Dynegy gets $1.66 bln financing deal
HOUSTON -- - Dynegy Inc. , a U.S. power company, on Wednesday said a key subsidiary landed a $1.66 billion loan package that forestalled sizable debt payments that were fast coming due.
The new financing for Dynegy Holdings Inc., which replaces $1.3 billion in existing credit facilities set to mature in the next two months, is the latest in a string of recent bank deals struck by U.S. utilities. The industry has struggled with a credit crunch amid a sharp downturn in energy trading activity since the collapse of Enron Corp. On Monday, Reliant Resources Inc. secured a $6.2 billion loan package critical to revitalizing its business and rebuilding its credit. Its banks let pass a March 28 deadline for a $2.9 billion payment, which would have forced Reliant to file for bankruptcy had it come due. CMS Energy Corp. also lined up $850 million in financing on Monday. Houston based Dynegy's new funding, which includes a $1.1 billion revolving credit facility and term loans of $200 million and $360 million, respectively mature in 2005. The package is secured by a substantial amount of Dynegy's assets and stock, and requires the company to pay off its loan with the proceeds of all but one of its planned asset sales. The interest rate Dynegy is expected to pay is the London Interbank Offered Rate plus 4.75 percentage points. "This takes care of us out into 2005 and this marks the day where we push our business plan to center stage and away from liquidity concerns," Dynegy Chief Executive Bruce Williamson told Reuters in an interview. "Now we shift to operating our business and we have to demonstrate that we are going to be that fiscally disciplined company," he said. Williamson said Dynegy finished up its negotiations 26 days before its debt came due, unlike other companies that had to get extensions. Dynegy's shares fell 10 percent after the announcement, closing down 29 cents at $2.59 on the New York Stock Exchange. One analyst said the market will need time to evaluate the company's financial position in light of the new financing. "This deal removes the liquidity risks that may have concerned a lot of investors," said Credit Lyonnais analyst Gordon Howald, who has a "hold" rating on the stock and owns no shares in the company. "What investors need to do now is say 'If the liquidity risk is gone then how do we value Dynegy?'" he said. Dynegy in its statement said the increased interest costs would not affect its previously announced earnings guidance of 8 cents to 15 cents per share or cash flow guidance of $1.2 billion to $1.3 billion for 2003. Favorable natural gas and power prices would offset the interest costs, the company said.
The industry has struggled with a credit crunch amid a sharp downturn in energy trading activity since the collapse of Enron Corp.
On Monday, Reliant Resources Inc. secured a $6.2 billion loan package critical to revitalizing its business and rebuilding its credit. Its banks let pass a March 28 deadline for a $2.9 billion payment, which would have forced Reliant to file for bankruptcy had it come due. CMS Energy Corp. also lined up $850 million in financing on Monday.
Houston based Dynegy's new funding, which includes a $1.1 billion revolving credit facility and term loans of $200 million and $360 million, respectively mature in 2005.
The package is secured by a substantial amount of Dynegy's assets and stock, and requires the company to pay off its loan with the proceeds of all but one of its planned asset sales.
The interest rate Dynegy is expected to pay is the London Interbank Offered Rate plus 4.75 percentage points.
"This takes care of us out into 2005 and this marks the day where we push our business plan to center stage and away from liquidity concerns," Dynegy Chief Executive Bruce Williamson told Reuters in an interview.
"Now we shift to operating our business and we have to demonstrate that we are going to be that fiscally disciplined company," he said.
Williamson said Dynegy finished up its negotiations 26 days before its debt came due, unlike other companies that had to get extensions.
Dynegy's shares fell 10 percent after the announcement, closing down 29 cents at $2.59 on the New York Stock Exchange.
One analyst said the market will need time to evaluate the company's financial position in light of the new financing.
"This deal removes the liquidity risks that may have concerned a lot of investors," said Credit Lyonnais analyst Gordon Howald, who has a "hold" rating on the stock and owns no shares in the company.
"What investors need to do now is say 'If the liquidity risk is gone then how do we value Dynegy?'" he said.
Dynegy in its statement said the increased interest costs would not affect its previously announced earnings guidance of 8 cents to 15 cents per share or cash flow guidance of $1.2 billion to $1.3 billion for 2003. Favorable natural gas and power prices would offset the interest costs, the company said.
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