Dynegy Disputes Examiner's Fraudulent Transfer Finding
By Jim Polson – Mar 16, 2012 8:02 AM ET
“Dynegy is both troubled and disappointed by the examiner’s report as we continue to believe our restructuring activities benefited all stakeholders and were conducted in the proper manner,” Chief Executive Officer Robert C. Flexon said today in a statement.
The Houston-based company put subsidiary Dynegy Holdings LLC and four of its units into bankruptcy in November after moving ownership of the plants to the parent. The transaction was a fraudulent transfer, examiner Susheel Kirpalani said in a report filed March 9 in U.S. Bankruptcy Court in Poughkeepsie, New York.
Kirpalani improperly assumed that Dynegy Holdings was insolvent at the time of the transfer, Dynegy said today in a court filing. Documents and other evidence also showed that Dynegy didn’t intend to hinder or delay creditors, the company said.
“The examiner’s conclusion of a fraudulent transfer is incorrect,” Dynegy said.
Kirpalani, a lawyer at Quinn Emanuel Urquhart & Sullivan LLP (496224L), was appointed in January to investigate the pre-bankruptcy reorganization. Dynegy put the units into Chapter 11 court protection with a restructuring agreement backed by a group of bondholders including Franklin Advisers Inc. and Avenue Capital Group, according to court documents.
The bankruptcy filing came after bondholders sued the company over the reorganization, saying it moved assets out of their reach to benefit shareholders of the Dynegy parent, including billionaire Carl Icahn.
Dynegy shares have lost 88 percent of their value since shareholders led by Icahn and Seneca Capital rejected a $604.5 million takeover by Blackstone Group LP (BX) in November 2010.
Dynegy is the fourth-largest U.S. independent power producer by revenue, according to data compiled by Bloomberg. Its coal unit owns and operates six plants in Illinois with a combined capacity of 3,132 megawatts, according to the company website. That’s enough to power 2.5 million average U.S. homes, based on Energy Department data.
The case is In re Dynegy Holdings LLC, 11-38111, U.S. Bankruptcy Court, Southern District of New York (Poughkeepsie).
To contact the reporter on this story: Jim Polson in New York at email@example.com