Bonds of Dynegy Inc. tumbled the most in four months after the junk-rated independent power producer announced plans to fund a $6.25 billion expansion with debt less than a year after emerging from bankruptcy.
Dynegy expects to sell $5 billion of new senior notes to help finance the purchase of power plants from Duke Energy Corp. and private-equity firm Energy Capital Partners, the Houston-based company said in a statement today. The acquisition will almost double its generating capacity.
Its $500 million of 5.875 percent bonds maturing in 2023 fell 2.25 cents, the most since April, to 95.75 cents on the dollar at 9:35 a.m. in New York, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The securities yielded 6.5 percent.
Dynegy sold 10-year notes at a premium last year to entice investors to its first bond issue since an examiner found it fraudulently moved assets out of creditors’ reach in 2011.
Chief Executive Officer Robert Flexon has been rebuilding Dynegy through acquisitions since guiding the firm through bankruptcy. His goal is to profit by squeezing costs and improving prices from plants dropped by regulated utilities that are abandoning more-risky wholesale power.
In addition to the $5 billion of new notes, Dynegy will increase its revolving credit lines by $950 million, the company said. It will also partly fund the acquisition with $1.25 billion in stock and equity-linked securities.
The last of Dynegy’s subsidiaries emerged from bankruptcy protection in November 2013, after a collapse in wholesale electricity prices drove several years of losses.