seek $1.8 Billion Covenant-Light Financing

March 28 (Bloomberg) -- Dynegy Inc., the U.S. independent power producer that exited from bankruptcy protection last year, is seeking $1.8 billion of loans to refinance debt, according to a person with knowledge of the matter.

Credit Suisse Group AG is leading the transaction, which includes a $500 million term loan B-1 portion that will mature in two years, a $500 million revolving line of credit due in five years and an $800 million term B-2 piece that expires in seven years, said the person, who asked not to be identified because the deal is private.

The transaction “refinances high-cost debt and significantly reduces our annual interest expense,” Laura Hrehor, managing director of investor relations at Dynegy said in a telephone interview. “It simplifies our capital structure and removes an existing ring-fencing structure at our coal and gas plants that will free up cash that’s currently restricted.”

Dynegy, based in Houston, is hosting a lender meeting April 2 at 2 p.m. in New York, the person said. The loans are so-called covenant-light, meaning they will not contain financial maintenance requirements.

The company had about $1.4 billion of long-term debt as of Dec. 31, according to a March 14 regulatory filing.

Dynegy’s $837 million and $517 million of loans outstanding under a credit pact that expires in August 2016 pay interest at 7.75 percentage points more than the London interbank offered rate with a 1.5 percent minimum on the lending benchmark, according to data compiled by Bloomberg. It has a $150 million credit line that expires in January 2014 that pays interest at 3.25 percentage points more than Libor, the data show.

Dynegy Bankruptcy

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.

In a revolving line of credit, money can be borrowed again once it’s repaid; in a term loan it can’t.

To contact the reporter on this story: Krista Giovacco in New York at kgiovacco1@bloomberg.net

To contact the editor responsible for this story: Faris Khan at fkhan33@bloomberg.net

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