Reuters: Bankruptcy News: UPDATE 1-Dynegy says settles disputes over bankrupt unit

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UPDATE 1-Dynegy says settles disputes over bankrupt unit Apr 4th 2012, 15:19 Wed Apr 4, 2012 11:19am EDT April 4 (Reuters) - Dynegy Inc said it has resolved major disputes with creditors who complained it shielded some assets from them before putting a unit into bankruptcy. The settlement could put the unit a step closer to emerging from Chapter 11. Dynegy said it reached an agreement in principle with creditors holding more than $2.5 billion of claims against the Dynegy Holdings LLC unit, which filed for bankruptcy protection on Nov. 7. It said the agreement "contemplates the resolution of all disputes, claims and causes of action" between the unit and the parent company, which is not under bankruptcy protection. The settlement resolves a dispute over whether Dynegy acted properly last Sept. 1 in taking coal-powered plant assets from Dynegy Holdings in exchange for a $1.25 billion undertaking. Court-appointed examiner Susheel Kirpalani found in a March 9 report that the swap was an "actual fraudulent transfer" that harmed Dynegy Holdings, and that many directors who approved the swap did not understand it or had conflicts of interest. The agreement could lead to Dynegy Holdings emerging from bankruptcy by the summer, the independent power producer said in a statement. "The parties have taken a pragmatic approach and have the company back on track to put the Dynegy Holdings Chapter 11 case behind it during the third quarter," Robert Flexon, chief executive of Dynegy and Dynegy Holdings, said in a statement. He said the accord "recognizes the continuing decline in natural gas prices and the associated impact this has on our business" while also addressing the issues raised in the examiner's report. Wednesday's settlement would also give Dynegy Holdings' unsecured creditors common equity representing a 99 percent stake in the reorganized company. A settlement requires final documentation and court approval. Link this Share this Digg this Email Reprints

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