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8-K - 8-K - DYNEGY HOLDINGS, LLCa12-14963_18k.htm
EX-99.3 - EX-99.3 - DYNEGY HOLDINGS, LLCa12-14963_1ex99d3.htm
EX-99.1 - EX-99.1 - DYNEGY HOLDINGS, LLCa12-14963_1ex99d1.htm

Exhibit 99.2

 

THIS IS NOT A SOLICITATION OF ACCEPTANCE OR REJECTION OF THE PLAN.  ACCEPTANCES OR REJECTIONS MAY NOT BE SOLICITED UNTIL A DISCLOSURE STATEMENT HAS BEEN APPROVED BY THE BANKRUPTCY COURT.  THIS DISCLOSURE STATEMENT IS BEING SUBMITTED FOR APPROVAL BUT HAS NOT BEEN APPROVED BY THE BANKRUPTCY COURT.

 

THE PLAN CONTEMPLATES TREATMENT OF CLAIMS AGAINST AND INTERESTS IN DYNEGY INC.  SUCH INCLUSION IS SUBJECT TO DYNEGY INC. FILING A PETITION FOR RELIEF PURSUANT TO CHAPTER 11 OF THE BANKRUPTCY CODE, HOWEVER, DYNEGY INC. HAS NOT FILED FOR RELIEF UNDER CHAPTER 11 OF THE BANKRUPTCY CODE AS OF THE DATE OF FILING OF THIS DISCLOSURE STATEMENT (AND NO DETERMINATION HAS BEEN MADE REGARDING WHETHER OR NOT TO FILE).  IF DYNEGY INC. FILES FOR RELIEF UNDER CHAPTER 11 OF THE BANKRUPTCY CODE AND SEEKS CONFIRMATION OF THE MODIFIED THIRD AMENDED PLAN OF REORGANIZATION DESCRIBED HEREIN AS A DEBTOR, THIS DISCLOSURE STATEMENT SHALL BE MODIFIED TO REFLECT SUCH FILING AND BE A DISCLOSURE STATEMENT WITH RESPECT TO DYNEGY HOLDINGS, LLC AND DYNEGY INC.

 

UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK

 

 

-------------------------------------------------------------

x

 

 

In re:

 

DYNEGY HOLDINGS, LLC, et al.,(1)

 

 

Debtors.

:

:

:

:

:

:

:

 

Chapter 11

 

Case No. 11-38111 (CGM)

 

Jointly Administered

 

-------------------------------------------------------------

x

 

 

DISCLOSURE STATEMENT RELATED TO THE MODIFIED THIRD AMENDED CHAPTER 11 PLAN OF REORGANIZATION FOR DYNEGY HOLDINGS, LLC
PROPOSED BY DYNEGY HOLDINGS, LLC AND DYNEGY INC.

 

Dated: June 18, 2012

 

SIDLEY AUSTIN LLP

James F. Conlan
Jeffrey E. Bjork

Paul S. Caruso
Matthew A. Clemente

787 Seventh Avenue
New York, New York 10019
Telephone: (212) 839-5300

Facsimile:  (212) 839-5599

 

COUNSEL FOR THE DEBTORS AND DEBTORS IN POSSESSION

 

WHITE & CASE LLP

Thomas E Lauria

Gerard H. Uzzi

1155 Avenue of Americas

New York, New York 10036-2787

Telephone:  (212) 819-8200

Facsimile:  (212) 354-8113

 

COUNSEL FOR DYNEGY INC.

 

 


(1)  The Debtors, together with the last four digits of each Debtor’s federal tax identification number, are Dynegy Holdings, LLC (8415); Dynegy Northeast Generation, Inc. (6760); Hudson Power, L.L.C. (NONE); Dynegy Danskammer, L.L.C. (9301); and Dynegy Roseton, L.L.C. (9299).  The location of the Debtors’ corporate headquarters and the service address for Dynegy Holdings, LLC, Dynegy Northeast Generation, Inc. and Hudson Power, L.L.C. is 601 Travis Street, Suite 1400, Houston, Texas 77002.  The location of the service address for Dynegy Roseton, L.L.C. is 992 River Road, Newburgh, New York 12550.  The location of the service address for Dynegy Danskammer, L.L.C. is 994 River Road, Newburgh, New York 12550.

 



 

TABLE OF CONTENTS

 

I. INTRODUCTION

 

1

 

 

 

II. NOTICE TO HOLDERS OF CLAIMS

 

2

 

 

 

III. ADDITIONAL INFORMATION AND INCORPORATION BY REFERENCE

 

5

 

 

 

IV. SUMMARY EXPLANATION OF CHAPTER 11

 

6

 

 

 

 

 

 

 

A.

Overview of Chapter 11

 

6

 

 

 

 

 

 

B.

Plan of Reorganization

 

7

 

 

 

 

 

 

C.

Confirmation of a Plan of Reorganization

 

7

 

 

 

 

 

 

V. OVERVIEW OF THE PLAN

 

8

 

 

 

 

 

 

 

A.

Summary of the Terms of the Plan

 

11

 

 

 

 

 

 

B.

Summary of Treatment Under the Plan

 

11

 

 

 

 

 

 

VI. GENERAL INFORMATION

 

17

 

 

 

 

 

 

 

A.

Overview of the Company

 

17

 

 

 

 

 

 

B.

Overview of the Company’s Business

 

18

 

 

 

 

 

 

 

 

1.

Dynegy Holdings, LLC

 

19

 

 

 

 

 

 

 

 

2.

Dynegy Northeast Generation, Inc.

 

20

 

 

 

 

 

 

 

 

3.

Hudson Power, L.L.C.

 

20

 

 

 

 

 

 

 

 

4.

Dynegy Danskammer, L.L.C.

 

20

 

 

 

 

 

 

 

 

5.

Dynegy Roseton, L.L.C.

 

20

 

 

 

 

 

 

 

C.

Operations of Dynegy Danskammer and Dynegy Roseton

 

20

 

 

 

 

 

 

D.

Events Leading to the Need for Restructuring; the Prepetition Restructurings

 

22

 

 

 

 

 

 

E.

Prepetition Indebtedness and Lease Obligations

 

25

 

 

 

 

 

 

 

 

1.

New Credit Facilities

 

25

 

 

 

 

 

 

 

 

2.

DH Note

 

28

 

ii



 

 

 

3.

Cash Collateralized Letter of Credit Facility

 

28

 

 

 

 

 

 

 

 

4.

Unsecured Debt

 

28

 

 

 

 

 

 

 

 

5.

Bilateral Contingent Letter of Credit Facility

 

29

 

 

 

 

 

 

 

 

6.

Lease Obligations

 

29

 

 

 

 

 

 

 

F.

Material Prepetition Lawsuits

 

31

 

 

 

 

 

 

G.

Putative Securities Class Action Lawsuits

 

32

 

 

 

 

 

 

H.

Intercompany Receivable

 

32

 

 

 

 

 

 

I.

November 2011 Restructuring Support Agreement

 

33

 

 

 

 

 

 

J.

The Debtors’ Employees

 

33

 

 

 

 

 

 

K.

The Company’s Retirement Obligations and Employment Contracts

 

34

 

 

 

 

 

 

L.

Dynegy’s Board of Directors

 

35

 

 

 

 

 

 

M.

Dynegy’s Officers

 

38

 

 

 

 

 

 

N.

DH’s Board of Managers and Officers

 

40

 

 

 

 

 

 

O.

DH’s Independent Manager

 

42

 

 

 

 

 

 

P.

Information on the Plan Proponents

 

44

 

 

 

 

 

 

VII. SELECTED FINANCIAL INFORMATION

 

44

 

 

 

VIII. FINANCIAL PROJECTIONS AND ASSUMPTIONS

 

44

 

 

 

IX. VALUATION

 

47

 

 

 

X. THE REORGANIZATION CASES

 

48

 

 

 

 

 

 

 

A.

Commencement of the Chapter 11 Cases

 

48

 

 

 

 

 

 

B.

First Day Pleadings

 

48

 

 

 

 

 

 

 

 

1.

Joint Administration

 

48

 

 

 

 

 

 

 

 

2.

Case Management

 

48

 

 

 

 

 

 

 

 

3.

Extension of Deadline for Filing Schedules

 

49

 

 

 

 

 

 

 

 

4.

Retention of a Claims and Noticing Agent and Administrative Agent

 

49

 

iii



 

 

 

5.

Limitation of Service

 

49

 

 

 

 

 

 

 

 

6.

Business Operations

 

50

 

 

 

 

 

 

 

C.

Representation of DH

 

58

 

 

 

 

 

 

D.

Formation and Representation of the Creditors’ Committee

 

59

 

 

 

 

 

 

E.

Interim Compensation and Reimbursement of Professional Persons and Committee Members

 

60

 

 

 

 

 

 

F.

Adversary Proceeding Filed by the Lease Trustee

 

60

 

 

 

 

 

 

G.

Motion to Dismiss

 

61

 

 

 

 

 

 

H.

PSEG Settlement

 

62

 

 

 

 

 

 

I.

Appointment of Examiner and Examiner’s Report

 

63

 

 

 

 

 

 

J.

Motions for Appointment of a Chapter 11 Trustee

 

64

 

 

 

 

 

 

K.

Mediation

 

65

 

 

 

 

 

 

L.

Settlement Agreement

 

66

 

 

 

 

 

 

M.

Plan Support Agreement

 

72

 

 

 

 

 

 

N.

Bar Date Order

 

75

 

 

 

 

 

 

O.

Exclusivity

 

75

 

 

 

 

 

 

XI. THE CHAPTER 11 PLAN

 

76

 

 

 

 

 

 

 

A.

Classification and Treatment of Claims and Equity Interests

 

76

 

 

 

 

 

 

 

 

1.

Unclassified Claims

 

76

 

 

 

 

 

 

 

 

2.

Classified Claims and Equity Interests

 

76

 

 

 

 

 

 

 

B.

Identification of Impaired Classes of Claims and Equity Interests

 

77

 

 

 

 

 

 

 

 

1.

Unimpaired Classes of Claims

 

77

 

 

 

 

 

 

 

 

2.

Impaired Classes of Claims and Equity Interests

 

77

 

 

 

 

 

 

 

 

3.

Impairment Controversies

 

77

 

 

 

 

 

 

 

C.

Provisions for Treatment of Classified Claims and Equity Interests Under the Plan

 

77

 

iv



 

 

 

1.

Class 1 — Priority Claims

 

77

 

 

 

 

 

 

 

 

2.

Class 2 — Secured Claims

 

77

 

 

 

 

 

 

 

 

3.

Class 3 — General Unsecured Claims

 

78

 

 

 

 

 

 

 

 

4.

Class 4 — Convenience Claims

 

78

 

 

 

 

 

 

 

 

5.

Class 5 — Securities Claims

 

78

 

 

 

 

 

 

 

 

6.

Class 6 — Equity Interests

 

78

 

 

 

 

 

 

 

D.

Provision for Treatment of Intercompany Claims

 

79

 

 

 

 

 

 

E.

Provisions for Treatment of Unclassified Claims Under the Plan

 

79

 

 

 

 

 

 

 

 

1.

Treatment of Administrative Claims

 

79

 

 

 

 

 

 

 

 

2.

Dynegy Administrative Claim

 

80

 

 

 

 

 

 

 

 

3.

Settling Creditor Professional Fee Claims

 

80

 

 

 

 

 

 

 

 

4.

Treatment of Priority Tax Claims

 

81

 

 

 

 

 

 

 

F.

Acceptance or Rejection of the Plan

 

81

 

 

 

 

 

 

 

 

1.

Class Entitled to Vote

 

81

 

 

 

 

 

 

 

 

2.

Classes of Claims Deemed to Accept the Plan

 

81

 

 

 

 

 

 

 

 

3.

Classes of Claims and Equity Interests Deemed to Reject the Plan

 

81

 

 

 

 

 

 

 

 

4.

Class Acceptance Requirement

 

82

 

 

 

 

 

 

 

G.

Settlements and Compromises

 

82

 

 

 

 

 

 

H.

Means for Implementation of the Plan

 

82

 

 

 

 

 

 

 

 

1.

Operations Between the Confirmation Date and the Effective Date

 

82

 

 

 

 

 

 

 

 

2.

Implementing Transactions on or Prior to the Effective Date

 

82

 

 

 

 

 

 

 

 

3.

Corporate Action

 

83

 

 

 

 

 

 

 

 

4.

Allowance of Senior Notes Claims and Subordinated Notes Claims

 

84

 

 

 

 

 

 

 

 

5.

Transfer of Dynegy Administrative Claim

 

85

 

 

 

 

 

 

 

 

6.

Initial Board of Directors

 

85

 

v



 

 

 

7.

Management and Officers of Reorganized Dynegy

 

86

 

 

 

 

 

 

 

 

8.

Long Term Management Incentive Plan

 

86

 

 

 

 

 

 

 

 

9.

Employment Contracts

 

86

 

 

 

 

 

 

 

 

10.

Compensation and Benefit Programs

 

86

 

 

 

 

 

 

 

 

11.

Termination of Certain Debt Obligations

 

86

 

 

 

 

 

 

 

 

12.

Cancellation of Liens

 

87

 

 

 

 

 

 

 

 

13.

Issuance of Reorganized Dynegy Common Stock and Warrants

 

87

 

 

 

 

 

 

 

 

14.

Registration Rights of Holders of Reorganized Dynegy Common Stock

 

87

 

 

 

 

 

 

 

 

15.

Causes of Action

 

87

 

 

 

 

 

 

 

 

16.

Appointment of the Disbursing Agent

 

88

 

 

 

 

 

 

 

 

17.

[Intentionally Omitted]

 

88

 

 

 

 

 

 

 

 

18.

Investment of Funds Held by the Disbursing Agent; Tax Reporting by the Disbursing Agent

 

88

 

 

 

 

 

 

 

 

19.

Releases by the Surviving Entity, its Estate and Non-Debtor Affiliates, and the Plan Proponents

 

88

 

 

 

 

 

 

 

 

20.

Releases by Creditors and Equity Interest Holders

 

89

 

 

 

 

 

 

 

I.

Plan Distribution Provisions

 

89

 

 

 

 

 

 

 

 

1.

Plan Distributions

 

89

 

 

 

 

 

 

 

 

2.

Timing of Plan Distributions

 

89

 

 

 

 

 

 

 

 

3.

Address for Delivery of Plan Distributions/Unclaimed Plan Distributions

 

89

 

 

 

 

 

 

 

 

4.

De Minimis Plan Distributions

 

90

 

 

 

 

 

 

 

 

5.

Time Bar to Cash Payments

 

90

 

 

 

 

 

 

 

 

6.

Manner of Payment Under the Plan

 

90

 

 

 

 

 

 

 

 

7.

Fractional Plan Distributions

 

91

 

 

 

 

 

 

 

 

8.

Special Distribution Provisions Concerning Senior Notes Claims,

 

 

 

vi



 

 

 

 

Subordinated Notes Claims, and Lease Guaranty Claims

 

91

 

 

 

 

 

 

 

 

9.

Reserve for Contested Claims

 

93

 

 

 

 

 

 

 

 

10.

Surrender and Cancellation of Instruments

 

93

 

 

 

 

 

 

 

J.

Procedures for Resolving and Treating Contested Claims

 

94

 

 

 

 

 

 

 

 

1.

Claim Objection Deadline

 

94

 

 

 

 

 

 

 

 

2.

Prosecution of Contested Claims

 

95

 

 

 

 

 

 

 

 

3.

Settlement of Claims and Causes of Action

 

95

 

 

 

 

 

 

 

 

4.

Entitlement to Plan Distributions Upon Allowance

 

95

 

 

 

 

 

 

 

 

5.

Indenture Trustee as Claim Holder

 

95

 

 

 

 

 

 

 

 

6.

Estimation of Claims

 

95

 

 

 

 

 

 

 

K.

Conditions Precedent to Confirmation of the Plan and the Occurrence of the Effective Date

 

96

 

 

 

 

 

 

 

 

1.

Conditions Precedent to Confirmation

 

96

 

 

 

 

 

 

 

 

2.

Conditions Precedent to the Occurrence of the Effective Date

 

97

 

 

 

 

 

 

 

 

3.

Waiver of Conditions

 

97

 

 

 

 

 

 

 

 

4.

Effect of Non-Occurrence of the Effective Date

 

97

 

 

 

 

 

 

 

L.

The Disbursing Agent

 

98

 

 

 

 

 

 

 

 

1.

Powers and Duties of the Disbursing Agent

 

98

 

 

 

 

 

 

 

 

2.

Plan Distributions

 

98

 

 

 

 

 

 

 

 

3.

Exculpation of the Disbursing Agent

 

98

 

 

 

 

 

 

 

M.

Treatment of Executory Contracts and Unexpired Leases

 

99

 

 

 

 

 

 

 

 

1.

Assumption and Rejection of Executory Contracts and Unexpired Leases

 

99

 

 

 

 

 

 

 

 

2.

Cure

 

100

 

 

 

 

 

 

 

 

3.

Claims Arising from Rejection, Expiration or Termination

 

100

 

 

 

 

 

 

 

N.

Retention of Jurisdiction

 

101

 

vii



 

 

O.

Miscellaneous Provisions

 

103

 

 

 

 

 

 

 

 

1.

Substantial Consummation

 

103

 

 

 

 

 

 

 

 

2.

Confirmation Over Non-Accepting Classes

 

103

 

 

 

 

 

 

 

 

3.

Payment of Statutory Fees

 

103

 

 

 

 

 

 

 

 

4.

Satisfaction of Claims

 

103

 

 

 

 

 

 

 

 

5.

Special Provisions Regarding Insured Claims

 

104

 

 

 

 

 

 

 

 

6.

Third Party Agreements; Subordination

 

104

 

 

 

 

 

 

 

 

7.

Exculpation

 

104

 

 

 

 

 

 

 

 

8.

Discharge

 

105

 

 

 

 

 

 

 

 

9.

Notices

 

105

 

 

 

 

 

 

 

 

10.

Headings

 

105

 

 

 

 

 

 

 

 

11.

Governing Law

 

105

 

 

 

 

 

 

 

 

12.

Expedited Determination

 

106

 

 

 

 

 

 

 

 

13.

Exemption from Transfer Taxes

 

106

 

 

 

 

 

 

 

 

14.

Exemption from Registration

 

106

 

 

 

 

 

 

 

 

15.

Notice of Entry of Confirmation Order and Relevant Dates

 

106

 

 

 

 

 

 

 

 

16.

Interest and Attorneys’ Fees

 

106

 

 

 

 

 

 

 

 

17.

Modification of the Plan

 

106

 

 

 

 

 

 

 

 

18.

Revocation of the Plan

 

107

 

 

 

 

 

 

 

 

19.

Corrective Action

 

108

 

 

 

 

 

 

 

 

20.

Application of Plan Cash Payment

 

108

 

 

 

 

 

 

 

 

21.

Creditors’ Committee

 

108

 

 

 

 

 

 

 

 

22.

Setoff Rights

 

108

 

 

 

 

 

 

 

 

23.

Compliance with Tax Requirements

 

108

 

 

 

 

 

 

 

 

24.

Rates

 

109

 

viii



 

 

 

25.

Injunctions

 

109

 

 

 

 

 

 

 

 

26.

Binding Effect

 

110

 

 

 

 

 

 

 

 

27.

Successors and Assigns

 

110

 

 

 

 

 

 

 

 

28.

Severability

 

111

 

 

 

 

 

 

 

 

29.

No Admissions

 

111

 

 

 

 

 

 

XII. RISK FACTORS

 

111

 

 

 

 

 

 

 

A.

General Considerations

 

112

 

 

 

 

 

 

B.

Certain Bankruptcy Considerations

 

112

 

 

 

 

 

 

C.

Risks Related to the Reorganized Dynegy Common Stock and Warrants

 

114

 

 

 

 

 

 

D.

Risks Related to Business Operations

 

115

 

 

 

 

 

 

E.

Disclosure Statement Disclaimer

 

126

 

 

 

 

 

 

F.

Forward Looking Statements

 

128

 

 

 

 

 

 

XIII. CONFIRMATION AND CONSUMMATION PROCEDURES

 

130

 

 

 

 

 

 

 

A.

Overview

 

130

 

 

 

 

 

 

B.

Confirmation of the Plan

 

132

 

 

 

 

 

 

 

 

1.

Elements of Section 1129 of the Bankruptcy Code

 

132

 

 

 

 

 

 

 

 

2.

Acceptance

 

133

 

 

 

 

 

 

 

 

3.

Standards Applicable to Releases

 

133

 

 

 

 

 

 

 

 

4.

Best Interests of Creditors Test

 

134

 

 

 

 

 

 

 

 

5.

Feasibility

 

135

 

 

 

 

 

 

 

C.

Cramdown

 

135

 

 

 

 

 

 

 

 

1.

No Unfair Discrimination

 

136

 

 

 

 

 

 

 

 

2.

Fair and Equitable Test

 

136

 

 

 

 

 

 

 

D.

Effect of Confirmation

 

136

 

ix



 

XIV. SECURITIES LAW MATTERS

 

137

 

 

 

 

 

 

 

A.

Issuance of Plan Securities

 

137

 

 

 

 

 

 

B.

Subsequent Transfers of Plan Securities

 

137

 

 

 

 

 

 

C.

Delivery of Disclosure Statement

 

140

 

 

 

 

 

 

XV. CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES

 

140

 

 

 

 

 

 

 

A.

General

 

140

 

 

 

 

 

 

B.

Tax Consequences to Holders of Allowed General Unsecured Claims

 

141

 

 

 

 

 

 

 

 

1.

U.S. Holders

 

141

 

 

 

 

 

 

 

 

2.

Non-U.S. Holders

 

144

 

 

 

 

 

 

 

C.

Tax Consequences to Holders of Dynegy Capital Stock Upon Receipt of the Dynegy Administrative Claim

 

145

 

 

 

 

 

 

D.

Tax Consequences to Holders of Priority, Secured, Convenience and Securities Claims

 

146

 

 

 

 

 

 

E.

Tax Consequences to Dynegy, DH and DNE Upon Consummation of the Plan

 

146

 

 

 

 

 

 

 

 

1.

In General

 

146

 

 

 

 

 

 

 

 

2.

Cancellation of Indebtedness

 

147

 

 

 

 

 

 

 

 

3.

Section 382 Limitation on Net Operating Losses

 

148

 

 

 

 

 

 

 

 

4.

Accrued Interest

 

150

 

 

 

 

 

 

 

 

5.

Federal Alternative Minimum Tax

 

150

 

 

 

 

 

 

 

 

6.

Reorganization Treatment of Merger of DH and Dynegy

 

151

 

 

 

 

 

 

 

 

7.

Tax Consequences to Dynegy on the issuance of the Reorganized Dynegy Common Stock and Warrants

 

151

 

 

 

 

 

 

 

F.

Taxation of Reorganized Dynegy Common Stock

 

151

 

 

 

 

 

 

 

 

1.

U.S. Holders

 

151

 

 

 

 

 

 

 

 

2.

Non-U.S. Holders

 

152

 

 

 

 

 

 

 

G.

Taxation of Warrants

 

154

 

x



 

 

 

1.

U.S. Holders

 

154

 

 

 

 

 

 

 

 

2.

Non-U.S. Holders

 

156

 

 

 

 

 

 

 

H.

Information Reporting and Backup Withholding

 

156

 

 

 

 

 

 

XVI. ALTERNATIVES TO CONFIRMATION AND CONSUMMATION OF THE PLAN

 

157

 

 

 

 

 

 

 

A.

Liquidation Under Chapter 7 of the Bankruptcy Code

 

157

 

 

 

 

 

 

B.

Alternative Plans of Reorganization

 

158

 

 

 

 

 

 

XVII. CONCLUSION

 

159

 

xi



 

SCHEDULES AND EXHIBITS

 

List of Defined Terms

 

Schedule 1

 

 

 

* Chapter 11 Plan of Reorganization

 

Exhibit “A”

 

 

 

** Disclosure Statement Order

 

Exhibit “B”

 

 

 

*** Selected Financial Information

 

Exhibit “C”

 

 

 

Projections

 

Exhibit “D”

 

 

 

** Liquidation Analysis

 

Exhibit “E”

 

 

 

Valuation

 

Exhibit “F”

 

 

 

**** Settlement Agreement

 

Exhibit “G”

 


*

Included as Exhibit 99.1 to the Current Report on Form 8-K filed June 19, 2012.

 

 

**

Exhibits not included in the Current Report on Form 8-K filed on June 19, 2012, such Exhibits will be filed with the Bankruptcy Court at a later date not yet determined.

 

 

***

Exhibit C filed as Form 10-Q of Dynegy Inc. on May 10, 2012.

 

 

****

Included as Exhibit 10.1 to the Current Report on Form 8-K filed May 31, 2012.

 

xii


 


 

I.

 

INTRODUCTION

 

All capitalized terms used in this Disclosure Statement but not defined in this Disclosure Statement shall have the meaning ascribed to them in the Plan (see Exhibit “A” to the Plan, Glossary of Defined Terms).  For ease of reference, all terms defined in this Disclosure Statement are listed on Schedule 1 hereto with reference to the page numbers where the terms are defined.  Unless otherwise stated, all references herein to “Schedules” and “Exhibits” are references to schedules and exhibits to this Disclosure Statement, respectively.

 

BY ORDER DATED                             , 2012 (THE “DISCLOSURE STATEMENT ORDER”), THE UNITED STATES BANKRUPTCY COURT FOR THE SOUTHERN DISTRICT OF NEW YORK (THE “BANKRUPTCY COURT”) APPROVED THE DISCLOSURE STATEMENT RELATING TO THE THIRD AMENDED CHAPTER 11 PLAN OF REORGANIZATION FOR DYNEGY HOLDINGS, LLC (“DH”) PROPOSED BY DH AND DYNEGY INC. (“DYNEGY” AND TOGETHER WITH DH, THE “PLAN PROPONENTS”).  THIS DISCLOSURE STATEMENT INCLUDES AND DESCRIBES THE THIRD AMENDED CHAPTER 11 PLAN OF REORGANIZATION FOR DYNEGY HOLDINGS, LLC PROPOSED BY DYNEGY HOLDINGS, LLC AND DYNEGY INC., DATED JUNE 8, 2012 (THE “PLAN”), A COPY OF WHICH IS ATTACHED HERETO AS EXHIBIT “A.”  THE PLAN IS NOT A PLAN FOR DYNEGY NORTHEAST GENERATION, INC., HUDSON POWER, L.L.C., DYNEGY DANSKAMMER, L.L.C., AND DYNEGY ROSETON, L.L.C.

 

PURSUANT TO THE PLAN, CLASS 1 — PRIORITY CLAIMS, CLASS 2 — SECURED CLAIMS, AND CLASS 4 — CONVENIENCE CLAIMS ARE UNIMPAIRED AND ARE THEREFORE DEEMED TO HAVE ACCEPTED THE PLAN.  CLASS 5 — SECURITIES CLAIMS AND CLASS 6 — EQUITY INTERESTS ARE NOT ENTITLED TO DISTRIBUTIONS UNDER THE PLAN AND ARE THEREFORE DEEMED TO HAVE REJECTED THE PLAN.  ACCORDINGLY, EXCEPT AS OTHERWISE DESCRIBED HEREIN, THE PLAN PROPONENTS ARE ONLY SOLICITING ACCEPTANCES OF THE PLAN FROM THE HOLDERS OF CLASS 3 — GENERAL UNSECURED CLAIMS.

 

THE PLAN IS THE PRODUCT OF EXTENSIVE NEGOTIATIONS BETWEEN AND AMONG, AND IS SUPPORTED BY, THE PLAN PROPONENTS, (I) THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS (THE “CREDITORS’ COMMITTEE”), AND ALL OF DH’S MAJOR CREDITOR CONSTITUENCIES WHO REPRESENT APPROXIMATELY $2.6 BILLION OF UNSECURED CLAIMS IN THE CHAPTER 11 CASES, IN PARTICULAR, (II) HOLDERS OF IN EXCESS OF $1.9 BILLION OF THE OUTSTANDING SENIOR NOTES CLAIMS (THE “CONSENTING SENIOR NOTEHOLDERS”), (III) U.S. BANK NATIONAL ASSOCIATION, AS SUCCESSOR INDENTURE TRUSTEE UNDER THE LEASE INDENTURES AND AS SUCCESSOR PASS THROUGH TRUSTEE UNDER THE PASS THROUGH TRUST AGREEMENT (THE “LEASE TRUSTEE”) AND HOLDERS OF APPROXIMATELY $342 MILLION OF THE OUTSTANDING LEASE CERTIFICATES (THE “CONSENTING LEASE CERTIFICATE

 

1



 

HOLDERS”),(1) (IV) DANSKAMMER OL LLC, ROSETON OL LLC, DANSKAMMER OP LLC, ROSETON OP LLC, RESOURCES CAPITAL MANAGEMENT CORPORATION (“RCM”), AND RESOURCES CAPITAL ASSET RECOVERY, L.L.C., SERIES DD AND SERIES DR (COLLECTIVELY, THE “PSEG ENTITIES”),(2) AND (V) HOLDERS OF APPROXIMATELY $170 MILLION OF THE OUTSTANDING SUBORDINATED NOTES CLAIMS (THE “CONSENTING SUBORDINATED NOTEHOLDERS”).(3)

 

VOTING INSTRUCTIONS ARE CONTAINED IN THE DISCLOSURE STATEMENT ORDER, A TRUE AND CORRECT COPY OF WHICH IS ATTACHED HERETO AS EXHIBIT “B.”  IN ADDITION, THE SOLICITATION PACKAGE ACCOMPANYING EACH OF THE BALLOTS CONTAINS APPLICABLE VOTING INSTRUCTIONS.  TO BE COUNTED, YOUR BALLOT MUST BE DULY COMPLETED, EXECUTED AND ACTUALLY RECEIVED BY 5:00 P.M. (PREVAILING EASTERN TIME), ON                                           , 2012 (THE “VOTING DEADLINE”).

 

II.

 

NOTICE TO HOLDERS OF CLAIMS

 

The purpose of this Disclosure Statement is to enable each holder of a Claim that is impaired and entitled to vote under the Plan to make an informed decision in exercising its right to vote on the Plan.  More information on voting on the Plan is contained in this Disclosure Statement in the article entitled “Confirmation and Consummation Procedures.”

 

THIS DISCLOSURE STATEMENT CONTAINS IMPORTANT INFORMATION THAT MAY BEAR UPON YOUR DECISION TO ACCEPT OR REJECT THE PLAN.  PLEASE READ THIS DOCUMENT WITH CARE.

 

PLAN SUMMARIES AND STATEMENTS MADE IN THIS DISCLOSURE STATEMENT ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO THE PLAN AND THE EXHIBITS AND SCHEDULES ANNEXED TO THE PLAN AND THIS DISCLOSURE STATEMENT.  THE STATEMENTS CONTAINED IN THIS

 


(1)  The inclusion of the parties in (I) through (III) is subject to the satisfactory resolution of negotiations regarding a mechanism to address General Unsecured Claims asserted against Dynegy that are not satisfactorily resolved and exceed an agreed upon estimate.  The Plan Proponents and the parties in (I) through (III) anticipate that prior to any hearing to approve the adequacy of the Disclosure Statement there shall be further modifications to the Plan and Disclosure Statement to incorporate the agreed mechanics.

(2)  Pursuant to a settlement among Dynegy, the Debtors and the PSEG Entities, the PSEG Entities will have an allowed Claim against DH in the amount of $110 million.  See “The Reorganization Cases — PSEG Settlement”.

(3)  Pursuant to Section 5.02 of the Subordinated Notes Indenture and Section 3.16 of the NGC Trust Declaration, the beneficial holders of the NGC Trust Capital Income Securities shall be deemed to be the beneficial holders of the Subordinated Notes for purposes of solicitation and voting on the Plan.  Pursuant to the Settlement Agreement, DH agreed to provide the Subordinated Notes Indenture Trustee, for the benefit of holders of Subordinated Notes Claims, with an allowed subordinated unsecured claim in the amount of approximately $222.5 million on account of outstanding principal and interest and, for purposes of treatment of and distribution on such allowed subordinated unsecured claim under the Plan, provide the Subordinated Notes Indenture Trustee with an Allowed General Unsecured Claim in the aggregate amount of $55 million (which claim is not subject to subordination) in full satisfaction of all Subordinated Notes Claims.

 

2



 

DISCLOSURE STATEMENT ARE MADE ONLY AS OF THE DATE HEREOF, AND THERE CAN BE NO ASSURANCE THAT THE STATEMENTS CONTAINED HEREIN WILL BE CORRECT AT ANY TIME AFTER THE DATE HEREOF.  IN THE EVENT OF ANY CONFLICT BETWEEN THE DESCRIPTIONS SET FORTH IN THIS DISCLOSURE STATEMENT AND THE TERMS OF THE PLAN, THE TERMS OF THE PLAN SHALL GOVERN.

 

THIS DISCLOSURE STATEMENT HAS BEEN PREPARED IN ACCORDANCE WITH SECTION 1125 OF THE BANKRUPTCY CODE AND RULE 3016(b) OF THE FEDERAL RULES OF BANKRUPTCY PROCEDURE (THE “BANKRUPTCY RULES”) AND NOT NECESSARILY IN ACCORDANCE WITH FEDERAL OR STATE SECURITIES LAW OR OTHER NON-BANKRUPTCY LAW.  THIS DISCLOSURE STATEMENT HAS NEITHER BEEN APPROVED NOR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION (THE “SEC”), NOR HAS THE SEC PASSED UPON THE ACCURACY OR ADEQUACY OF THE STATEMENTS CONTAINED HEREIN.  PERSONS OR ENTITIES TRADING IN OR OTHERWISE PURCHASING, SELLING OR TRANSFERRING SECURITIES OR CLAIMS OF PLAN PROPONENTS OR ANY OF THEIR AFFILIATES SHOULD EVALUATE THIS DISCLOSURE STATEMENT AND THE PLAN IN LIGHT OF THE PURPOSE FOR WHICH THEY WERE PREPARED.

 

AS TO CONTESTED MATTERS, ADVERSARY PROCEEDINGS AND OTHER ACTIONS OR THREATENED ACTIONS, THIS DISCLOSURE STATEMENT SHALL NOT CONSTITUTE OR BE CONSTRUED AS AN ADMISSION OF ANY FACT OR LIABILITY, STIPULATION, OR WAIVER, BUT RATHER AS A STATEMENT MADE IN SETTLEMENT NEGOTIATIONS SUBJECT TO RULE 408 OF THE FEDERAL RULES OF EVIDENCE AND OTHER SIMILAR RULES.  ACCORDINGLY, THIS DISCLOSURE STATEMENT SHALL NOT BE ADMISSIBLE IN ANY NON-BANKRUPTCY PROCEEDING NOR SHALL IT BE CONSTRUED TO BE CONCLUSIVE ADVICE ON THE TAX, SECURITIES, OR OTHER LEGAL EFFECTS OF THE PLAN AS TO HOLDERS OF CLAIMS AGAINST, OR EQUITY INTERESTS IN, DH, THE SURVIVING ENTITY, OR ANY OF THEIR AFFILIATES.

 

On                       , 2012 after notice and a hearing, the Bankruptcy Court entered the Disclosure Statement Order pursuant to section 1125 of the Bankruptcy Code, finding that this Disclosure Statement contains information of a kind, and in sufficient detail, adequate to enable a hypothetical, reasonable investor typical of the solicited holders of Claims to make an informed judgment with respect to the acceptance or rejection of the Plan.  APPROVAL OF THIS DISCLOSURE STATEMENT BY THE BANKRUPTCY COURT DOES NOT CONSTITUTE A DETERMINATION BY THE BANKRUPTCY COURT OF THE FAIRNESS OR MERITS OF THE PLAN OR OF THE ACCURACY OR COMPLETENESS OF THE INFORMATION CONTAINED IN THIS DISCLOSURE STATEMENT.

 

Each holder of a Claim entitled to vote to accept or reject the Plan should read each of this Disclosure Statement and the Plan in its entirety before voting.  No solicitation of votes to accept or reject the Plan may be made except pursuant to this Disclosure Statement and section 1125 of the Bankruptcy Code.  Except for the Plan Proponents and certain of the professionals

 

3



 

they have retained, no person has been authorized to use or promulgate any information concerning DH, the Surviving Entity, their businesses, or the Plan other than the information contained in this Disclosure Statement, and if other information is given or made, such information may not be relied upon as having been authorized by the Plan Proponents.  YOU SHOULD NOT RELY ON ANY INFORMATION RELATING TO DH, THE SURVIVING ENTITY, THEIR BUSINESSES OR THE PLAN OTHER THAN THAT CONTAINED IN THIS DISCLOSURE STATEMENT AND THE SCHEDULES AND EXHIBITS ANNEXED HERETO.

 

After carefully reviewing this Disclosure Statement, including the attached Schedules and Exhibits, please indicate your acceptance or rejection of the Plan by voting in favor of or against the Plan on the enclosed ballot, and return the completed ballot to the address set forth on the ballot in the enclosed postage prepaid return envelope so that it will be actually received by Epiq Bankruptcy Solutions, LLC (“Epiq” or the “Solicitation Agent” or the “Claims Agent,” as applicable), no later than the Voting Deadline.  All votes to accept or reject the Plan must be cast by using the appropriate ballot.  Votes which are cast in any other manner will not be counted.  All ballots must be actually received by the Solicitation Agent no later than the Voting Deadline:                                , 2012 at 5:00 p.m., Prevailing Eastern Time.  For detailed voting instructions and the name, address and phone number of the person you may contact if you have questions regarding the voting procedures, see the Disclosure Statement Order attached hereto as Exhibit “B.”

 

DO NOT RETURN ANY OTHER DOCUMENTS WITH YOUR BALLOT.

 

You will be bound by the Plan if it is accepted by the requisite holders of Claims and confirmed by the Bankruptcy Court, even if you do not vote to accept the Plan or if you are the holder of a Claim or Equity Interest that is not entitled to vote on the Plan.  The Consenting Senior Noteholders, who hold in the aggregate in excess of $1.9 billion of the approximately $3.37 billion principal amount of Senior Notes Claims, the Consenting Lease Certificate Holders, who hold in the aggregate approximately $342 million of the outstanding Lease Certificates (defined below), the PSEG Entities, who hold an Allowed General Unsecured Claim in the amount of $110 million, and the Consenting Subordinated Noteholders, who hold in the aggregate approximately $170 million of the approximately $206 million principal amount of Subordinated Notes Claims, have each agreed, subject to the terms and conditions contained in the Plan Support Agreement, to vote to accept the Plan.  See “The Reorganization Cases — Plan Support Agreement.”  Class 3 — General Unsecured Claims will have accepted the Plan if the holders of at least two-thirds in amount and more than one-half in number of the Claims entitled to vote and actually voting in such class have accepted the Plan.  See “Confirmation and Consummation Procedures.”  Further information concerning the minimum thresholds required to constitute acceptance of the Plan for the purposes of confirmation is contained in Article XII herein entitled “Confirmation and Consummation Procedures.”

 

Pursuant to section 1128 of the Bankruptcy Code, the Bankruptcy Court has scheduled a hearing to consider confirmation of the Plan (the “Confirmation Hearing”) on                       , 2012, at                .m., Prevailing Eastern Time, before the Honorable Cecelia G. Morris, United States Bankruptcy Judge.  The Bankruptcy Court has directed that objections, if any, to confirmation of the Plan be filed and served on or before                       ,

 

4



 

2012, in the manner described in the Disclosure Statement Order attached hereto as Exhibit “B.”

 

THE PLAN PROPONENTS, THE SUPPORTING CREDITORS (AS DEFINED BELOW), AND THE CREDITORS’ COMMITTEE URGE ALL HOLDERS OF CLASS 3 — GENERAL UNSECURED CLAIMS TO ACCEPT THE PLAN.

 

III.

 

ADDITIONAL INFORMATION AND INCORPORATION BY REFERENCE

 

Dynegy and DH have filed annual and quarterly reports and other information with the SEC.  Holders of Claims entitled to vote on the Plan may read and copy any reports, statements and other information that Dynegy and DH file at the SEC’s public reference room located at 100 F Street, NE, Washington, D.C. 20549 and request copies of the documents, upon payment of a duplicating fee, by writing the Public Reference Section of the SEC.  Please call 1-800-SEC-0330 for further information on the public reference rooms. Dynegy’s and DH’s filings will also be available to the public from commercial document retrieval services and at the web site maintained by the SEC at http://www.sec.gov.  The reports that Dynegy and DH file are also available free of charge on Dynegy’s website at http://www.dynegy.com.  In addition, the Quarterly Report on Form 10-Q of Dynegy for the quarter ended March 31, 2012 is filed herewith on Exhibit “C” — “Selected Financial Information.”  Information on Dynegy’s website does not constitute part of this Disclosure Statement, is not incorporated by reference in this Disclosure Statement and should not be relied upon in connection with making any decision with respect to voting for the Plan.

 

The Plan Proponents “incorporate by reference” information into this Disclosure Statement. This means the Plan Proponents disclose important information to the holders of Claims entitled to vote on the Plan by referring such holders to another document filed separately with the SEC.  The information in the documents incorporated by reference is considered to be part of this Disclosure Statement. The Plan Proponents incorporate by reference the documents listed below filed by Dynegy and DH under section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These documents contain important information about them and their financial condition.

 

·                  Annual Report on Form 10-K, as amended, of Dynegy for the fiscal year ended December 31, 2011;

·                  Quarterly Report on Form 10-Q of Dynegy for the period ended March 31, 2012;

·                  Current Reports on Form 8-K or 8-K/A of Dynegy and DH filed on January 25, 2011, January 26, 2011, February 8, 2011, February 11, 2011, February 14, 2011, February 23, 2011, March 1, 2011, April 11, 2011, June 10, 2011, June 21, 2011, June 28, 2011, July 11, 2011, August 1, 2011, August 26, 2011, September 12, 2011, September 26, 2011, October 14, 2011, November 2, 2011, November 8, 2011, December 2, 2011, December 9, 2011, December 14, 2011, December 20, 2011, January 23, 2012, March 7, 2012, May 2, 2012, and May 31, 2012 (to the extent such reports are filed);

 

5



 

·                  Current Reports on Form 8-K or 8-K/A of Dynegy filed on March 10, 2011, March 22, 2011, May 5, 2011, November 14, 2011, November 17, 2011, November 22, 2011, December 2, 2011, January 9, 2012, February 3, 2012, March 2, 2012, March 8, 2012, April 11, 2012, and May 10, 2012 (to the extent such reports are filed); and

·                  Current Report on Form 8-K of DH filed on September 8, 2011, December 23, 2011 (as amended on February 15, 2012), January 25, 2012, March 19, 2012, March 28, 2012, April 27, 2012, and May 31, 2012 (to the extent such reports are filed).

 

Holders of Claims entitled to vote on the Plan can also obtain from the Plan Proponents, as applicable, without charge, copies of any document incorporated by reference in this Disclosure Statement, excluding exhibits (unless the exhibit is specifically incorporated by reference into the information that this Disclosure Statement incorporates, in which case the Plan Proponents may charge a nominal fee to cover its expenses) by requesting such materials in writing or by telephone from Dynegy at:

 

Dynegy Inc.

Attention: Investor Relations

601 Travis, Suite 1400

Houston, Texas 77002

(713) 507-6400

 

IV.

 

SUMMARY EXPLANATION OF CHAPTER 11

 

A.                                    Overview of Chapter 11

 

Chapter 11 is the principal reorganization chapter of the Bankruptcy Code pursuant to which a debtor may reorganize its business for the benefit of its creditors, equity interest holders, and other parties in interest.  DH and certain of its direct and indirect subsidiaries (the “Debtors”)(4) commenced the Chapter 11 Cases with the filing of petitions for voluntary protection under chapter 11 of the Bankruptcy Code on November 7, 2011.  By order of the Bankruptcy Court, the Chapter 11 Cases have been consolidated for procedural purposes only and are being jointly administered under Case No. 11-38111 (CGM).

 

The commencement of a chapter 11 case creates an estate comprising all of the legal and equitable interests of a debtor as of the date the petition is filed.  Sections 1101, 1107, and 1108 of the Bankruptcy Code provide that a debtor may continue to operate its business and remain in possession of its property as a “debtor in possession” unless the bankruptcy court orders the appointment of a trustee.  In the Chapter 11 Cases, DH and each of the other Debtors remain in possession of their property and continue to operate their businesses as debtors in possession.

 


(4)  The Debtors are Dynegy Holdings, LLC; Dynegy Northeast Generation, Inc.; Hudson Power, L.L.C. Dynegy Danskammer, L.L.C.; and Dynegy Roseton, L.L.C.

 

6



 

The filing of a chapter 11 petition triggers the automatic stay provisions of the Bankruptcy Code.  Section 362 of the Bankruptcy Code provides, among other things, for an automatic stay of all actions against a debtor on account of prepetition claims against it and various other forms of interference with a debtor’s property or business.  Exempted from the automatic stay are, among other things, actions by governmental authorities seeking to exercise police or regulatory powers.  Except as otherwise ordered by the bankruptcy court administering a chapter 11 case, the automatic stay remains in full force and effect until the effective date of a confirmed plan of reorganization.

 

The formulation and ultimate consummation of a plan of reorganization is the principal purpose of a chapter 11 case.  The plan sets forth the means for satisfying claims against and interests in a debtor’s estate.  Unless a trustee is appointed, only a debtor may file a plan during the first 120 days of a chapter 11 case (the “Exclusive Filing Period”), and the debtor will have 180 days to solicit acceptance of such plan (the “Exclusive Solicitation Period”).  However, section 1121(d) of the Bankruptcy Code permits the bankruptcy court to extend or reduce the Exclusive Filing Period and Exclusive Solicitation Period upon a showing of “cause.”  The Exclusive Filing Period and Exclusive Solicitation Period may not be extended beyond 18 months and 20 months, respectively, from the Petition Date.  The Plan was filed within the Exclusive Filing Period.  To the extent that DH believes it may be unable to secure acceptance of the Plan within the Exclusive Solicitation Period, DH may seek to extend that period.  So long as the Exclusive Solicitation Period continues, and so long as no trustee is appointed in the Chapter 11 Case of DH, only DH (or Persons authorized by DH) shall be entitled to file and solicit a plan of reorganization.

 

B.                                    Plan of Reorganization

 

Although referred to simply as a plan of reorganization, a plan may provide for anything from a comprehensive restructuring of a debtor’s business and its related obligations to a simple liquidation of a debtor’s assets.  In either event, upon confirmation of a plan, the plan becomes binding on the debtor and all of its creditors and equity holders, and the prior obligations owed by the debtor to such parties are compromised and exchanged for the obligations specified in the plan.  For a description of key components of the Plan, refer to the article of this Disclosure Statement entitled “Overview of the Plan.”

 

After a plan of reorganization has been filed, the holders of impaired claims against and equity interests in a debtor are permitted to vote to accept or reject the plan.  Before soliciting acceptances of the proposed plan, section 1125 of the Bankruptcy Code requires the debtor to prepare and file a disclosure statement containing adequate information of a kind, and in sufficient detail, to enable a hypothetical reasonable investor to make an informed judgment about the plan.  This Disclosure Statement is presented to holders of Claims to satisfy the requirements of section 1125 of the Bankruptcy Code in connection with the Plan Proponents’ solicitation of votes on the Plan.

 

C.                                   Confirmation of a Plan of Reorganization

 

A bankruptcy court may confirm a plan if it independently determines that the requirements of section 1129 of the Bankruptcy Code have been satisfied.  These requirements are discussed in this Disclosure Statement in the article entitled “Confirmation and

 

7



 

Consummation Procedures.”  The Plan Proponents believe that the Plan satisfies all the applicable requirements of section 1129 of the Bankruptcy Code.

 

Chapter 11 of the Bankruptcy Code does not require that each holder of a claim or interest in a particular class vote in favor of a plan for the bankruptcy court to determine that the class has accepted the plan.  Further information concerning minimum thresholds required to constitute acceptance of the Plan for the purposes of confirmation is contained in this Disclosure Statement in the article entitled “Confirmation and Consummation Procedures.”

 

Classes of claims or equity interests that are not “impaired” under a plan of reorganization are conclusively presumed to have accepted the plan and thus are not entitled to vote.  Thus, acceptances of a plan will generally be solicited only from those persons who hold claims or equity interests in an impaired class.  Under the Plan, Class 1 — Priority Claims, Class 2 — Secured Claims, and Class 4 — Convenience Claims are unimpaired classes and are therefore deemed to have accepted the Plan.  Class 5 — Securities Claims and Class 6 — Equity Interests are not entitled to distributions under the Plan and are therefore deemed to have rejected the Plan.  Accordingly, except as otherwise described herein (and specifically, in the next paragraph), only holders of Class 3 — General Unsecured Claims are entitled to vote on the Plan.

 

If a controversy arises as to whether any Claim or Equity Interest, or any class of Claims or Equity Interests, is impaired under the Plan, the Bankruptcy Court shall determine such controversy at the Confirmation Hearing.  Prior to the determination by the Bankruptcy Court with respect to any such controversy, each holder of a Claim or Equity Interest within the class of Claims or Equity Interests with respect to which such controversy has arisen may be provided a provisional ballot to cast a vote to accept or reject the Plan pursuant to the procedures approved by the Bankruptcy Court in the Disclosure Statement Order.

 

In general, a bankruptcy court also may confirm a plan of reorganization even though fewer than all the classes of impaired claims against and equity interests in a debtor accept such plan.  For a plan of reorganization to be confirmed, despite its rejection by a class of impaired claims or equity interests, the plan must be accepted (to the extent there exists a class of impaired claims) by at least one class of impaired claims (determined without counting the vote of insiders) and the proponent of the plan must show, among other things, that the plan does not “discriminate unfairly” and that the plan is “fair and equitable” with respect to each impaired class of claims or equity interests that has not accepted the plan.  See “Confirmation and Consummation Procedures — Cramdown.”  The Plan has been structured so that it will satisfy the foregoing requirements as to any class of Claims or Equity Interests that is deemed to reject the Plan, and can therefore be confirmed over the deemed rejection of such classes.

 

V.

 

OVERVIEW OF THE PLAN

 

The following is an overview of the Plan.  It is qualified in its entirety by reference to the full text of the Plan, which is attached to this Disclosure Statement as Exhibit “A.”  In addition, for a more detailed description of the terms and provisions of the Plan, refer to the article of this Disclosure Statement entitled “The Chapter 11 Plan.”  As noted above, this plan of reorganization is not for the Debtors in these Chapter 11 Cases other than DH.

 

8



 

The Plan contemplates that on or prior to the Effective Date, DH will be merged with and into Dynegy, with Dynegy being the Surviving Entity (the “Merger”).  The Surviving Entity will then emerge on the Effective Date as Reorganized Dynegy.  As such, the Plan provides for the treatment of Claims against and Equity Interests in the Surviving Entity pursuant to the Merger, as compared to DH and Dynegy separately.(5)

 

The Plan substantially amends the Second Amended Chapter 11 Plan of Reorganization for Dynegy Holdings, LLC Proposed by Dynegy Holdings, LLC and Dynegy Inc. (the “Second Amended Plan”) filed on March 6, 2012.  The Plan, as amended, represents the culmination of extensive negotiations during the Court-ordered mediation which began on March 16, 2012 (the “Mediation”) between the Plan Proponents and all of DH’s major creditor constituencies, including (i) the Consenting Senior Noteholders, (ii) the Consenting Lease Certificate Holders, (iii) the Consenting Subordinated Noteholders and (iv) the PSEG Entities (collectively, the “Supporting Creditors”), as well as the Indenture Trustees and the Creditors’ Committee, which resulted in the Settlement Agreement (as further explained herein).  Importantly, pursuant to and subject to the terms of that certain amended and restated plan support agreement, dated as of May 30, 2012 (which amended and restated the Original Plan Support Agreement, as defined below) (the “Plan Support Agreement”), by and among the Plan Proponents, certain of their Affiliates, and the Supporting Creditors, each of the Supporting Creditors has agreed to support and vote in favor of the Plan.  See “The Reorganization Cases — Plan Support Agreement.”

 

The Plan is premised upon, and incorporates by reference, that certain amended and restated settlement agreement, dated as of May 30, 2012 (the “Settlement Agreement”), by and among Dynegy, DGIN, Dynegy Coal Holdco, LLC, each of the Debtors, the Consenting Senior Noteholders, the Consenting Subordinated Noteholders, the PSEG Entities, the Lease Trustee, and the Subordinated Notes Indenture Trustee(6) (collectively, the “Settlement Parties”), as further described in the section of this Disclosure Statement entitled “The Reorganization Cases — Settlement Agreement,” and which was approved by the Bankruptcy Court on June 1, 2012.  Notably, pursuant to the Settlement Agreement, the Settlement Parties agreed to, among other things, (i) settle certain disputes and mutually release certain Claims and Causes of Action, including those arising in connection with the Prepetition Lawsuits, the Adversary Proceeding (as defined below), and the Intercompany Receivable (as defined herein), (ii) transfer the DCH Membership Interests (as defined below) from Dynegy to DH (directly or indirectly by transfer to DGIN), (iii) in consideration for such transfer and Dynegy’s other covenants and agreements as set forth in the Settlement Agreement and Plan Support Agreement, provide Dynegy with an Allowed Administrative Expense Claim against DH in an unliquidated amount (the “Dynegy Administrative Claim”) and dismiss with prejudice the Prepetition Lawsuits and the Adversary Proceeding, (iv) provide the Subordinated Notes Indenture Trustee, for the benefit of holders of Subordinated Notes Claims, with an Allowed subordinated unsecured claim in

 


(5)  Such treatment of Dynegy Claims and Equity Interests is subject to Dynegy filing a petition for relief pursuant to chapter 11 of the Bankruptcy Code, although no decision has been made at this time as to whether and, if so, when such filing may occur.

(6)  The Subordinated Notes Indentures Trustee has agreed to the terms of the Settlement Agreement solely with respect to certain provisions of the Settlement Agreement as specified therein.

 

9



 

the amount of approximately $222.5 million on account of outstanding principal and interest and, for purposes of treatment of and distribution on such allowed subordinated unsecured claim under the Plan, provide the Subordinated Notes Indenture Trustee with an Allowed General Unsecured Claim in the aggregate amount of $55 million (which claim is not subject to subordination) in full satisfaction of all Subordinated Notes Claims, (v) pursue a sale of the Dynegy Roseton and Dynegy Danskammer(7) power generation facilities, including all of the power generation units and other structures and equipment, the related land and all other assets related to the operation thereof (the “Facilities Sale”), and (vi) allocate a portion of the proceeds of the Facilities Sale to DH for distribution to holders of Allowed General Unsecured Claims (the “Allocated Facilities Sale Proceeds”).

 

In addition to the Allocated Facilities Sale Proceeds, the Plan provides for the distribution to holders of Allowed General Unsecured Claims of their Pro Rata Share of (i) 99% of the shares of common stock, subject to dilution, to be issued or reserved for issuance by Reorganized Dynegy on or after the Effective Date pursuant to the Plan (the “Reorganized Dynegy Common Stock”) and (ii) $200 million in Cash pursuant to the Plan Cash Payment.  The Plan also provides for the distribution to the beneficial holder or holders of the Dynegy Administrative Claim of 1% of the Reorganized Dynegy Common Stock and warrants to purchase, at any time prior to the fifth (5th) anniversary of the Effective Date, an aggregate of 13.5% of the fully-diluted Reorganized Dynegy Common Stock to be outstanding immediately following the Effective Date, for an exercise price determined based on a net equity value of Reorganized Dynegy of $4 billion, and containing customary anti-dilution adjustments (the “Warrants”), which distribution shall be in full satisfaction of the Dynegy Administrative Claim.  It is contemplated that the Dynegy Administrative Claim will be placed in a trust by Dynegy prior to the effective time of the Merger (the “Merger Effective Time”) pursuant to either a motion of the Plan Proponents or the Confirmation Order.

 

The Plan substantially modifies the recoveries and rights of holders of General Unsecured Claims from those set forth in the Second Amended Plan.  Specifically, instead of providing a combination of new notes, preferred stock and cash, the Plan, among other things, provides holders of Allowed General Unsecured Claims with the treatment described in the preceding paragraph, and also will permit certain holders of General Unsecured Claims to participate in the selection of the new board of directors of Reorganized Dynegy.(8)  The Plan Proponents believe that the Plan enables holders of Claims to realize the best recoveries under the present circumstances.  Accordingly, the Plan Proponents urge holders of Claims entitled to vote on the Plan to vote to accept the Plan.  The Supporting Creditors, who hold in the aggregate over $2.6 billion of the estimated approximately $4.2 billion of Class 3 — General Unsecured Claims, have each agreed, subject to the terms and conditions contained in the Plan Support Agreement, to vote to accept the Plan.  See “The Reorganization Cases — Plan Support Agreement.”  Class 3 — General Unsecured Claims will have accepted the Plan if the holders of at least two-thirds in amount and more than one-half in number of the Claims entitled to vote and actually voting in such class have accepted the Plan.  See “Confirmation and Consummation Procedures.”

 


(7)  For the avoidance of doubt, the Plan is not for Dynegy Danskammer, Dynegy Roseton, DNE, and Hudson Power.

(8)  The new board of directors of Reorganized Dynegy shall be selected in a manner to be agreed to among the Majority Consenting Senior Noteholders, the Lease Trustee, and the Creditors’ Committee.

 

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A.                                    Summary of the Terms of the Plan

 

The Plan is built around the following key elements, which are qualified in their entirety by reference to the full text of the Plan.

 

·                                          As noted above, on or prior to the Effective Date, DH will be merged, pursuant to the Merger, with and into Dynegy, with Dynegy being the Surviving Entity.  Such Merger shall be pursuant to documentation that is in form and substance reasonably acceptable to Dynegy, DH, the Creditors’ Committee, the Majority Consenting Senior Noteholders, and the Lease Trustee.  By virtue of the Merger, all Equity Interests in DH issued and outstanding immediately prior to the Merger Effective Time will be cancelled.

 

·                                          The Plan provides for the treatment of Claims against and Equity Interests in the Surviving Entity pursuant to the Merger.  In particular, Class 1 — Priority Claims, Class 2 — Secured Claims, and Class 4 — Convenience Claims are all unimpaired, whereas only Class 5 — Securities Claims and Class 6 — Equity Interests (both of which are not entitled to distributions under the Plan) and Class 3 — General Unsecured Claims are impaired under the Plan.

 

·                                          The Plan provides that each holder of an Allowed General Unsecured Claim against the Surviving Entity shall receive its Pro Rata Share of (a) 99% of the Reorganized Dynegy Common Stock (subject to dilution by any options, restricted stock or other Equity Interests issued as equity compensation to officers, employees or directors of the Surviving Entity or its Affiliates and the Warrants), (b) the Plan Cash Payment (of $200,000,000), and (c) the Allocated Facilities Sale Proceeds (the amount of which is to be determined); provided, however, that with respect to sub-clause (c), the Lease Trustee (on behalf of itself and the Lease Certificate Holders) shall not receive a Pro Rata distribution of any amounts paid pursuant to (c) in its capacity as holder of the Lease Guaranty Claim.  Further, the Plan contemplates that Reorganized Dynegy will enter into a registration rights agreement with holders of an Allowed Claim that receive a distribution pursuant to the Plan of ten percent (10%) or greater of the Reorganized Dynegy Common Stock.

 

·                                          Finally, the Plan provides that on the Effective Date, in full satisfaction of the Dynegy Administrative Claim, the beneficial holder or holders of the Dynegy Administrative Claim shall receive (a) 1% of the Reorganized Dynegy Common Stock (subject to dilution by the Warrants and by any options, restricted stock or other Equity Interests issued as equity compensation to officers, employees or directors of Reorganized Dynegy or its Affiliates) and (b) the Warrants.

 

B.                                    Summary of Treatment Under the Plan

 

The following chart summarizes the treatment of each class of Claims and Equity Interests under the Plan.  The chart also provides an estimation of Allowed Claims in Class 3 — General Unsecured Claims, which is the sole impaired class receiving distributions under the Plan and entitled to vote on the Plan.  Although every reasonable effort was made to be accurate,

 

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this projected range of Allowed Class 3 — General Unsecured Claims is only an estimate as of the date of this Disclosure Statement, and may vary from the final amounts Allowed by the Bankruptcy Court.  Reference should be made to the entire Disclosure Statement and the Plan for a complete description of the classification and treatment of Allowed Claims and Equity Interests under the Plan.

 

CLAIMS NOT CLASSIFIED UNDER THE PLAN

 

Type of Claims(9)

 

Treatment of Claims

 

 

 

Administrative Claims

 

 

On the Plan Distribution Date, each holder of an Allowed Administrative Claim, other than the Dynegy Administrative Claim and the Settling Creditor Professional Fee Claims, shall receive (i) the amount of such holder’s Allowed Administrative Claim in one Cash payment or (ii) such other treatment as may be agreed upon in writing by (A) the Plan Proponents or, if after the Effective Date, the Disbursing Agent and (B) such holder; provided, that such treatment shall not provide a recovery to such holder having a present value as of the Effective Date in excess of such holder’s Allowed Administrative Claim; and provided, further, that an Administrative Claim representing a liability incurred in the ordinary course of business of DH (or Dynegy or the Surviving Entity, as applicable) may be paid at the Plan Proponents’ (or, if after the Effective Date, the Disbursing Agent’s) election in the ordinary course of business.

 

 

 

Dynegy Administrative Claim

 

On the Effective Date, in full satisfaction of the Dynegy Administrative Claim, the beneficial holder or holders of the Dynegy Administrative Claim shall receive its (or their) Pro Rata Share of (i) the Settlement Stock Pool, and (ii) the Warrants.

 

 

 

Settling Creditor Professional Fee Claims

 

The Settling Creditor Professional Fee Claims constitute Allowed Administrative Claims and shall be paid in full, in Cash on the Effective Date; provided, that the fees and expenses comprising such Claims (other than those incurred pursuant to an engagement letter disclosed to DH, Dynegy and

 


(9) Administrative Claims and Priority Tax Claims are treated in accordance with sections 1129(a)(9)(A) and 1129(a)(9)(C) of the Bankruptcy Code, respectively.  Such Claims are not designated as classes of Claims for the purposes of the Plan or for the purposes of sections 1123, 1124, 1125, 1126 or 1129 of the Bankruptcy Code.

 

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the Creditors’ Committee) shall be submitted to DH, the Office of the United States Trustee and the Creditors’ Committee in the form of customary summary invoices of the relevant law firms and institutions not less than fifteen (15) Business Days prior to the Effective Date (including a good faith estimate for fees and expenses anticipated to be incurred through the Effective Date) for review in accordance with the standards set forth in the Settlement Agreement.  In the event of any dispute with respect to such submitted costs and expenses, the undisputed portion shall be paid by DH, the Surviving Entity, or Reorganized Dynegy on the Effective Date, and the disputed portion shall not be paid on the Effective Date but shall be reserved pending resolution of such dispute, either by mutual agreement or, in the event such dispute cannot be resolved by agreement, by order of the Bankruptcy Court; provided, further, that fees and expenses incurred pursuant to an engagement letter shall be subject to the standard of review and conditions set forth in the applicable engagement letter.

 

 

 

Priority Tax Claims

 

 

At the election of the Plan Proponents or, if after the Effective Date, the Disbursing Agent (and with the reasonable consent of the Creditors’ Committee), each holder of an Allowed Priority Tax Claim shall receive in full satisfaction of such Allowed Priority Tax Claim: (a) payments in Cash, in regular installments over a period ending not later than five (5) years after the Petition Date, of a total value, as of the Effective Date, equal to the Allowed amount of such Claim and paid in a manner that is not less favorable than the treatment provided to the most favored nonpriority unsecured Claims under the Plan (exclusive of Convenience Claims); or (b) a lesser amount in one Cash payment as may be agreed upon in writing by the Plan Proponents or, if after the Effective Date, the Disbursing Agent, and such holder; or (c) such other treatment as may be agreed upon in writing by the Plan Proponents or, if after the Effective Date, the Disbursing Agent, and such holder; provided, that such agreed upon treatment may not provide such holder with a recovery having a present value as of the Effective Date that is greater than the amount of such

 

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holder’s Allowed Priority Tax Claim.  The Confirmation Order shall enjoin any holder of an Allowed Priority Tax Claim from commencing or continuing any action or proceeding against any responsible person, officer or manager of DH, Dynegy, the Surviving Entity or Reorganized Dynegy that otherwise would be liable to such holder for payment of a Priority Tax Claim so long as DH, Dynegy, the Surviving Entity or Reorganized Dynegy is in compliance with Section 5.5 of the Plan (as described herein).  So long as the holder of an Allowed Priority Tax Claim is enjoined from commencing or continuing any action or proceeding against any responsible person, officer or manager of DH, Dynegy, the Surviving Entity or Reorganized Dynegy pursuant to Section 5.5 of the Plan or pursuant to the Confirmation Order, the statute of limitations for commencing or continuing any such action or proceeding shall be tolled.

 

CLAIMS AND EQUITY INTERESTS CLASSIFIED UNDER THE PLAN

 

Class of Claims or Equity Interests

 

Treatment of Class of Claims or Equity Interests

 

 

 

Class 1 — Priority Claims

 

Unimpaired

 

Each holder of an Allowed Priority Claim shall be left unimpaired under the Plan and, pursuant to section 1124 of the Bankruptcy Code, all of the legal, equitable and contractual rights to which such Claim entitles such holder in respect of such Claim shall be left unaltered, and except to the extent that a holder of an Allowed Priority Claim and the Plan Proponents (or, if after the Effective Date,  the Disbursing Agent) agree on less favorable treatment for such holder, such Allowed Priority Claim (including any amounts to which such holder is entitled pursuant to section 1124(2) of the Bankruptcy Code) shall be paid in full in accordance with such rights on the Plan Distribution Date.

 

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Class 2 — Secured Claims

 

Unimpaired

 

Each holder of an Allowed Secured Claim shall be left unimpaired under the Plan and, pursuant to section 1124 of the Bankruptcy Code, all of the legal, equitable and contractual rights to which such Claim entitles such holder in respect of such Claim shall be left unaltered, and except to the extent that a holder of an Allowed Secured Claim and the Plan Proponents (or, if after the Effective Date, the Disbursing Agent) agree on less favorable treatment for such holder, such Allowed Secured Claim (including any amounts to which such holder is entitled pursuant to section 1124(2) of the Bankruptcy Code) shall be paid in full in accordance with such rights on the Plan Distribution Date or, if after the Plan Distribution Date, as and when such payment is due.

 

 

 

Class 3 — General Unsecured Claims

 

Approximate Allowed Senior Notes Claims:(10)

 

·      2012 Notes – $90 million

 

·      2015 Notes – $811 million

 

·      2016 Notes – $1,092 million

 

·      2018 Notes – $181 million

 

·      2019 Notes – $1,137 million

 

·      2026 Notes – $176 million

 

Allowed TIA Claim: $110 million(11)

 

Allowed Lease Guaranty Claims: $540 million(12)

 

Allowed Subordinated Notes Claims: $55 million(13)

 

Except to the extent that a holder of an Allowed General Unsecured Claim and the Plan Proponents (or, if after the Effective Date, the Disbursing Agent) agree on less favorable treatment for such holder, each holder of an Allowed General Unsecured Claim shall receive, on the Plan Distribution Date, its Pro Rata Share of (i) the Class 3 Stock Pool, (ii) the Allocated Facilities Sale Proceeds, and (iii) the Plan Cash Payment; provided, however, that with respect to sub-clause (ii), the Lease Trustee (on behalf of itself and the Lease Certificate Holders) shall not receive a Pro Rata distribution of any portion of the Allocated Facilities Sale Proceeds in its capacity as holder of the Lease Guaranty Claim.

 


(10) The Allowed amounts of the various issuances of Senior Notes Claims are set forth in Exhibit “B” to the Plan.

(11) Pursuant to the Amended Stipulated Rejection Order (defined below), the TIA Claim was Allowed as a General Unsecured Claim in the amount of $110,000,000.

(12) Pursuant to the Settlement Agreement, the Lease Guaranty Claims were Allowed against DH as a General Unsecured Claims in the aggregate amount of $540,000,000.  As described herein, the total recovery for the Lease Trustee’s claims against the Debtors (including DH) is capped at approximately $571,000,000.

 

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Estimated Allowed Other General Unsecured Claims:  $0-30 million

 

Estimated Total Allowed General Unsecured Claims: $4.2 billion(14)

 

Impaired

 

 

 


(13)  Pursuant to the Settlement Agreement, DH agreed to provide the Subordinated Notes Indenture Trustee, for the benefit of holders of Subordinated Notes Claims, with an Allowed subordinated unsecured claim in the amount of approximately $222.5 million on account of outstanding principal and interest and, for purposes of treatment of and distribution on such Allowed subordinated unsecured claim under the Plan, provide the Subordinated Notes Indenture Trustee with an Allowed General Unsecured Claim in the aggregate amount of $55 million (which claim is not subject to subordination) in full satisfaction of all Subordinated Notes Claims.

(14)  The Bar Date for claims to be filed in these cases was February 24, 2012.  As of the Bar Date, the Claims Agent received approximately 65 timely filed Proofs of Claim for General Unsecured Claims against DH that totaled, along with the scheduled General Unsecured Claims against DH, approximately $6.5 billion; however, this figure includes the $1.25 billion DH Note which was cancelled pursuant to the Settlement Agreement on the Settlement Effective Date (discussed below).  DH has evaluated the Proofs of Claim and believes that many of the Claims filed are invalid, untimely, duplicative and/or overstated.  DH therefore anticipates that it will file objections to many of the Proofs of Claim.  In addition, as discussed herein, in the event Dynegy files a petition with this Court for chapter 11 relief (although Dynegy has not yet filed and no filing has been authorized by its Board), the Plan also provides for the treatment of Claims against and Equity Interests in Dynegy, as the Surviving Entity of the Merger, including the treatment of certain Allowed Claims as Allowed General Unsecured Claims in Class 3.  Although Dynegy has not filed for chapter 11 at this time and, therefore, no bar date has yet been set with respect to potential Claims against Dynegy, Dynegy expects that it has few creditors holding Claims that could be classified as Class 3 – General Unsecured Claims.  As such, Dynegy expects that the aggregate amount of its unsecured claims will have no material impact on the ultimate outcome of voting or the treatment in Class 3 – General Unsecured Claims under the Plan. Dynegy estimates that any such Allowed Class 3 – General Unsecured Claims are not likely to exceed $[ ].  The pro rata recovery for holders of Allowed Class 3 – General Unsecured Claims will necessarily depend on the aggregate amount of such Allowed Claims, but pursuant to the low and high ends of the enterprise valuation prepared by Lazard and attached as Exhibit “F” to this Disclosure Statement, the percentage recovery range based on an estimated aggregate Allowed amount of Class 3 – General Unsecured Claims of approximately $4.2 billion, is between 59% and 89%.

 

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Class 4 — Convenience Claims

 

Estimated Allowed Convenience Claims: <$500,000

 

 

 

Unimpaired

 

Each holder of an Allowed Convenience Claim shall be left unimpaired under the Plan, and, pursuant to section 1124 of the Bankruptcy Code, all of the legal, equitable and contractual rights to which such Claim entitles such holder in respect of such Claim shall be left unaltered, and such Allowed Convenience Claim (including any amounts to which such holder is entitled pursuant to section 1124(2) of the Bankruptcy Code) shall be paid in full in accordance with such rights on the Plan Distribution Date or, if after the Plan Distribution Date, as and when such payment is due.

Class 5 — Securities Claims

 

Impaired

 

No holder of a Securities Claim shall be entitled to any distribution under the Plan on account of such Securities Claim, which claims have the same respective priority as the Equity Interests in Class 6 pursuant to section 510(b) of the Bankruptcy Code.

Class 6 — Equity Interests

 

Impaired

 

All Equity Interests in the Surviving Entity shall be extinguished, cancelled and discharged on the Effective Date, and the holders of Equity Interests in the Surviving Entity shall not be entitled to any monetary distributions or other property on account of such Equity Interests under the Plan. All Equity Interests in DH shall be cancelled pursuant to the Merger upon the Merger Effective Time, and are not classified in Class 6 or any other class under the Plan.

 

VI.

 

GENERAL INFORMATION

 

The discussion below briefly describes Dynegy, DH, as well as the other Debtors, and certain of their non-Debtor subsidiaries and affiliates (collectively, the “Company”) and their businesses as they exist as of the date of this Disclosure Statement.  Please note that while all of the Debtors filed voluntary petitions for relief under chapter 11 of the Bankruptcy Code and their cases are being jointly administered under Case No. 11-38111 (CGM), the Plan is not a plan of reorganization for the other Debtors in these Chapter 11 Cases other than DH.

 

A.                                    Overview of the Company

 

Dynegy and DH are holding companies and conduct substantially all of their business operations through their subsidiaries.  Their primary business is the production and sale of electric energy, capacity and ancillary services from their fleet of sixteen operating power plants in six states totaling approximately 11,600 megawatts of generating capacity.  The organizational chart below illustrates the structure of the Company as of the date of this Disclosure Statement.  Please note that this organizational chart does not show all legal entities in the corporate

 

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structure, nor does it show the organizational structure of the Company that will be in place following the Merger.(15)

 

 

B.                                    Overview of the Company’s Business

 

Dynegy and DH are holding companies that conduct their business operations through their direct and indirect subsidiaries, including the other Debtors.  The primary business of the Company is the production and sale of electric energy, capacity and ancillary services from a fleet of 10 operating power plants in six states totaling approximately 8,464 megawatts (“MW”) of generating capacity.  The other Debtors’ direct operations consist of only two of these plants — at Dynegy Danskammer and Dynegy Roseton — which have a combined generating capacity of 1,693 MW.

 

Wholesale electricity customers will, for reliability reasons and to meet regulatory requirements, contract for rights to capacity from generating units.  Ancillary services are the products of a power generation facility that support the transmission grid operation, follow real-

 


(15)  The amounts of the Senior Notes and Subordinated Notes provided in the organizational chart below are the principal amounts of such Notes only, and do not reflect accrued interest as of the Petition Date.

 

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time changes in load, and provide emergency reserves for major changes to the balance of generation and load.

 

The operating subsidiaries of Dynegy and DH sell these products individually or in combination to customers under short-, medium- and long-term contractual agreements or tariffs.  These customers include regional transmission organizations and independent system operators, integrated utilities, municipalities, electric cooperatives, transmission and distribution utilities, industrial customers, power marketers, financial participants such as banks and hedge funds, other power generators, and commercial end-users.  All products are sold on a wholesale basis for various lengths of time from hourly to multi-year transactions.  Some customers, such as municipalities or integrated utilities, purchase products for resale in order to serve their retail, commercial and industrial customers.  Other customers, such as some power marketers, may buy products and related services to serve their own wholesale or retail customers or as a hedge against power sales they have made.

 

DH and the other Debtors rely on certain non-Debtor subsidiaries of DH for essential functions.  For example, Dynegy Administrative Services Company, a Delaware corporation, generally manages the segregated cash management systems for DH and its subsidiaries.  Dynegy Power Marketing, LLC, a Texas limited liability company (“DPM”), performs various functions, including marketing power and capacity, coordinating the power output of the various generation facilities, and providing fuel management services.  The Debtors also have service agreements with other non-Debtor affiliates, under which the Debtors provide compensation to such affiliates for their services.

 

The following is a description of each of DH and the other Debtors.

 

1.                                       Dynegy Holdings, LLC

 

DH began operations as Natural Gas Clearinghouse (“Clearinghouse”) in 1985.  From the inception of its operations until 1990, Clearinghouse’s activities related primarily to natural gas marketing.  Starting in 1990, Clearinghouse began expanding its core business operations through acquisitions and strategic alliances resulting in the formation of a midstream energy asset business, and it established energy marketing operations in both Canada and the United Kingdom.  In 1994, Clearinghouse initiated electric power marketing operations in order to take advantage of opportunities created by the deregulation of the domestic electric power industry, and in March 1995, Clearinghouse merged with Trident NGL Holding, Inc., a fully integrated natural gas liquids company, with the surviving entity named NGC Corporation (“NGC”).  Approximately one year later, NGC completed a strategic combination with Chevron U.S.A. Inc. and certain of its affiliates (collectively, “Chevron”) whereby substantially all of Chevron’s midstream assets merged with NGC.  In 1998, NGC changed its name to Dynegy Inc. to reflect its evolution from a natural gas marketing company to an energy services company capable of meeting the growing demands and diverse challenges of the dynamic energy market of the 21st century.  In early 2000, Dynegy Inc. acquired Illinova Corporation, and as part of this acquisition, Dynegy Inc. changed its name to Dynegy Holdings Inc. and became a wholly-owned subsidiary of a new holding company, now referred to as Dynegy Inc.  On September 1, 2011, DH changed its corporate form from a Delaware corporation to a Delaware limited liability company pursuant to the General Corporation Law of the State of Delaware.

 

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As further described above, DH is a holding company that conducts its business operations through its direct and indirect subsidiaries, including the other Debtors.  The primary business of DH and its operating subsidiaries is the production and sale of electric energy, capacity and ancillary services from a fleet of 10 operating power plants in six states totaling approximately 8,464 MW of generating capacity.

 

2.                                       Dynegy Northeast Generation, Inc.

 

DNE is a Delaware corporation and wholly-owned subsidiary of DH that holds 100% of the equity interests in Hudson Power, L.L.C. and provides administrative support and employs personnel for the operation of the Danskammer and Roseton power generation facilities.

 

3.                                       Hudson Power, L.L.C.

 

Hudson Power, L.L.C. (“Hudson Power”) is a Delaware limited liability company that has no operations and holds 100% of the equity interests in Dynegy Danskammer and Dynegy Roseton.

 

4.                                       Dynegy Danskammer, L.L.C.

 

Dynegy Danskammer, L.L.C. (“Dynegy Danskammer”), a Delaware limited liability company, owns the 185-acre site in Newburgh, New York on which the Danskammer power generation facility is located, adjacent to the Roseton site.  There are six (6) units at Dynegy Danskammer’s power generation facility — four of which are owned by Dynegy Danskammer, and two of which are leased by Dynegy Danskammer from Danskammer OL LLC (the “Danskammer Owner Lessor”), an indirect subsidiary of Public Service Enterprise Group, Inc. (“PSEG”), an unaffiliated entity.  A further description of Dynegy Danskammer’s operations is set forth below.

 

5.                                       Dynegy Roseton, L.L.C.

 

Dynegy Roseton, L.L.C. (“Dynegy Roseton”), a Delaware limited liability company, owns the 195-acre site in Newburgh, New York, on which the Roseton power generation facility is located, adjacent to the Danskammer site.  Dynegy Roseton operates the two (2) units at the power generation facility.  It leases these units from Roseton OL LLC (the “Roseton Owner Lessor” and together with the Danskammer Owner Lessor, the “Owner Lessors”), an indirect subsidiary of PSEG.  A further description of Dynegy Roseton’s operations is set forth below.

 

C.                                    Operations of Dynegy Danskammer and Dynegy Roseton

 

Dynegy Danskammer owns units 1, 2, 5, and 6 at the Danskammer power generation facility.  Units 1 and 2 are “peakers” (power plants that generally run only during periods of peak demand for electricity) with a net capacity of 129.7 MW.  They use natural gas and fuel oil as their primary fuels.  Units 5 and 6 are emergency diesel generators with net capacities of 2.5 MW each and currently are not in operation and are not connected to the power grid.  Dynegy Danskammer leases units 3 and 4 (collectively, the “Danskammer Facility”) from the Danskammer Owner Lessor; these units are “baseload” power plants (power plants that generally

 

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run at all times, providing the amount of electricity generally needed to meet customer demand) with a net capacity of 373.4 MW.  They use coal and natural gas as their primary fuels.

 

Dynegy Roseton leases both units at the Roseton power generation facility (collectively, the “Roseton Facility” and together with the Danskammer Facility, the “Leased Facilities”) from the Roseton Owner Lessor; these units are “peakers” with a net capacity of 1,200 MW.  They use natural gas and fuel oil as their primary fuels.

 

The Leased Facilities are connected to the Northeast Power Coordinating Council, one of the 10 regional reliability councils that form the North American Electric Reliability Council.  They compete primarily in the New York wholesale market, operated and maintained by the New York Independent System Operator (the “NYISO”), although the power generated at the Danskammer and Roseton facilities may be sold into PJM, as well as to New England, Quebec, and Ontario.

 

The operations of Dynegy Danskammer and Dynegy Roseton are subject to extensive federal, state, and local statutes, rules and regulations, including the Federal Power Act (the “FPA”), the Comprehensive Environmental Response, Compensation and Liability Act, the Superfund Amendments and Reauthorization Act, the Resource Conservation and Recovery Act, and the Occupational Safety and Health Act.  Their regulators include the Federal Energy Regulatory Commission (“FERC”), the New York Public Service Commission (the “NYPSC”), and the Environmental Protection Agency (the “EPA”).

 

Dynegy Danskammer and Dynegy Roseton have no employees; the workers at the facility are employed by DNE.(16)  Their major liabilities consist of semiannual rent payments to the Owner Lessors under the Lease Documents (defined below).  In addition to the land on which the Roseton and Danskammer power plants are located and the power plant units or leasehold interests therein, as applicable, their assets consist of various capital spare parts, emissions credits, emissions control and monitoring equipment, fuel inventory, fuel supply equipment, communications equipment and licenses, vehicles, a locomotive, administrative buildings, and similar items.  Substantially all of Dynegy Danskammer’s and Dynegy Roseton’s revenues are derived from sales to the NYISO through DPM, a non-Debtor affiliate.  Because none of the Debtors are currently authorized NYISO market participants/customers,(17) DPM, an energy marketer that is a registered NYISO customer and market participant and is authorized to sell energy, capacity and certain ancillary services at market-based rates, provides energy management services to Dynegy Roseton and Dynegy Danskammer.  Among other things, DPM sells the energy generated by the Leased Facilities into the NYISO markets.

 

The Debtors’ obligations under the Danskammer Lease Documents and the Roseton Lease Documents (together, the “Lease Documents”) are significantly burdensome and would impair the Debtors’ ability to reorganize absent rejection.  Accordingly, the Debtors determined that the rejection of the Lease Documents was an appropriate exercise of their business judgment.  On the Petition Date, the Debtors filed a Motion Pursuant to section 365 of the

 


(16)  One employee, the Managing Director of Plant operations at the Danskammer and Roseton facilities is employed by Dynegy Operating Company, a non-Debtor Affiliate.

(17)  Each of Dynegy Roseton and Dynegy Danskammer filed new customer applications that are currently pending with NYISO.

 

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Bankruptcy Code and Bankruptcy Rule 6006 for Entry of an Order Authorizing the Debtors to Reject the Lease Documents [Docket No. 5] (the “Motion to Reject”).  On December 20, 2011, the Bankruptcy Court entered a stipulated order approving the rejection of the Lease Documents [Docket No. 227] (the “Stipulated Rejection Order”), which was thereafter amended, and such amended stipulated order was entered by the Bankruptcy Court on December 28, 2011 [Docket No. 273] (the “Amended Stipulated Rejection Order” and together with the Stipulated Rejection Order, the “Rejection Orders”).  Further information concerning the Motion to Reject and the Rejection Orders is contained in this Disclosure Statement in the article entitled “The Reorganization Cases.”

 

In addition, as set forth in the Settlement Agreement (and as further explained in this Disclosure Statement in the article entitled “The Reorganization Cases — Settlement Agreement”), the Debtors have agreed to pursue the Facilities Sale.

 

D.                                    Events Leading to the Need for Restructuring; the Prepetition Restructurings

 

A combination of dwindling liquidity due to declining revenues (resulting from lower prices over the past two years) and unprofitable leases at the Roseton Facility and Danskammer Facility have adversely impacted the Company’s financial performance.  Overall, sustained low power prices over the past two years have had a significant adverse impact on the Debtors’ business and continue to negatively impact their projected future liquidity.  Specifically, DH’s annual consolidated revenue peaked in the year ending December 31, 2008 at $3.324 billion, and has since declined to $2.468 billion in the year ending December 31, 2009 and $2.323 billion in the year ending December 31, 2010.  As further illustration of the steep decline in revenue, for the nine month period ending September 30, 2010, DH reported consolidated revenues of $1.872 billion, and for the nine month period ending September 30, 2011, DH reported consolidated revenues of $1.347 billion.

 

In an attempt to address these issues, the Company implemented a number of cost-cutting initiatives, including, among other things, in February 2011, eliminating approximately 135 positions across all functional and geographic areas, resulting in an expected annual savings of approximately $50 million.  While helpful, the cost-cutting initiatives were not enough, and as DH’s ratio of secured debt to EBITDA increased, its ability to draw on the revolving credit facility under the Credit Agreement (as defined below) became more problematic.  Further strain on DH’s liquidity came in March as S&P downgraded DH to “CC” and placed it on CreditWatch with negative implications.  Similarly, on March 28, 2011, Moody’s downgraded DH from “Caa1” to “Caa3”, representing Moody’s fourth downgrade of DH since the beginning of 2009 (when it was rated “B1”).  These downgrades caused various counterparties to demand additional collateral in support of certain of the Debtors’ operational agreements.  The Company uses a significant portion of its capital resources in the form of cash, short-term investments, and letters of credit to satisfy counterparty collateral demands.  These counterparty collateral demands reflect the Company’s non-investment grade credit ratings and counterparties’ views of DH’s and its subsidiaries’ financial condition and ability to satisfy their performance obligations, as well as commodity prices and other factors.

 

Overall, the Company faced a number of difficult circumstances in the spring of 2011.  Dynegy’s entire senior management team had departed.  See “General Information — Dynegy’s

 

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Board of Directors.”  In addition, DH faced a potential near-term covenant default under its then-existing senior secured credit facility, which jeopardized the Company’s ability to continue as a going concern, and projected cash losses over the next four years exceeded $1.5 billion, which losses were attributable largely to the unprofitable leases at the Roseton Facility and Danskammer Facility. Further, the Company’s organizational structure impaired value by constraining operational, financial and transactional flexibility and exposed all of the Company’s assets, operations, and employees to the risk and costs of bankruptcy if a default occurred under any of DH’s debt instruments.

 

A great deal of effort was exerted to identify and assess potential alternative courses of action that could be pursued to maximize the Company’s flexibility to address leverage and liquidity issues and to preserve the value of their assets.  No alternative was free from risk and many of the alternatives posed an unacceptable risk of value destruction.  Faced with these difficult circumstances, and without any certain solution to be able to rely on, the Company moved cautiously down a path that involved (i) an operational reorganization of the Company to eliminate the regional organizational structure and instead create separate coal-fired power generation and gas-fueled power generation units, to enhance operational, financial and transactional flexibility; (ii) a refinancing of DH’s senior secured credit facility into a separate facility at each of the coal-fired power generation and gas-fueled power generation units, which removed the risk of an imminent liquidity crisis that could have been caused by a debt default, further promoted flexibility and made it possible to shield substantially all of the Company’s operations from bankruptcy; and (iii) positioned the Company to engage in one or more exchange offers that would provide bondholders with greater security and better terms in exchange for a discount.  Along the way, the plan underwent numerous modifications.

 

One of the primary goals of the Prepetition Restructurings was to facilitate obtaining new financing for Dynegy GasCo and Dynegy CoalCo at a lower cost than otherwise would have been available but for the Prepetition Restructurings.  In connection therewith, the Company’s regional organizational structure was eliminated and separate coal-fired power generation and gas-fueled power generation units were created whereby (i) substantially all of Dynegy’s indirect wholly-owned coal-fired power generation facilities were held by Dynegy Midwest Generation, LLC (“Dynegy CoalCo”), (ii) substantially all of Dynegy’s indirect wholly-owned natural gas-fueled power generation facilities were held by Dynegy Power, LLC (“Dynegy GasCo”), and (iii) all of Dynegy’s indirect ownership interests in DNE, the entity that indirectly holds the equity interests in Dynegy Roseton and Dynegy Danskammer, were held by DH.  Following such reorganization, Dynegy’s operations were reorganized into three segments: a gas segment, a coal segment and an “other” segment consisting of the remaining assets, including primarily DNE and the leasehold interests in the facilities owned by Dynegy Roseton and Dynegy Danskammer.

 

Dynegy GasCo and Dynegy CoalCo were designed to be separately financeable and bankruptcy remote.  This resulted in the credit rating agencies assigning a better credit rating to Dynegy GasCo and, consequently, a lower cost of raising capital to fund the entities’ operations.  On August 5, 2011, Dynegy GasCo and its parent Dynegy Gas Investments Holdings, LLC, each a non-Debtor subsidiary of DH, entered into a $1.1 billion, five-year senior secured term loan facility (as further described below, the “GasCo Credit Facility”).  The same day, Dynegy CoalCo and its parent Dynegy Coal Investments Holdings, LLC, each a non-Debtor subsidiary of

 

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DH, entered into a $600 million, five-year senior secured term loan facility (as further described below, the “CoalCo Credit Facility” and together with the GasCo Credit Facility, the “New Credit Facilities”).  Proceeds from these New Credit Facilities were used, among other things, to (a) repay an intercompany obligation of a Dynegy GasCo subsidiary to DH, which ultimately enabled DH to repay its outstanding indebtedness under DH’s existing senior secured credit agreement (the “Credit Agreement”), and (b) fund additional cash to the balance sheets of Dynegy GasCo and Dynegy CoalCo to be used for general working capital and general corporate purposes.  Refinancing Dynegy’s Credit Agreement into the separate CoalCo Credit Facility and GasCo Credit Facility removed the risk of an imminent liquidity crisis that could have resulted from a debt default under the Credit Agreement, promoted flexibility and made it possible to shield substantially all of Dynegy’s operations from bankruptcy.

 

On September 1, 2011, Dynegy and DGIN entered into a Membership Interest Purchase Agreement (the “Membership Interest Purchase Agreement”) whereby DGIN sold 100% of the outstanding membership interests (the “DCH Membership Interests”) of Dynegy Coal Holdco, LLC, a Delaware limited liability company and wholly owned subsidiary of DGIN, to Dynegy. In exchange for Dynegy Coal Holdco, LLC, Dynegy issued an undertaking to make certain specified payments over time which coincided in timing and amount to the payments of principal and interest that DH is obligated to make under a portion of certain of its Senior Notes (the “Undertaking Agreement”).  The Undertaking Agreement did not provide any rights or obligations with respect to any outstanding DH notes or debentures, including the notes and debentures due in 2019 and 2026.  The Membership Interest Purchase Agreement contained a purchase price adjustment mechanism, pursuant to which, in the event of a dispute within two years of the date of the Membership Interest Purchase Agreement as to the equity value of Dynegy Coal Holdco, upon written notice of such valuation dispute by either DGIN or Dynegy, such equity value was to be determined by final arbitration.  In connection with any such arbitration, in the event the final equity value of Dynegy Coal Holdco, LLC was determined by the arbitrator to be greater than $1.25 billion, Dynegy would be required to provide DGIN with consideration equal to the difference in value, and if determined by the arbitrator to be less than $1.25 billion, DGIN would be required to provide Dynegy with the difference in value.

 

DGIN assigned its right to receive payments under the Undertaking Agreement to DH in exchange for a promissory note (the “DH Note”) in the amount of $1.25 billion that matured in 2027 (the “Assignment”).  The DH Note bore annual interest at a rate of 4.24%, which was payable upon maturity.  As a condition to Dynegy’s consent to the Assignment, the Undertaking Agreement was amended and restated to be between DH and Dynegy and to provide for the reduction of Dynegy’s obligations if the outstanding principal amount of the Senior Notes decreased as a result of any exchange offer, tender offer or other purchase or repayment by Dynegy or its subsidiaries (other than DH and its subsidiaries, unless Dynegy guaranteed the debt securities of DH or such subsidiary in connection with such exchange offer, tender offer or other purchase or repayment), provided that such principal amount was retired, cancelled or otherwise forgiven.

 

Pursuant to the Undertaking Agreement, Dynegy paid DH approximately $22.5 million on December 1, 2011 and approximately $6.7 million on April 15, 2012, and Dynegy Coal HoldCo paid DH approximately $41.6 million on or about June 1, 2012. Pursuant to the Settlement Agreement, the Undertaking Agreement was amended to provide that any future

 

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payments required to be made by Dynegy to DH under the Undertaking Agreement (prior to the occurrence of the effective date of the Settlement Agreement (the “Settlement Effective Date”)) would instead be made directly by Dynegy Coal Holdco. On the Settlement Effective Date, each of the Undertaking Agreement and the DH Note, and all obligations thereunder, were terminated. For additional information on the Settlement Agreement, see the section of this Disclosure Statement entitled “The Reorganization Cases — Settlement Agreement.”

 

DH continued to be burdened with a significant debt load, including approximately $3.5 billion in debt securities, and the leases at Dynegy Roseton and Dynegy Danskammer, with respect to which DH also had guaranty obligations.  These liabilities left the Company with substantial financial uncertainty and in need of further restructuring efforts.  Therefore, on September 15, 2011, exchange offers were initiated with respect to DH’s outstanding senior notes and debentures as well as its subordinated notes, pursuant to which Dynegy offered to pay a combination of cash and its own new 10% Senior Secured Notes due 2018 in exchange for the tender of up to $1.25 billion of the outstanding notes.  After being extended several times, the exchange offer was terminated on November 3, 2011 as holders of an insufficient amount of outstanding notes had tendered their notes, and the exchange offer was not consummated.  As discussed below, Dynegy therefore engaged in extensive discussions with certain holders of the Senior Notes and Subordinated Notes with respect to a potential consensual restructuring.  See “General Information — November 2011 Restructuring Support Agreement.”

 

As discussed below, several state court actions were brought against DH and certain of its non-debtor affiliates relating to the Prepetition Restructurings.  Among other things, plaintiffs in two such actions, brought in Delaware and New York, sought injunctive relief to attempt to prevent the August Prepetition Restructurings.  Their request was denied, however, by the Delaware court, after the court found that the plaintiffs did not establish a reasonable probability of success on the merits of their breach of contract and fraudulent transfer claims (the other action, filed in New York, was stayed in favor of the Delaware action and later discontinued by the New York court).  For a further description of the Prepetition Lawsuits, please see the subsection of this disclosure statement below entitled “General Information — Material Prepetition Lawsuits.”

 

Pursuant to the Settlement Agreement, the Prepetition Lawsuits were dismissed with prejudice on the Settlement Effective Date, and any potential claims relating to or arising from disputes with respect to, among other things, the matters investigated by the Examiner, including the Prepetition Restructurings, and the Prepetition Lawsuits were released by the parties to the Settlement Agreement.  For more information regarding the Settlement Agreement, see the section of this Disclosure Statement entitled “The Reorganization Cases — Settlement Agreement.”

 

E.                                      Prepetition Indebtedness and Lease Obligations

 

1.                                       New Credit Facilities

 

a.                                       GasCo Credit Facility

 

As part of the Prepetition Restructurings described above, on August 5, 2011, Dynegy GasCo and Dynegy Gas Investment Holdings, LLC entered into the GasCo Credit Facility.  The

 

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GasCo Credit Facility is a five-year senior secured term loan facility with an aggregate principal amount of $1.1 billion.  Amounts borrowed under the GasCo Credit Facility that are repaid or prepaid may not be re-borrowed.  The GasCo Credit Facility will mature on August 5, 2016 and will amortize in equal quarterly installments in aggregate annual amounts equal to 1.00 percent of the original principal amount of the GasCo Credit Facility with the balance payable on the fifth anniversary of the closing date.

 

All obligations of Dynegy GasCo under (i) the GasCo Credit Facility (the “GasCo Borrower Obligations”) and (ii) at the election of Dynegy GasCo, (a) cash management arrangements and (b) interest rate protection, commodity trading or hedging or other permitted hedging or swap arrangements (the “Hedging/Cash Management Arrangements”) are unconditionally guaranteed jointly and severally on a senior secured basis (the “GasCo Guarantees”) by each existing and subsequently acquired or organized direct or indirect material domestic subsidiary of Dynegy GasCo (the “GasCo Guarantors”), in each case, as otherwise permitted by applicable law, regulation and contractual provision and to the extent such guarantee would not result in adverse tax consequences as reasonably determined by Dynegy GasCo.  None of Dynegy GasCo’s parent companies is obligated to repay the GasCo Borrower Obligations.

 

The GasCo Borrower Obligations, the GasCo Guarantees and any Hedging/Cash Management Arrangements so elected by Dynegy GasCo are secured by first priority liens on and security interests in 100 percent of the capital stock of Dynegy GasCo (as discussed below) and substantially all of the present and after-acquired assets of Dynegy GasCo and each GasCo Guarantor (collectively, the “GasCo Collateral”).  Accordingly, such assets are only available for the creditors of Dynegy Gas Investments Holdings, LLC and its subsidiaries.

 

The GasCo Credit Facility bears interest, at Dynegy GasCo’s option, at either (i) 7.75% per annum plus LIBOR, subject to a LIBOR floor of 1.50% with respect to any Eurodollar Term Loan or (ii) 6.75% per annum plus the Alternate Base Rate with respect to any ABR Term Loan.  Dynegy GasCo may elect from time to time to convert all or a portion of the Term Loan from any ABR Borrowing into a Eurodollar Borrowing or vice versa.  With certain exceptions, the GasCo Credit Facility is non-callable for the first two years and is subject to a prepayment premium.  The GasCo Credit Facility contains certain mandatory prepayment provisions.  The GasCo Credit Facility also contains customary events of default and affirmative and negative covenants including, subject to certain specified exceptions, limitations on amendments to constitutive documents, liens, capital expenditures, acquisitions, subsidiaries and joint ventures, investments, the incurrence of debt, fundamental changes, asset sales, sale-leaseback transactions, hedging arrangements, restricted payments, changes in nature of business, transactions with affiliates, burdensome agreements, amendments of debt and other material agreements, accounting changes, prepayment of indebtedness or repurchases of equity interests and change of control.

 

The GasCo Credit Facility permits distributions of up to $135 million per year provided the distributing entity has, as of the date of the distribution, at least $50 million of liquidity and no default or event of default has occurred and is continuing or would result from such distribution.

 

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b.                                      CoalCo Credit Facility

 

As part of the Prepetition Restructurings described above, on August 5, 2011, Dynegy CoalCo and Dynegy Coal Investments Holdings, LLC entered into the CoalCo Credit Facility.  The CoalCo Credit Facility is a senior secured term loan facility with an aggregate principal amount of $600 million.  Amounts borrowed under the CoalCo Credit Facility that are repaid or prepaid may not be re-borrowed.  The CoalCo Credit Facility will mature on August 5, 2016 and will amortize in equal quarterly installments in aggregate annual amounts equal to 1.00 percent of the original principal amount of the CoalCo Credit Facility with the balance payable on the fifth anniversary of the closing date.

 

All obligations of Dynegy CoalCo under (i) the CoalCo Credit Facility (the “CoalCo Borrower Obligations”) and (ii) at the election of Dynegy CoalCo, Hedging/Cash Management Arrangements are unconditionally guaranteed jointly and severally on a senior secured basis (the “CoalCo Guarantees”) by each existing and subsequently acquired or organized direct or indirect material domestic subsidiary of Dynegy CoalCo (the “CoalCo Guarantors”), in each case, as otherwise permitted by applicable law, regulation and contractual provision and to the extent such guarantee would not result in adverse tax consequences as reasonably determined by Dynegy CoalCo.  None of Dynegy CoalCo’s immediate or ultimate parent companies is obligated to repay the CoalCo Borrower Obligations.  The CoalCo Borrower Obligations, the CoalCo Guarantees and any Hedging/Cash Management Arrangements so elected by Dynegy CoalCo are secured by first priority liens on and security interests in 100 percent of the capital stock of Dynegy CoalCo and substantially all of the present and after-acquired assets of Dynegy CoalCo and each CoalCo Guarantor.  Accordingly, such assets are only available for the creditors of Dynegy CoalCo Investments Holdings, LLC and its subsidiaries.

 

The CoalCo Credit Facility bears interest, at Dynegy CoalCo’s option, at either (i) 7.75% per annum plus LIBOR, subject to a LIBOR floor of 1.50% with respect to any Eurodollar Term Loan or (ii) 6.75% per annum plus the Alternate Base Rate with respect to any ABR Term Loan.  Dynegy CoalCo may elect from time to time to convert all or a portion of the Term Loan from any ABR Borrowing into a Eurodollar Borrowing or vice versa.  With certain exceptions, the CoalCo Credit Facility is non-callable for the first two years and is subject to a prepayment premium.  The CoalCo Credit Facility contains certain mandatory prepayment provisions.  The CoalCo Credit Facility also contains customary events of default and affirmative and negative covenants including, subject to certain specified exceptions, limitations on amendments to constitutive documents, liens, capital expenditures, acquisitions, subsidiaries and joint ventures, investments, the incurrence of debt, fundamental changes, asset sales, sale-leaseback transactions, hedging arrangements, restricted payments, changes in nature of business, transactions with affiliates, burdensome agreements, amendments of debt and other material agreements, accounting changes, prepayment of indebtedness or repurchases of equity interests and change of control (which would be triggered upon an exercise of the pledge of the membership interests of Dynegy Coal Holdco, LLC).

 

The CoalCo Credit Facility limits distributions to $90 million per year provided the distributing entity has, as of the date of the distribution, at least $50 million of liquidity and no default or event of default has occurred and is continuing or would result from such distribution.

 

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2.                                       DH Note

 

As further described above, on September 1, 2011, DH issued the DH Note in the principal amount of $1.25 billion to DGIN in exchange for the transfer by DGIN to DH of DGIN’s rights to receive the payment stream from Dynegy pursuant to the Undertaking Agreement.  The DH Note bore annual interest at a rate of 4.24%, payable upon the maturity date, September 1, 2027.  Pursuant to the Settlement Agreement, the DH Note was terminated on the Settlement Effective Date.  For additional information on the Settlement Agreement, see the section of this Disclosure Statement entitled “The Reorganization Cases — Settlement Agreement.”

 

3.                                       Cash Collateralized Letter of Credit Facility

 

On August 5, 2011, DH and Credit Suisse AG, Cayman Islands Branch (“Credit Suisse Cayman”), entered into a Letter of Credit Reimbursement and Collateral Agreement, dated as of August 5, 2011 (the “Letter of Credit Agreement”), for a $26,217,318 cash collateralized Letter of Credit Facility under which Credit Suisse Cayman would maintain five then-existing letters of credit (one of which expired on October 28, 2011) (the “Letter of Credit Facility”).  The letters of credit under the Letter of Credit Facility are issued (i) to various New York state regulatory agencies for certain environmental liabilities related to Dynegy Danskammer and (ii) to backstop certain obligations under the Debtors’ workers compensation insurance programs, as well as various surety bonds posted in connection with litigation matters.  The Letter of Credit Facility is collateralized by an account maintained by Bank of New York Mellon holding the sum of $27,005,346.81, which amount may be withdrawn only in accordance with the Letter of Credit Agreement.

 

4.                                       Unsecured Debt

 

DH is obligated under seven (7) different series of notes, debentures, and subordinated capital income securities in the outstanding aggregate principal amount of $3,570.3 million.

 

a.                                       Senior Unsecured Notes/Debentures

 

DH has, from time to time, issued various series of senior unsecured notes under the Indenture dated September 26, 1996, as amended and restated as of March 23, 1998, as amended and restated as of March 14, 2001, and under the First through Sixth Supplemental Indentures thereto, between DH and Wilmington Trust Company (as successor to JP Morgan Chase Bank, N.A., successor to Bank One Trust Company, National Association) (the “Senior Notes Indenture”).  The following series of notes issued under the Senior Notes Indenture are outstanding:

 

·                                          8.75% senior unsecured notes in the outstanding aggregate principal amount of $88.5 million, due February 15, 2012;

 

·                                          7.5% senior unsecured notes in the outstanding aggregate principal amount of $785 million, due June 1, 2015;

 

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·                                          8.375% senior unsecured notes in the outstanding aggregate principal amount of $1,046.8 million, due May 1, 2016;

 

·                                          7.125% senior debentures in the outstanding aggregate principal amount of $175 million due May 15, 2018;

 

·                                          7.75% senior unsecured notes in the outstanding aggregate principal amount of $1,100 million, due June 1, 2019; and

 

·                                          7.625% senior debentures in the outstanding aggregate principal amount of $175 million due October 15, 2026.

 

b.                                      Subordinated Debentures

 

In May 1997, NGC Corporation Capital Trust I (the “NGC Trust”) issued, through a Rule 144A offering to qualified institutional buyers, $200 million aggregate liquidation amount of Series A 8.316% Subordinated Capital Income Securities due 2027 (the “Series A SKIS”) representing preferred undivided beneficial interests in the assets of the NGC Trust.  The NGC Trust invested the proceeds from the issuance of the Series A SKIS in an equivalent amount of DH’s Series A 8.316% Deferrable Interest Debentures due 2027 (the “Series A Subordinated Notes”).  In October 1997, Series B 8.316% Subordinated Capital Income Securities due 2027 (the “NGC Trust Capital Income Securities”) were exchanged for the outstanding Series A SKIS, and Series B 8.316% Deferrable Interest Debentures due 2027 (the “Subordinated Notes”) were exchanged for the Series A Subordinated Notes.  The sole assets of the NGC Trust are the Subordinated Notes.  Subordinated Notes in the aggregate principal amount of $200 million remain outstanding and represent DH’s unsecured obligations that rank subordinate and junior in right of payment to all of DH’s senior indebtedness to the extent and in the manner set forth in the Subordinated Notes Indenture.  DH has irrevocably and unconditionally guaranteed, on a subordinated basis, payment for the benefit of the holders of the NGC Trust Capital Income Securities the obligations of the NGC Trust to the extent the NGC Trust does not have funds legally available for distribution to the holders of the NGC Trust Capital Income Securities.

 

5.                                       Bilateral Contingent Letter of Credit Facility

 

On May 21, 2010, DH executed a $150 million bilateral contingent letter of credit facility with Morgan Stanley Capital Group Inc. to provide DH access to liquidity to support collateral posting requirements.  Availability under the facility is tied to increases in 2012 forward spark spreads and power prices.  The facility matures on December 31, 2012.  A facility fee accrues on the unutilized portion of the facility at an annual rate of 0.6% and letter of credit availability fees accrue at an annual rate of 7.25%.  There are currently no amounts available or outstanding under the facility.

 

6.                                       Lease Obligations

 

On or about May 8, 2001 (the “Closing Date”), Debtors Dynegy Roseton and Dynegy Danskammer (together, the “Debtor Lessees”) each entered into a sale-and-leaseback transaction pertaining to, respectively, the Roseton Facility and the Danskammer Facility.

 

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On the Closing Date, the Owner Lessors purchased the Roseton Facility and the Danskammer Facility from Dynegy Roseton and Dynegy Danskammer, respectively, and, in each case, entered into contractual arrangements which gave them certain rights to use certain related common facilities located at the sites of the respective Leased Facilities.  The Owner Lessors are subsidiaries of RCM, a third party investor and a wholly-owned subsidiary of PSEG Resources Inc. (which is an indirect subsidiary of PSEG, a company engaged in various aspects of the electric power business).

 

The purchase price of the Danskammer Facility was approximately $300 million.  The purchase price of the Roseton Facility was approximately $620 million.  To fund their purchases of the respective Leased Facilities from Dynegy Danskammer and Dynegy Roseton, the Owner Lessors used $138 million in equity funding from certain of the PSEG Entities, and financed the remaining $800 million of the purchase price and the related transaction expenses through a private offering of pass-through trust certificates (the “Lease Certificates”), which were sold to qualified institutional buyers, the Lease Certificate Holders.  The proceeds thereof were then used to purchase notes from the Owner Lessors (the “Lessor Notes”), which are held for the benefit of the Pass-Through Certificate Holders by the Lease Trustee under the Indentures of Trust, Mortgage, Assignment of Leases and Rents and Security Agreement related to each Facility (the “Lease Indentures”).

 

Also on the Closing Date, each of the Owner Lessors simultaneously leased each Facility to the respective Debtor Lessee pursuant to the Danskammer Facility Lease and Roseton Facility Lease (collectively, the “Facility Leases”).  Absent early termination, the Danskammer Facility Lease expires on May 8, 2031, and the Roseton Facility Lease expires on February 8, 2035.

 

Under the Facility Leases, rent is paid in semi-annual payments.  These lease payments under the Facility Leases are used by the Owner Lessors to pay principal and interest on the Lessor Notes with excess amounts available for distribution to RCM.  The Lessor Notes are secured by, among other things, an assignment of the Facility Leases and a mortgage on the underlying Leased Facilities.  Payments made in respect of the Lessor Notes are distributed to the Pass-Through Certificate Holders under the terms of the Pass-Through Trust Agreement pursuant to which the Pass-Through Certificates were issued.

 

As of the Petition Date, the future lease payments are (i) $691,030,741.42 in the aggregate due from November 8, 2011 through the lease expiration for the Roseton Facility and (ii) $102,991,141.25 in the aggregate due from November 8, 2011 through the lease expiration for the Danskammer Facility.  DH has guaranteed the Debtor Lessees’ payment and performance obligations under their respective leases on a senior unsecured basis.  Dynegy Roseton and Dynegy Danskammer have no demand rights to purchase the Leased Facilities at the end of their respective lease terms.  However, under certain circumstances, Dynegy Roseton and Dynegy Danskammer have a right of first refusal and right of first offer on the Leased Facilities.

 

As the Lease Documents are significantly burdensome to the Debtors’ estates and will impair the Debtors’ ability to reorganize absent rejection, the Debtors have determined that the rejection of the Lease Documents is an appropriate exercise of their business judgment.  Accordingly, on the Petition Date, the Debtors filed the Motion to Reject.  On December 20, 2011, the Bankruptcy Court entered a stipulated order approving the rejection of the Lease

 

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Documents [Docket No. 227], which was thereafter amended, and such amended stipulated order was entered by the Bankruptcy Court on December 28, 2011 [Docket No. 273].  Further information concerning the Motion to Reject and the Rejection Orders is contained in this Disclosure Statement in the article entitled “The Reorganization Cases.”

 

F.                                      Material Prepetition Lawsuits

 

Prior to the Settlement Effective Date, DH was a defendant, along with certain non-Debtor affiliates, in three cases filed in New York State Supreme Court relating to the Prepetition Restructurings.  These cases were Avenue Investments, L.P., et al. v. Dynegy Inc., et al., Index No. 652599/2011 (New York County, filed Sept. 21, 2011) (the “Noteholder Litigation”), The Successor Lease Indenture Trustee, et al. v. Dynegy Inc., et al., Index No. 652642/2011 (New York County, filed Sept. 27, 2011) (the “Lease Trustee Litigation”), and Resources Capital Management Corp., et al. v. Dynegy Inc., et al., Index No. 653067/11 (New York County, filed Nov. 4, 2011) (the “PSEG Litigation” and together with the Noteholder Litigation and Lease Trustee Litigation, the “Prepetition Lawsuits”).  Plaintiffs in these cases challenged DGIN’s transfer of Dynegy Coal Holdco to Dynegy, alleging, inter alia, that the challenged transfer constituted a fraudulent conveyance under New York law or, in the alternative, an unlawful dividend or distribution from a subsidiary to its parent.  Plaintiffs also asserted causes of action for breach of fiduciary duties against the directors of Dynegy and the managers of DH and DGIN, and sought to pierce the corporate veil between Dynegy, DH, and DGIN.  The Lease Trustee plaintiff also asserted breach of contract and quasi-contract claims against defendants for alleged breaches of the Danskammer Lease Guaranty and the Roseton Lease Guaranty (together, the “Lease Guarantees”).  Plaintiffs sought a judgment setting aside and annulling the challenged transfer and related transactions or awarding damages.  Pursuant to the PSEG Settlement (as defined and discussed below in the section of this Disclosure Statement entitled “The Reorganization Cases — PSEG Settlement”), the PSEG Entities agreed to continue the stay with respect to the PSEG Litigation, and to dismiss such action with prejudice upon the effectiveness of the DH plan.

 

On October 31, 2011, DH and its non-Debtor co-defendants filed motions to dismiss the Noteholder Litigation and Lease Trustee Litigation.  Among other things, the defendants asserted that the complaints failed to state a claim upon which relief could be granted because the plaintiffs are not creditors of the transferor (DGIN) with respect to the asserted fraudulent transfer claims, and the defendants did not breach any agreements with the plaintiffs in engaging in the Prepetition Restructurings.

 

Pursuant to the Settlement Agreement, on the Settlement Effective Date, the plaintiffs or parties (as applicable) to the Prepetition Lawsuits filed necessary papers to dismiss and discontinue with prejudice each of the Noteholder Litigation, the Lease Trustee Litigation and the PSEG Litigation and any potential claims relating to or arising from disputes with respect to such actions were released by the parties thereto.  For more information regarding the Settlement Agreement, see the section of this Disclosure Statement entitled “The Reorganization Cases — Settlement Agreement.”  Consequently, each of the Prepetition Lawsuits described above has been settled, dismissed or discontinued.

 

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G.                                    Putative Securities Class Action Lawsuits

 

On March 28, 2012, Mr. Charles Silsby (“Silsby”) filed a putative securities class action lawsuit, styled Silsby v. Icahn, et al., Case No. 12-cv-02307(JGK), in the United States District Court for the Southern District of New York against Dynegy, Mr. Flexon, Mr. Freeland, and Mr. Carl C. Icahn (collectively, the “Defendants”).  Silsby alleges that Dynegy and Messrs. Flexon and Freeland violated Section 10(b) of the Exchange Act and Securities and Rule 10b-5 promulgated thereunder in making certain statements regarding DGIN’s transfer of Dynegy Coal Holdco to Dynegy. Silsby further alleges that Messrs. Flexon, Freeland, and Icahn are liable for such violations as control persons of Dynegy pursuant to Section 20(a) of the Exchange Act.  Silsby seeks to bring these claims on behalf of a putative class comprising all persons who acquired Dynegy common stock between September 2, 2011 and March 9, 2012.

 

On April 26, 2012, the district court approved the parties’ stipulation adjourning the Defendants’ time to respond to Silsby’s complaint without date, in light of anticipated motions to appoint a lead plaintiff and lead counsel and the filing of an amended complaint. On May 29, 2012, two competing motions for appointment of lead plaintiff and lead counsel were filed. The district court has not ruled on these motions. Dynegy believes the claims are without merit and intends to vigorously contest this lawsuit.

 

Two additional putative shareholder actions have been filed in state courts:  Zahariades v. Elward et al., No. 7539 (Del. Ch. filed May 17, 2012) and Nicolle v. Flexon et al., No. CC-12-02703-A (Tex. Dallas Co. filed May 4, 2012).  Dynegy also believes that the claims asserted in these actions are without merit and intends to vigorously contest them.

 

H.                                    Intercompany Receivable

 

As set forth in the Current Report on Form 8-K filed by Dynegy with the SEC on February 3, 2012 (the “February 3, 2012 8-K”), on January 30, 2012, Dynegy’s management concluded that solely under applicable technical accounting standards as of November 7, 2011, the date of the filing of the Chapter 11 Cases, Dynegy’s consolidated financial statements were required to reflect the deconsolidation of DH and its consolidated subsidiaries as of the Petition Date.  As also set forth in the February 3, 2012 8-K and in the Form 10-K filed by Dynegy with the SEC on March 8, 2012, the deconsolidation of DH and its consolidated subsidiaries is considered a disposition of assets by Dynegy requiring the presentation of certain pro forma financial information, which pro forma financial information was filed as an exhibit to the February 3, 2012 8-K.  Such pro forma financial information reflected, among other things, $864 million (as of the date of the report on Form 10-K) for an affiliate receivable balance that has been recorded and adjusted over time and held by DH from Dynegy (the “Intercompany Receivable”).  Historically, the affiliate receivable has been classified within equity by DH as there are no defined payment terms, it is not evidenced by any promissory note, and there was never an intent for payment to occur.  Upon deconsolidation of DH, the amount no longer eliminates in the consolidation process and, for accounting purpose, the amount has been reclassified to reflect the amount as a payable to an affiliate.(18)  The Plan Proponents do not know

 


(18)  Dynegy’s management believes that under applicable technical accounting standards, upon consummation of the Plan, Dynegy will be eligible to re-consolidate its investment in DH’s wholly owned subsidiaries at such time.  By virtue of the Merger, to the extent the Merger is consummated, the separate existence of DH shall cease on or prior to the Effective Date.  The Company’s analysis and accounting conclusions were based on the applicable facts and circumstances applying accounting guidance and did not, and do not, represent legal conclusions.

 

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of any reason why such affiliate receivable balance would give rise to a right of repayment, given that there was no intention to create an obligation of repayment when it was booked, and know of no reason why the change in accounting treatment as mandated by the deconsolidation of DH from Dynegy would change the rights of the parties.

 

Pursuant to the Settlement Agreement, the Intercompany Receivable was released along with any Claims related thereto.  For more information regarding the Settlement Agreement, see the section of this Disclosure Statement entitled “The Reorganization Cases — Settlement Agreement.”

 

I.                                         November 2011 Restructuring Support Agreement

 

Prior to the Petition Date, Dynegy and DH engaged in extensive discussions related to a potential consensual restructuring with certain holders of DH’s outstanding Senior Notes and Subordinated Notes.  After several weeks of active arm’s-length negotiations, DH and Dynegy, in consultation with their advisors, reached an agreement with certain holders of an aggregate in excess of $1.4 billion of the Senior Notes (the “Original Consenting Noteholders”) regarding a framework for a potential consensual restructuring of over $4.0 billion of obligations owed by DH.  The principal terms of the pre-arranged restructuring plan were evidenced by the Restructuring Support Agreement dated November 7, 2011 among Dynegy, DH and the Original Consenting Noteholders and the restructuring term sheet attached as an exhibit thereto (together, the “November 2011 Restructuring Support Agreement”) [Docket No. 18, Ex. 2].

 

The November 2011 Restructuring Support Agreement was amended on December 9, 2011 and was further amended on December 22, 2011 to extend deadlines for finalizing documentation.  On December 26, 2011, Dynegy, DH and Consenting Noteholders, holding approximately $1.8 billion of the Senior Notes Claims and Subordinated Notes Claims, entered into an Amended and Restated Restructuring Support Agreement (as amended and restated, the “Noteholder Restructuring Support Agreement”), further modifying the November 2011 Restructuring Support Agreement.

 

Pursuant to, and in light of the entry by the Consenting Senior Noteholders into, the Settlement Agreement and the Plan Support Agreement, the Noteholder Restructuring Support Agreement was terminated on May 1, 2012.  For more information on the Plan Support Agreement, see the section of this Disclosure Statement entitled “The Reorganization Cases — Plan Support Agreement.”

 

J.                                      The Debtors’ Employees

 

The Debtors employ approximately 152 full-time employees, of whom approximately 126 are represented by Local Union 320 of the International Brotherhood of Electrical Workers, AFL-CIO.  DNE and Local Union 320 are parties to a collective bargaining agreement, effective February 1, 2008, with an original expiration date of January 31, 2012.  On January 31, 2012, DNE and Local Union 320 reached a tentative agreement, subject only to ratification by the

 

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union rank and file, to extend this collective bargaining agreement through October 31, 2012, or earlier, if terminated by DNE upon sixty days’ written notice to the Union provided on or after the date upon which DNE obtains regulatory approval to cease to be the operator of the Danskammer and Roseton power generating facilities.  In that event, the collective bargaining agreement will expire upon the end of that sixty-day notification period or the date on which DNE ceases to operate the facilities, whichever occurs later.  DNE was informed on February 7, 2012 that the Union rank and file voted to ratify the collective bargaining agreement extension, which is now in effect.  The remaining employees, outside the approximately 126 represented by Local Union 320 and covered by the collective bargaining agreement, are not represented by a union and are predominantly administrative and managerial employees.  All of these employees are employed in connection with the operation of the Danskammer and Roseton power generation facilities, and all but one are employees of DNE.(19)

 

K.                                    The Company’s Retirement Obligations and Employment Contracts

 

Dynegy sponsors the following retirement plans:(20)

 

·                                          the Dynegy 401(k) Plan (resulting from the merger on April 12, 2012 of the Dynegy Inc. 401(k) Savings Plan, Dynegy Midwest Generation, LLC 401(k) Savings Plan for Employees Covered under a Collective Bargaining Agreement and Dynegy Northwest Generation, Inc. Savings Investment Plan (non-union only)), a defined contribution plan subject to the provisions of ERISA, in which all employees of designated Dynegy subsidiaries are generally eligible to participate;

 

·                                          the Dynegy Northeast Generation, Inc. Savings Incentive Plan (includes only collectively bargained employees), a tax-qualified defined contribution plan for union and non-union employees;.

 

·                                          the Dynegy Inc. Retirement Plan for eligible employees of Dynegy and certain subsidiaries, a tax-qualified defined benefit pension plan which contains a cash balance component for employees of certain Dynegy subsidiaries and traditional career average and final average pay formula components for employees of other Dynegy subsidiaries;

 

·                                          the Dynegy Northeast Generation, Inc. Retirement Income Plan for certain employees of Dynegy Northeast Generation, Inc., a tax-qualified defined benefit pension plan that is a cash balance plan and is frozen to new participants;

 

·                                          the Sithe Stable Pension Account Plan (frozen as to participation and benefit accruals); and

 


(19)  As noted above, one employee, the Managing Director of Plant Operations at the Danskammer and Roseton facilities is employed by Dynegy Operating Company, a non-Debtor Affiliate.

(20)  Although Dynegy is the “plan sponsor” of the retirement plans, it does not have any obligation to make matching contributions to the 401(k) plans or fund the pension plans in the ordinary course, although it may incur certain administrative costs in connection with such plans.  However, in the event of a plan termination, which is not currently expected or contemplated, Dynegy would be jointly and severally liable for any funding shortfall, PBGC assessments, or other liabilities under the pension plans.

 

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·                                          the Dynegy Inc. Restoration 401(k) Savings Plan and the Dynegy Inc. Restoration Pension Plan, two nonqualified plans that supplement or restore benefits lost by certain of Dynegy’s and its subsidiaries highly compensated employees under the tax qualified plans as a result of Internal Revenue Code limitations that apply to the tax qualified plans.

 

Dynegy is a party to Employment Contracts with the following five (5) executives: (1) Robert Flexon, Chief Executive Officer; (2) Kevin Howell, Chief Operating Officer; (3) Clint C. Freeland, Chief Financial Officer; (4) Carolyn J. Burke, Chief Administrative Officer; and (5) Catherine B. Callaway, General Counsel.  Each of the Employment Contracts, and the various supplements thereto, are available in previous public filings by Dynegy filed on January 4, 2008, April 8, 2008, February 25, 2010, November 9, 2010, March 8, 2011, March 22, 2011, August 8, 2011, November 14, 2011 and January 9, 2012 at the web site maintained by the SEC at http://www.sec.gov.  The Employment Contracts generally set forth minimum compensation and benefits for each executive and certain restrictive covenants, including but not limited to noncompetition, non-solicitation and nondisclosure covenants.  In addition, the Employment Contracts contain provisions for severance and the executives’ eligibility to participate in the Dynegy Executive Severance Pay Plan and the Dynegy Executive Change in Control Severance Pay Plan, as well as certain restructuring cash bonuses in varying amounts.  Each of the executives is eligible to receive certain severance benefits under the Dynegy Executive Severance Pay Plan if his or her employment is terminated under circumstances as defined by such plan.  Likewise, each of the executives is eligible to receive certain severance benefits (generally greater than those provided under the Executive Severance Pay Plan and in lieu of such severance benefits) under the Dynegy Executive Change in Control Severance Plan if his or her employment is terminated under circumstances defined in the plan and in connection with a change in control, also as defined in such plan.  DH is not party to any Employment Contracts.

 

L.                                     Dynegy’s Board of Directors(21)

 

As set forth below, pursuant to the Plan, as of the Effective Date, the initial board of directors of Reorganized Dynegy (the “Board”) will be the persons identified in Exhibit “I” to the Plan (to be filed as a Plan Document).  The Board shall be selected in a manner to be agreed to among the Majority Consenting Senior Noteholders, the Lease Trustee and the Creditors’ Committee.  The term of any current members of the board of directors of Dynegy not identified as members of the Board shall expire upon the Effective Date.  The current directors of Dynegy and DH are eligible to be, but there shall be no obligation that they be, selected for the Board pursuant to sections 1123(a)(7) and 1129(a)(5) of the Bankruptcy Code.  What follows here is a description of the current board of Dynegy and its officers for purposes of disclosure to creditors and interest holders.

 

In 2010, the following individuals served on Dynegy’s Board of Directors: (i) David W. Biegler, (ii) Thomas D. Clark, Jr., (iii) Victor E. Grijalva, (iv) George L. Mazanec, (v) Howard B. Sheppard, (vi) William L. Trubeck, (vii) Patricia A. Hammick, and (viii) Bruce A.

 


(21)  Information regarding the Board and Officers set forth herein includes Dynegy because, as discussed herein and in the Plan, DH will be merged with Dynegy pursuant to the Merger.  The disclosure herein is made in accordance with section 1129(a)(5) of the Bankruptcy Code.

 

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Williamson.  Mr. Williamson resigned as a director and Chairman effective February 21, 2011, and Ms. Hammick, who served as Dynegy’s lead director until Mr. Williamson’s resignation from the Board, was then appointed Chairman.  Also on February 21, 2011, Mr. Biegler, Mr. Grijalva, Ms. Hammick, Mr. Sheppard and Mr. Trubeck each informed Dynegy that they did not intend to stand for reelection as a director at the 2011 annual meeting of stockholders.  On March 8, 2011, the Board elected Thomas W. Elward, E. Hunter Harrison, Vincent J. Intrieri and Samuel Merksamer as directors, and such individuals were the initial members of the Finance and Restructuring Committee designated to direct Dynegy’s restructuring process.  On May 4, 2011, Michael J. Embler was elected to the Board of Directors and at that time was elected to serve on the Finance and Restructuring Committee.

 

On June 15, 2011, a new Board of Directors for Dynegy was elected at the 2011 annual meeting of stockholders.  The members of this new Board of Directors included the following individuals: (i) Thomas W. Elward, (ii) Michael J. Embler, (iii) Robert C. Flexon, (iv) E. Hunter Harrison, (v) Vincent J. Intrieri, (vi) Samuel Merksamer and (vii) Felix Pardo.  On December 1, 2011, Mr. Harrison announced that he was resigning as interim Chairman of the Board and as a director effective December 16, 2011 and Mr. Elward was named the non-executive Chairman of the Board effective December 16, 2011.(22)

 

Below is a brief biography of each of the individuals who serve on the current Board of Directors for Dynegy.

 

Thomas W. Elward.  Mr. Elward served as President and Chief Operating Officer of CMS Enterprises from March 2003 to July 2008.  Mr. Elward previously served in various roles with CMS Generation, a subsidiary of CMS Enterprises, including President and Chief Executive Officer from January 2002 to July 2008; Senior Vice President — Operations and Asset Management from July 1998 to December 2001; and Vice President — Operations from March 1990 to June 1998.  Prior to CMS Enterprises, he held roles of increasing responsibility at Consumers Power, advancing to the position of Plant Manager.  He has served as a Dynegy director since 2011.  On December 1, 2011, Mr. Elward was named the non-executive Chairman of the Board effective December 16, 2011.

 

Michael J. Embler.  Mr. Embler formerly served as the Chief Investment Officer of Franklin Mutual Advisers LLC, an asset management subsidiary of Franklin Resources, Inc. from 2005 to 2009.  Mr. Embler joined Franklin Mutual Advisers in 2001 and, prior to becoming Chief Investment Officer, served as head of its Distressed Investment Group.  From 1992 until 2001, he worked at Nomura Holdings America, where he served as Managing Director managing a team investing in a proprietary fund focused on distressed and other event-driven corporate investments.  Mr. Embler currently serves on the Board of Directors of CIT Group, Inc., AboveNet, Inc. and Corlears School.  He has served as a Dynegy director since 2011.

 

Robert C. Flexon.  Mr. Flexon serves as President and Chief Executive Officer of Dynegy.  Prior to joining the Company, he served as the Chief Financial Officer of UGI Corporation, a distributor and marketer of energy products and related services from February to

 


(22)  For more information regarding any individuals who previously served on Dynegy’s Board of Directors, please see the Definitive Proxy Statement on Schedule 14A of Dynegy filed with the SEC on April 29, 2011, which is incorporated herein by reference.

 

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June 2011.  He was the Chief Executive Officer of Foster Wheeler AG from June 2010 until October 2010 and the President and Chief Executive Officer of Foster Wheeler USA from November 2009 until May 2010.  Prior to joining Foster Wheeler, Mr. Flexon was Executive Vice President and Chief Financial Officer of NRG Energy, Inc. (“NRG Energy”) from February 2009 until November 2009.  He previously served as Executive Vice President and Chief Operating Officer of NRG Energy from March 2008 until February 2009 and as its Executive Vice President and Chief Financial Officer from 2004 to 2008.  Prior to joining NRG Energy, Mr. Flexon held various key executive positions with Hercules, Inc. and Atlantic Richfield Company.  Mr. Flexon served on the board of directors of Foster Wheeler from 2006 until 2009 and from May 2010 until October 2010.  He has served as a Dynegy director since 2011.

 

Vincent J. Intrieri.  Mr. Intrieri has been a Senior Managing Director of Icahn Capital LP since November 2004.  Since January 2005, Mr. Intrieri has been Senior Managing Director of Icahn Associates Corp. and High River Limited Partnership.  Mr. Intrieri has been a director since July 2006 of Icahn Enterprises G.P. Inc.  From April 2005 through September 2008, Mr. Intrieri was the President and Chief Executive Officer of Philip Services Corporation.  Since December 2007, Mr. Intrieri has been the Chairman of the Board and a director of PSC Metal, Inc.  From August 2005 to June 2011, Mr. Intrieri served as a director of American Railcar Industries, Inc. (“ARI”).  From March 2005 to December 2005, Mr. Intrieri was a Senior Vice President, Treasurer and Secretary of ARI.  From April 2003 to June 2011, Mr. Intrieri served as Chairman of the Board and a director of Viskase Companies, Inc.  From November 2006 to November 2008, Mr. Intrieri served on the Board of Lear Corporation.  From August 2008 to September 2009, Mr. Intrieri was a director of WCI Communities, Inc.  Mr. Intrieri also serves on the boards of the following companies: National Energy Group, Inc., XO Holdings, Inc., WestPoint International Inc. and Federal-Mogul Corporation.  With respect to each company mentioned above, Carl C. Icahn, directly or indirectly, either (i) controls such company or (ii) has an interest in such company through the ownership of securities.  Mr. Intrieri was a certified public accountant.  He has served as a Dynegy director since 2011.

 

Samuel Merksamer.  Mr. Merksamer has served as an investment analyst at Icahn Capital LP, a subsidiary of Icahn Enterprises L.P., since May 2008.  Mr. Merksamer is responsible for identifying, analyzing and monitoring investment opportunities and portfolio companies for Icahn Capital.  Mr. Merksamer serves as a director of Viskase Companies, Inc., PSC Metals Inc. and Federal-Mogul Corporation.  Viskase Companies, PSC Metals and Federal-Mogul are each, directly or indirectly, controlled by Carl C. Icahn.  From 2003 until 2008, Mr. Merksamer was an analyst at Airlie Opportunity Capital Management, a hedge fund management company, where he focused on high yield and distressed investments.  He has served as a Dynegy director since 2011.

 

Felix Pardo.  Mr. Pardo served as the Chairman and Chief Executive Officer of Dyckerhoff, Inc., a major U.S. producer of cement, and as the Chairman of its subsidiaries, Lonestar Industries, Inc. and Glens Falls Cement Co., Inc., from July 1998 until his retirement in December 2002.  Prior to joining Dyckerhoff, Mr. Pardo was President and Chief Executive Officer of Ruhr American Coal Corporation from 1992 to 1998, Chairman of Newalta Corporation, a leading Canadian industrial waste management and environmental services company, from 1991 to 1998, Chief Executive Officer of Newalta during its restructuring in 1991 and on its board of directors from 1991 to 2009.  Mr. Pardo also served as Executive Vice

 

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President of Quorum Funding, a Canadian venture capital firm, during 1991 and 1992.  He was President and Chief Executive Officer of Philip Services, Inc., a waste management, scrap metals and industrial services company, from April 1998 to November 1998.  He also served as a director of Philip Services, Inc. from 1994 to 2003, Quorum Funding from 1991 to 1992, and other public companies, including Western Prospector Group Ltd, Exchange National Bank, Chicago, Invatec (valve distribution), ISG Technologies (medical imaging) and Panaco, Inc. (oil and gas exploration and production).  Mr. Pardo currently serves on the board of directors of Synthes, Inc. and Newalta Environmental Services.  He has served as a Dynegy director since 2011.

 

M.                                  Dynegy’s Officers

 

Set forth below are the names and positions of the current key executive officers of Dynegy, as well as their recent predecessors.  A brief biography of each of the officers is provided immediately following this list.

 

Name

 

Position(s)

 

 

 

 

 

 

 

Robert C. Flexon

 

President and Chief Executive Officer

 

Since July 11, 2011

 

Recent Predecessors: E. Hunter Harrison, Interim President and Chief Executive Officer (April 9, 2011 — July 10, 2011); David W. Biegler, Interim President and Chief Executive Officer (March 12, 2011 — April 8, 2011); Bruce A. Williamson, President (January 1, 2008 - March 11, 2011) and Chief Executive Officer (November 11, 2002 — March 11, 2011)

 

 

 

 

 

Carolyn J. Burke

 

Executive Vice President and Chief Administrative Officer

 

Since August 30, 2011

 

Recent Predecessors: J. Kevin Blodgett, Executive Vice President of Administration and General Counsel (November 29, 2005 — February 4, 2011)(23)

 


(23)  No one was appointed to the position of Executive Vice President and Chief Administrative Officer when Mr. Blodgett left Dynegy in February 2011.  At that time, Mr. Lednicky assumed responsibilities of administration; however, Mr. Lednicky’s title did not change.

 

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Clint C. Freeland

 

Executive Vice President and Chief Financial Officer

 

Since July 5, 2011

 

Recent Predecessors: Charles C. Cook, Executive Vice President and Interim Chief Financial Officer (March 12, 2011 — June 15, 2011); Holli Nichols, Executive Vice President and Chief Financial Officer (November 29, 2005 - March 11, 2011)

 

 

 

 

 

Kevin T. Howell

 

Executive Vice President and Chief Operating Officer

 

Since July 5, 2011

 

Recent Predecessors: Lynn A. Lednicky, Executive Vice President, Asset Management, Development and Regulatory Affairs (January 1, 2008 — August 1, 2011); Lynn A. Lednicky, Executive Vice President, Operations (August 2, 2011 — December 31, 2011)(24)

 

 

 

 

 

Catherine B. Callaway

 

Executive Vice President and General Counsel

 

Since September 26, 2011

 

Recent Predecessors: Kent R. Stephenson, Executive Vice President and General Counsel (March 7, 2011 — September 26, 2011);(25) J. Kevin Blodgett, Executive Vice President of Administration and General Counsel (November 28, 2005 - February 4, 2011)

 

Carolyn J. Burke.  Ms. Burke serves as Executive Vice President and Chief Administrative Officer with overall responsibility for the corporate functions including Human Resources, Information Technology, Investor Relations and Communications, and Business Services.  Prior to joining the Company in August 2011, Ms. Burke served as Global Controller for J.P. Morgan’s Global Commodities business since March 2008.  She was also NRG Energy’s Vice President and Corporate Controller from September 2006 to March 2008 and Executive Director of Planning and Analysis from April 2004 to September 2006.  Prior to joining NRG Energy, Ms. Burke held various key financial roles at Yale University, the University of Pennsylvania and at Atlantic Richfield Company (now British Petroleum).

 

Catherine B. Callaway.  Ms. Callaway has served as Executive Vice President and General Counsel since September 2011.  Ms. Callaway is responsible for Dynegy’s legal affairs, including legal services supporting Dynegy’s operational, commercial and corporate areas, as

 


(24)  When Mr. Howell joined Dynegy on July 5, 2011 as Executive Vice President and Chief Operating Officer, Mr. Lednicky continued to serve as Executive Vice President of Operations until December 31, 2011.

(25)  When Ms. Callaway joined Dynegy on September 26, 2011 as Executive Vice President and General Counsel, Mr. Stephenson continued to serve as Executive Vice President until March 30, 2012.

 

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well as ethics and compliance.  In addition, she is immediately involved in the restructuring efforts underway at the Company.  Ms. Callaway served as General Counsel for NRG Gulf Coast and Reliant Energy from August 2011 until September 2011.  She also served as General Counsel for NRG Texas and Reliant Energy from August 2010 to August 2011 and General Counsel for NRG Texas from November 2007 to August 2010.  Prior to joining NRG, Ms. Callaway held various key legal roles at Calpine Corporation, Reliant Energy, The Coastal Corporation and Chevron.

 

Robert C. Flexon.  Mr. Flexon serves as President and Chief Executive Officer of Dynegy.  Prior to joining the Company in July 2011, he served as the Chief Financial Officer of UGI Corporation, a distributor and marketer of energy products and related services from February to June 2011.  He was the Chief Executive Officer of Foster Wheeler AG from June 2010 until October 2010 and the President and Chief Executive Officer of Foster Wheeler USA from November 2009 until May 2010.  Prior to joining Foster Wheeler, Mr. Flexon was Executive Vice President and Chief Financial Officer of NRG Energy, Inc. from February 2009 until November 2009.  He previously served as Executive Vice President and Chief Operating Officer of NRG Energy from March 2008 until February 2009 and as its Executive Vice President and Chief Financial Officer from 2004 to 2008.  Prior to joining NRG Energy, Mr. Flexon held various key executive positions with Hercules, Inc. and Atlantic Richfield Company.  Mr. Flexon served on the board of directors of Foster Wheeler from 2006 until 2009 and from May 2010 until October 2010.  He has served as a Dynegy director since 2011.

 

Clint C. Freeland.  Mr. Freeland has served as Executive Vice President and Chief Financial Officer since July 2011.  He served as NRG Energy’s Senior Vice President, Strategy & Financial Structure from February 2009 to June 2011, where he developed a venture capital partnership investment fund to invest in emerging energy company technologies.  He was NRG Energy’s Senior Vice President and Chief Financial Officer from February 2008 to February 2009 and its Vice President and Treasurer from April 2006 to February 2008.  Prior to joining NRG Energy, Mr. Freeland held various key financial roles within the energy sector.

 

Kevin T. Howell.  Mr. Howell has served as Executive Vice President and Chief Operating Officer since July 2011.  He retired in August 2010 from NRG Energy, where he had served as President of NRG Texas and Reliant Energy since August 2008.  Prior to that, he was NRG Energy’s Executive Vice President and Chief Administrative Officer from January 2008 to August 2008 and Executive Vice President, Commercial Operations from August 2005 to January 2008.  Before joining NRG Energy, Mr. Howell served in a variety of operating and commercial positions with several domestic and international energy companies.

 

N.                                    DH’s Board of Managers and Officers(26)

 

The term of any current members of the board of managers of DH shall expire upon the Merger Effective Time.  The current directors of Dynegy and DH shall be eligible to be, but there shall be no obligation that they be, selected for the Board pursuant to sections 1123(a)(7) and 1129(a)(5) of the Bankruptcy Code.  What follows here is a description of the current

 


(26)  DH is the sole member of DGIN, a Delaware limited liability company.  DGIN was formed on August 1, 2011 and (a) the operating managers of DGIN have been and continue to be Robert C. Flexon, Clint C. Freeland and Kevin T. Howell and (b) the independent manager of DGIN has been and continues to be Orlando C. Figueroa.

 

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managers of DH and its officers merely for purposes of disclosure to creditors and interest holders.

 

In 2010, the following individuals served on DH’s Board of Directors: (i) J. Kevin Blodgett, (ii) Lynn A. Lednicky, and (iii) Holli C. Nichols.  Mr. Blodgett resigned as a director effective February 4, 2011, and Kent R. Stephenson was then appointed as a director effective February 5, 2011.  On March 11, 2011, Ms. Nichols resigned from DH’s Board of Directors, and Charles C. Cook was then appointed as a director effective March 12, 2011.  Mr. Cook resigned from the Board of Directors effective June 15, 2011.  Effective August 2, 2011, Robert C. Flexon, Clint C. Freeland and Kevin T. Howell were appointed to DH’s Board of Directors, replacing Mr. Lednicky and Mr. Stephenson.  Following a change in DH’s corporate form from a Delaware corporation to a Delaware limited liability company on September 1, 2011, Mr. Flexon, Mr. Freeland and Mr. Howell continued to serve on DH’s Board of Managers.  On November 1, 2011, Thomas W. Elward, Michael J. Embler, Vincent J. Intrieri and Samuel Merksamer were added to DH’s Board of Managers.

 

Set forth below are the names and positions of the current key executive officers of DH, as well as their recent predecessors.

 

Name

 

Position(s)

 

 

Robert C. Flexon

 

President and Chief Executive Officer

 

Since August 2, 2011

 

Recent Predecessors: E. Hunter Harrison, President and Chief Executive Officer (April 9, 2011 — July 10, 2011); David W. Biegler, Chief Executive Officer (March 12, 2011 — April 8, 2011); Bruce A. Williamson, President (January 1, 2008 - March 11, 2011) and Chief Executive Officer (November 11, 2002 — March 11, 2011)

 

 

 

 

 

Carolyn J. Burke

 

Executive Vice President and Chief Administrative Officer

 

Since August 30, 2011

 

Recent Predecessors: J. Kevin Blodgett, Executive Vice President of Administration and General Counsel (November 29, 2005 — February 4, 2011)(27)

 


(27)  No one was appointed to the position of Executive Vice President and Chief Administrative Officer when Mr. Blodgett left DH in February 2011.  At that time, Mr. Lednicky assumed responsibilities of administration; however, Mr. Lednicky’s title did not change.

 

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Clint C. Freeland

 

Executive Vice President and Chief Financial Officer

 

Since August 2, 2011

 

Recent Predecessors: Charles C. Cook, Executive Vice President and Chief Financial Officer (March 12, 2011 — June 15, 2011); Holli Nichols, Executive Vice President and Chief Financial Officer (November 29, 2005 - March 11, 2011)

 

 

 

 

 

Kevin T. Howell

 

Executive Vice President and Chief Operating Officer

 

Since August 2, 2011

 

Recent Predecessors: Lynn A. Lednicky, Executive Vice President, Asset Management, Development and Regulatory Affairs (January 1, 2008 — August 1, 2011); Lynn A. Lednicky, Executive Vice President, Operations (August 2, 2011 — December 31, 2011)(28)

 

 

 

 

 

Catherine B. Callaway

 

Executive Vice President and General Counsel

 

Since September 26, 2011

 

Recent Predecessors: Kent R. Stephenson, Executive Vice President and General Counsel (March 7, 2011 — September 27, 2011); J. Kevin Blodgett, Executive Vice President of Administration and General Counsel (November 28, 2005 - February 4, 2011)

 

O.                                   DH’s Independent Manager

 

As further described in the section of this Disclosure Statement entitled “The Reorganization Cases — Mediation,” on March 27, 2012, David Hershberg was appointed to the board of managers of DH (the “Independent Manager”).  In accordance with the Amended and Restated Limited Liability Company Operating Agreement of DH, dated March 27, 2012 (the “Amended LLC Agreement”), the Independent Manager has the exclusive power and authority over, and the separate and sole vote and approval to act on behalf of DH with respect to, the following actions (collectively, the “Independent Approval Matters”):

 

a.                                       Determining the appropriateness of, authorizing or filing with the United States

 


(28)  When Mr. Howell joined DH on July 5, 2011 as Executive Vice President and Chief Operating Officer, Mr. Lednicky continued to serve as Executive Vice President of Operations until December 31, 2011.

 

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Bankruptcy Court for the Southern District of New York or with any other court of competent jurisdiction, or otherwise approving or consenting to, any amendment to the initial plan, including determining the appropriateness of and consenting to or authorizing any settlements of any adversary or similar legal proceedings involving DH or any of its subsidiaries in connection with the initial plan as so amended;

 

b.                                      Determining the appropriateness of, authorizing or filing with any court of competent jurisdiction, or otherwise consenting to, any plan of reorganization (such plan, an “Alternative Plan”) for DH or its subsidiaries other than the Plan, proposed by any Person or any amendments to such Alternative Plan, including determining the appropriateness of and consenting to or authorizing any settlements of any adversary or similar legal proceedings involving DH or any of its subsidiaries in connection with such an Alternative Plan;

 

c.                                       Determining the appropriateness of and consenting to or authorizing any settlements of any actual or potential adversary or similar legal proceedings involving DH or any of its subsidiaries in connection with claims against any Affiliates of DH, including any claims or causes of action identified in the Examiner’s Report, whether pursuant to Bankruptcy Rule 9019 or otherwise;

 

d.                                      Directly or indirectly amending, restating, supplementing or otherwise modifying Sections 9.01, 9.02 or 9.03 of the Amended LLC Agreement;

 

e.                                       Following the execution of the Amended LLC Agreement, except to the extent provided for in, or contemplated or required by, any agreement, contract or other arrangement existing as of the date of the Amended LLC Agreement or that is subsequently approved by the Independent Manager in accordance with the terms of the Amended LLC Agreement, directly or indirectly, making any payment to or selling, leasing, transferring or otherwise disposing of any of DH’s properties or assets to, or purchasing or otherwise acquiring any property or assets from, or entering into or making or amending any transaction or series of related transactions, contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, Dynegy or any of its subsidiaries other than wholly owned subsidiaries of DH in transactions not specified in Sections 9.02(a) or (b) of the Amended LLC Agreement, including settling, resolving, modifying or waiving any intercompany rights or obligations (including accounts payable and accounts receivable) between DH or any of its wholly owned subsidiaries, on the one hand, and Dynegy or any of its subsidiaries (other than wholly owned subsidiaries of DH), on the other hand; provided, that the approval of the Independent Manager shall not be required in connection with any of the foregoing actions (and such actions shall not constitute Independent Approval Matters) to the extent any such action is taken in the ordinary course of DH’s business in connection with the day to day operation of DH’s business; and

 

f.                                         Taking any action, including entering into any agreement or arrangement, in furtherance of any of the above listed “Independent Approval Matters,” as set

 

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forth in clauses a. through e. above.

 

Since his appointment, as discussed below, the Independent Manager has engaged in discussions with each of the Settlement Parties, and has undertaken an independent evaluation and analysis of the issues related to the Settlement Agreement and the Plan.  As described further below, the Independent Manager has also retained Young Conaway Stargatt & Taylor LLP (“YCST”) as independent counsel to advise the Independent Manager.

 

P.                                     Information on the Plan Proponents

 

THE PLAN PROPONENTS ARE DYNEGY AND DH.  AS DESCRIBED ABOVE, DYNEGY IS A HOLDING COMPANY THAT CONDUCTS SUBSTANTIALLY ALL OF ITS BUSINESS OPERATIONS THROUGH ITS SUBSIDIARIES.  DH IS A DIRECT SUBSIDIARY OF DYNEGY AND A HOLDING COMPANY THAT CONDUCTS SUBSTANTIALLY ALL OF ITS BUSINESS OPERATIONS THROUGH ITS SUBSIDIARIES.  THE PLAN PROPONENTS ARE FURTHER DESCRIBED ABOVE.

 

VII.

 

SELECTED FINANCIAL INFORMATION

 

Attached hereto as Exhibit “C” is selected financial information for Dynegy and DH, including (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations, and (iii) Condensed Consolidated Statements of Cash Flows.  The selected financial information attached as Exhibit “C” should be read in conjunction with the financial statements and notes thereto included in the Annual Report of Dynegy and DH on Form 10-K for the year ended December 31, 2011 that was filed on March 8, 2012, which is available at the SEC’s website at http://www.sec.gov and on Dynegy’s website at http://www.dynegy.com/investor_relations/investor_relations.asp.  The quarterly financial statements of (i) Dynegy should be read in conjunction with the financial statements and notes thereto included in the Quarterly Report of Dynegy on Form 10-Q for the quarter ended September 30, 2011 that was filed on November 14, 2011 and (ii) DH should be read in conjunction with the financial statements and notes thereto included in the Quarterly Report of Dynegy and DH on Form 10-Q for the quarter ended June 30, 2011 that was filed on August 8, 2011, each of which is available at the SEC’s website at http://www.sec.gov and on Dynegy’s website at http://dynegy.com/investor_relations/investor_relations.asp.

 

VIII.

 

FINANCIAL PROJECTIONS AND ASSUMPTIONS

 

The projected operating and financial results (the “Projections”) for Dynegy have been prepared on a consolidated forward basis for the four-year period from 2012 through 2015 (the “Projection Period”).  The Projections are attached to this Disclosure Statement as Exhibit “D.”

 

THE PROJECTIONS HAVE BEEN PREPARED BY DYNEGY’S MANAGEMENT.  SUCH PROJECTIONS WERE NOT PREPARED TO COMPLY WITH THE GUIDELINES

 

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FOR PROSPECTIVE FINANCIAL STATEMENTS PUBLISHED BY THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS (“AICPA”), UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPALS (“U.S. GAAP”), OR THE RULES AND REGULATIONS OF THE SEC.  IN PREPARING THE PROJECTIONS, DYNEGY’S MANAGEMENT RELIED UPON THE ACCURACY AND COMPLETENESS OF FINANCIAL AND OTHER INFORMATION FURNISHED BY THIRD PARTIES, AS WELL AS PUBLICLY-AVAILABLE INFORMATION, AND PORTIONS OF THE INFORMATION CONTAINED IN THE PROJECTIONS MAY BE BASED UPON CERTAIN STATEMENTS, ESTIMATES, ASSUMPTIONS AND FORECASTS PROVIDED BY DYNEGY AND THIRD PARTIES WITH RESPECT TO DYNEGY’S ANTICIPATED FUTURE PERFORMANCE.  DYNEGY’S MANAGEMENT DID NOT ATTEMPT INDEPENDENTLY TO AUDIT OR VERIFY SUCH INFORMATION.  DYNEGY’S MANAGEMENT DID NOT CONDUCT AN INDEPENDENT INVESTIGATION INTO ANY OF THE LEGAL, TAX, OR ACCOUNTING MATTERS AFFECTING THE PROJECTIONS AND, THEREFORE, DOES NOT MAKE ANY REPRESENTATION AS TO THEIR POTENTIAL IMPACT ON DYNEGY FROM A FINANCIAL POINT OF VIEW.  FURTHER, DYNEGY’S INDEPENDENT ACCOUNTANTS HAVE NEITHER EXAMINED NOR COMPILED THE ACCOMPANYING ACTUAL RESULTS AND PROJECTIONS AND, ACCORDINGLY, DO NOT EXPRESS AN OPINION OR ANY OTHER FORM OF ASSURANCE WITH RESPECT TO THE PROJECTIONS, ASSUME NO RESPONSIBILITY FOR THE PROJECTIONS, AND DISCLAIM ANY ASSOCIATION WITH THE PROJECTIONS.  AS A MATTER OF COURSE, NEITHER DYNEGY, NOR DH, PUBLISH THEIR BUSINESS PLANS AND STRATEGIES OR PROJECTIONS OF THEIR ANTICIPATED FINANCIAL POSITION OR RESULTS OF OPERATIONS.  ACCORDINGLY, THE PLAN PROPONENTS DO NOT INTEND, AND DISCLAIM ANY OBLIGATION, TO: (1) FURNISH UPDATED BUSINESS PLANS OR PROJECTIONS TO HOLDERS OF CLAIMS AGAINST OR EQUITY INTERESTS IN DH, DYNEGY OR THE SURVIVING ENTITY PRIOR TO THE EFFECTIVE DATE, OR TO HOLDERS OF SECURITIES OF DH OR DYNEGY, THE SURVIVING ENTITY, REORGANIZED DYNEGY, OR ANY OTHER PARTY AFTER THE EFFECTIVE DATE; (2) INCLUDE SUCH UPDATED INFORMATION IN ANY DOCUMENTS THAT MAY BE REQUIRED TO BE FILED WITH THE SEC; OR (3) OTHERWISE MAKE SUCH UPDATED INFORMATION PUBLICLY AVAILABLE.  HOWEVER, FROM TIME TO TIME, DYNEGY MAY PREPARE UPDATED PROJECTIONS IN CONNECTION WITH PURSUING FINANCING, CREDIT RATINGS AND OTHER PURPOSES.  SUCH PROJECTIONS MAY DIFFER MATERIALLY FROM THE PROJECTIONS PRESENTED IN EXHIBIT “D” TO THIS DISCLOSURE STATEMENT.

 

THE PROJECTIONS ARE PRESENTED SOLELY FOR THE PURPOSE OF PROVIDING “ADEQUATE INFORMATION” UNDER SECTION 1125 OF THE BANKRUPTCY CODE TO ENABLE THE HOLDERS OF CLAIMS AGAINST THE SURVIVING ENTITY ENTITLED TO VOTE UNDER THE PLAN TO MAKE AN INFORMED JUDGMENT ABOUT THE PLAN AND SHOULD NOT BE USED OR RELIED UPON FOR ANY OTHER PURPOSE, INCLUDING THE PURCHASE OR SALE OF SECURITIES OF, OR CLAIMS AGAINST OR EQUITY INTERESTS IN, ANY OF THE DEBTORS OR DYNEGY.

 

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THE PROJECTIONS CONTAIN CERTAIN STATEMENTS THAT ARE “FORWARD-LOOKING STATEMENTS” WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995.  THESE STATEMENTS ARE SUBJECT TO A NUMBER OF ASSUMPTIONS, RISKS, AND UNCERTAINTIES, MANY OF WHICH ARE AND WILL BE BEYOND THE CONTROL OF THE PLAN PROPONENTS, INCLUDING THE IMPLEMENTATION OF THE PLAN, THE CONTINUING AVAILABILITY OF SUFFICIENT BORROWING CAPACITY OR OTHER FINANCING TO FUND OPERATIONS, ACHIEVING OPERATING EFFICIENCIES, CURRENCY EXCHANGE RATE FLUCTUATIONS, EXISTING AND FUTURE GOVERNMENTAL REGULATIONS AND ACTIONS OF GOVERNMENT BODIES, NATURAL DISASTERS AND UNUSUAL WEATHER CONDITIONS AND OTHER MARKET AND COMPETITIVE CONDITIONS.  HOLDERS OF CLAIMS ARE CAUTIONED THAT THE FORWARD-LOOKING STATEMENTS ARE AS OF THE DATE MADE AND ARE NOT GUARANTEES OF FUTURE PERFORMANCE.  ACTUAL RESULTS OR DEVELOPMENTS MAY DIFFER MATERIALLY FROM THE EXPECTATIONS EXPRESSED OR IMPLIED IN THE FORWARD-LOOKING STATEMENTS, AND THE PLAN PROPONENTS UNDERTAKE NO OBLIGATION TO UPDATE, MODIFY, CLARIFY OR REVISE ANY SUCH STATEMENTS FOR ANY REASON.

 

THE PROJECTIONS, WHILE PRESENTED WITH NUMERICAL SPECIFICITY, ARE NECESSARILY BASED ON A VARIETY OF ESTIMATES AND ASSUMPTIONS WHICH, THOUGH CONSIDERED REASONABLE BY DYNEGY’S MANAGEMENT, AT THE TIME WHEN MADE, MAY NOT BE REALIZED AND ARE INHERENTLY SUBJECT TO SIGNIFICANT BUSINESS, ECONOMIC, COMPETITIVE, INDUSTRY, REGULATORY, MARKET AND FINANCIAL UNCERTAINTIES AND CONTINGENCIES, MANY OF WHICH ARE AND WILL BE BEYOND DYNEGY’S CONTROL.  DYNEGY CAUTIONS THAT NO REPRESENTATIONS CAN BE MADE OR ARE MADE AS TO THE ACCURACY OF THE HISTORICAL FINANCIAL INFORMATION OR THE PROJECTIONS OR TO DYNEGY’S ABILITY TO ACHIEVE THE PROJECTED RESULTS.  SOME ASSUMPTIONS INEVITABLY WILL BE INCORRECT.  MOREOVER, EVENTS AND CIRCUMSTANCES OCCURRING SUBSEQUENT TO THE DATE ON WHICH THE PROJECTIONS WERE PREPARED MAY BE DIFFERENT FROM THOSE ASSUMED, OR, ALTERNATIVELY, MAY HAVE BEEN UNANTICIPATED, AND THUS THE OCCURRENCE OF THESE EVENTS MAY AFFECT FINANCIAL RESULTS IN A MATERIALLY ADVERSE OR MATERIALLY BENEFICIAL MANNER.  THE PLAN PROPONENTS DO NOT INTEND AND DO NOT UNDERTAKE ANY OBLIGATION WHATSOEVER TO UPDATE OR OTHERWISE REVISE THE PROJECTIONS (OR ANY ASSUMPTIONS, ESTIMATES OR OTHER INFORMATION CONTAINED THEREIN) TO REFLECT EVENTS OR CIRCUMSTANCES EXISTING OR ARISING AFTER THE DATE THIS DISCLOSURE STATEMENT IS INITIALLY FILED OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS.  THE PROJECTIONS, THEREFORE, MAY NOT BE RELIED UPON FOR ANY OTHER PURPOSE OR RELIED UPON AS A GUARANTY OR OTHER ASSURANCE OF THE ACTUAL RESULTS THAT WILL OCCUR.  IN DECIDING WHETHER TO VOTE TO ACCEPT OR REJECT THE PLAN, HOLDERS OF CLAIMS AGAINST THE SURVIVING ENTITY MUST MAKE THEIR OWN DETERMINATIONS AS TO THE REASONABLENESS OF SUCH ASSUMPTIONS AND THE RELIABILITY OF THE PROJECTIONS.

 

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The Projections should be read in conjunction with the assumptions, qualifications and explanations set forth herein and in Exhibit “D” and the historical financial information of Dynegy reported on Forms 10-K and 10-Q as filed with the SEC, including the notes thereto.  The Projections should also be read in conjunction with the Plan and this Disclosure Statement.

 

The Projections have been prepared based on the assumption that the Effective Date of the Plan will be September 30, 2012 and assume the successful implementation of the Plan.  Although the Plan Proponents presently intend to cause the Effective Date to occur as soon as is practicable following confirmation of the Plan, there can be no assurance as to when the Effective Date will actually occur given the conditions for the Effective Date to occur pursuant to the terms of the Plan.

 

The Projections are based on, among other things, the following: (a) current and projected market conditions and (b) confirmation of the Plan.

 

IX.

 

VALUATION

 

Dynegy’s financial advisor Lazard Frères & Co. LLC (“Lazard”) has estimated the value of the Company based on information available as of the date of this Disclosure Statement.  The valuation analysis is attached to this Disclosure Statement as Exhibit “F.”

 

Lazard has undertaken the valuation analysis to determine the value available for distribution to holders of Allowed Claims and Equity Interests pursuant to the Plan and to analyze the relative recoveries to such holders thereunder.  The estimated total value available for distribution to holders of Allowed Claims (the “Enterprise Value”) consists of the estimated value of the Company’s operations based on the Projections through the Projection Period, which Projections are attached hereto as Exhibit “D.”  The Projections were prepared based on a number of assumptions, which are set forth in Exhibit “D,” including that Reorganized Dynegy and its operating subsidiaries continue to operate throughout the Projection Period with 14 plants in its remaining operating subsidiaries: “CoalCo” and “GasCo”.

 

The valuation analysis assumes, among other things, that the Effective Date of the Plan occurs on September 30, 2012, and assumes the successful implementation of the Plan.  For more information on the assumptions upon which the valuations are based, see the valuation analysis attached to this Disclosure Statement as Exhibit “F.”  Although the Plan Proponents presently intend to cause the Effective Date to occur as soon as practicable following confirmation of the Plan, there can be no assurance as to when the Effective Date will actually occur given the conditions for the Effective Date to occur pursuant to the terms of the Plan.

 

THE VALUATION ATTACHED HERETO AS EXHIBIT “F” IS PRESENTED SOLELY FOR THE PURPOSE OF PROVIDING “ADEQUATE INFORMATION” UNDER SECTION 1125 OF THE BANKRUPTCY CODE TO ENABLE THE HOLDERS OF CLAIMS ENTITLED TO VOTE UNDER THE PLAN TO MAKE AN INFORMED JUDGMENT ABOUT THE PLAN AND SHOULD NOT BE USED OR RELIED UPON

 

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FOR ANY OTHER PURPOSE, INCLUDING THE PURCHASE OR SALE OF SECURITIES OF, OR CLAIMS OR EQUITY INTERESTS IN, THE SURVIVING ENTITY, THE DEBTORS OR ANY AFFILIATES.

 

THE VALUATION INFORMATION SET FORTH IN THE VALUATION ANALYSIS ATTACHED HERETO AS EXHIBIT “F” REPRESENTS A HYPOTHETICAL VALUATION OF REORGANIZED DYNEGY, WHICH ASSUMES THAT REORGANIZED DYNEGY WILL CONTINUE AS AN OPERATING BUSINESS IN ACCORDANCE WITH THE PROJECTIONS SET FORTH IN EXHIBIT “D” HERETO. THE ESTIMATED VALUE SET FORTH IN THE VALUATION ANALYSIS DOES NOT PURPORT TO CONSTITUTE AN APPRAISAL OR NECESSARILY REFLECT THE ACTUAL MARKET VALUE THAT MIGHT BE REALIZED THROUGH A SALE OR LIQUIDATION OF THE SURVIVING ENTITY, ITS SECURITIES OR ITS ASSETS, WHICH MAY BE MATERIALLY DIFFERENT THAN THE ESTIMATE SET FORTH IN THE VALUATION ANALYSIS. ACCORDINGLY, SUCH ESTIMATED VALUE IS NOT NECESSARILY INDICATIVE OF THE PRICES AT WHICH ANY SECURITIES OF REORGANIZED DYNEGY MAY TRADE AFTER GIVING EFFECT TO THE TRANSACTIONS SET FORTH IN THE PLAN. ANY SUCH PRICES MAY BE MATERIALLY DIFFERENT THAN INDICATED BY THE VALUATION.

 

X.

 

THE REORGANIZATION CASES

 

A.                                    Commencement of the Chapter 11 Cases

 

On November 7, 2011, DH and each of the other Debtors filed a voluntary petition for relief under chapter 11 of the Bankruptcy Code in the Bankruptcy Court, and the Chapter 11 Cases were assigned to the Honorable Cecelia G. Morris.

 

B.                                    First Day Pleadings

 

1.                                 Joint Administration

 

In order to expedite the administration of the Chapter 11 Cases and reduce administrative expenses, the Debtors sought the joint administration of the Chapter 11 Cases.  On November 9, 2011, the Bankruptcy Court issued an order directing the joint administration of the Debtors’ Chapter 11 Cases for procedural purposes [Docket No. 32].

 

2.                                 Case Management

 

In order to maximize the efficiency and orderly administration of the Chapter 11 Cases, the Debtors sought approval of an order implementing case management procedures.  On November 9, 2011, the Bankruptcy Court entered an order implementing case management procedures that: (a) established requirements for filing and serving notices, motions, applications, declarations, objections, responses, memoranda, briefs, supporting documents and other papers filed in these Chapter 11 Cases; (b) delineated standards for service of notices of

 

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hearings and agenda letters; (c) fixed periodic omnibus hearing dates and articulated mandatory guidelines for scheduling hearings and objection deadlines; and (d) limited matters that are required to be heard by the Bankruptcy Court [Docket No. 35].

 

3.                                 Extension of Deadline for Filing Schedules

 

Given the size and complexity of the Debtors’ businesses, the number of Debtors and the number of potential creditors of the Debtors, and the numerous burdens imposed by the Debtors’ reorganization efforts, particularly in the early days of these Chapter 11 Cases, the Debtors sought approval of an extension of the deadline for filing their Schedules.  On November 10, 2011, the Bankruptcy Court granted an extension of thirty-one (31) days, for a total of forty-five (45) days from the Petition Date, for the Debtors to file their Schedules [Docket No. 43].  The Debtors filed their Schedules with the Bankruptcy Court on December 22, 2011 [Docket Nos. 241 -245, 247-251].

 

4.                                 Retention of a Claims and Noticing Agent and Administrative Agent

 

The Debtors filed applications to employ Epiq as claims and noticing agent and administrative agent in order to expedite the distribution of notices and processing of claims and relieve the Bankruptcy Court’s Clerk’s office of the administrative burden of a potentially overwhelming number of claims.  The Debtors reviewed at least three engagement proposals from Court-approved claims and noticing agents to ensure selection through a competitive process.  The Bankruptcy Court granted the Debtors’ application to employ Epiq as claims and noticing agent on November 15, 2011 [Docket No. 58].  The Bankruptcy Court granted the Debtor’s application to retain Epiq as administrative agent to the Debtors nunc pro tunc to the Petition Date on December 6, 2011 [Docket No. 132].

 

5.                                 Limitation of Service

 

The Debtors sought approval of, and the Bankruptcy Court issued on November 15, 2011, an order (i) authorizing the Debtors to prepare a consolidated list of creditors in the format or formats maintained in the ordinary course of business in lieu of submitting a mailing matrix, (ii) authorizing the Debtors to file a consolidated list of their thirty (30) largest unsecured creditors, and (iii) approving the form and manner of notice of the commencement of the Debtors’ Chapter 11 Cases.  [Docket No. 60].  The Debtors have over 1000 creditors, and converting computerized information to a format compatible with creditor matrix requirements would be an exceptionally burdensome task and would greatly increase the risk of error with respect to information already intact on computer systems maintained by the Debtors or their agents.  Additionally, the top twenty (20) creditor lists of several of the Debtors would overlap, and certain other Debtors may have fewer than twenty (20) identifiable unsecured creditors, rendering separate top twenty (20) lists of limited utility.  Further, the Debtors sought authorization to publish notice of the commencement of the Chapter 11 Cases for the benefit of creditors who do not directly receive the notice of the commencement of the Chapter 11 Cases by mail and other creditors and parties in interest.

 

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6.                                 Business Operations

 

a.                                       Cash Management

 

As is typical with most corporate enterprises, the Debtors had in place as of the Petition Date a cash management system for the collection of receipts and the disbursement of funds.  The Debtors use a cash management system that consists of two (2) separate segregated cash management systems, one each for DH and DNE.  The cash management system for DNE is autonomously managed pursuant to the terms of a cash management agreement between DNE and certain of its non-Debtor affiliates; the cash management system for DH is not governed by a written agreement, but the accounts in each system are carefully managed through oversight procedures and controls implemented by Dynegy.  Through their use of the cash management system, the Debtors are able to facilitate cash forecasting and reporting, monitor collections and disbursements of funds, and maintain control over the administration of various bank accounts that are required to effect the collection, disbursement, and movement of cash.  Because it is critical that the Debtors’ cash be managed without interruption and all transfers of funds be coordinated for the efficient and effective operation of the Debtors’ businesses and the power generation facilities during the transition of operations of such facilities, the Debtors sought authority to continue to utilize their cash management systems.  On November 10, 2011, the Bankruptcy Court issued an interim order authorizing the Debtors to continue to use their existing cash management system, bank accounts, and disbursement accounts, provided that any check drawn or issued by the Debtors before the Petition Date may only be honored if specifically authorized by order of the Bankruptcy Court.  The Bankruptcy Court further ordered that the Debtors shall use their best efforts to print “Debtor in Possession” or “DIP” on their business forms immediately following the Petition Date [Docket No. 42].  On January 26, 2012, the Bankruptcy Court entered the final order authorizing (i) continued use of the existing cash management system, (ii) continuation of certain intercompany transactions, and (iii) continued use of the existing bank accounts signed on January 26, 2012 [Docket No. 370].

 

b.                                      Utility Services

 

In connection with the operation of their businesses and management of their properties, the Debtors obtain from certain utility companies (the “Utility Providers”) a wide range of utility services (collectively, the “Utility Services”) in the ordinary course of business for, among other things, water, sewer service, electricity, telephone, data services and other similar services.  On November 8, 2011, the Debtors filed a motion for an interim and final order (i) prohibiting utility providers from altering, refusing or discontinuing Utility Services, (ii) deeming Utility Providers adequately assured of future performance, and (iii) establishing procedures for resolving requests for additional adequate assurance of future payment [Docket No. 12].  On November 9, 2011, the Bankruptcy Court issued an interim order [Docket No. 39].  Pursuant to the interim order, within twenty (20) days of the Petition Date, the Debtors were required to deposit a sum equal to fifty percent (50%) of the Debtors’ estimated average monthly cost of Utility Services into an interest bearing, newly-created, segregated account for the purpose of providing each Utility Provider adequate assurance of payment of its post-petition Utility Services to the Debtors.

 

On November 23, 2011, Central Hudson Gas & Electric Corporation (“Central Hudson”) filed a limited objection noting that the Debtors had underestimated their average monthly utility

 

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service expenses and requesting adequate assurance of payment, including by requiring the Debtors to deposit into a segregated deposit account an amount equal to approximately three months of estimated utility service expense that would be owed to for Central Hudson [Docket No. 98].  On December 14, 2011, the Debtors filed with the Bankruptcy Court an agreed upon stipulation in respect of Central Hudson’s request for adequate assurance of payment which they wished to attach and incorporate into the proposed final order [Docket No. 201].  The stipulation provided that the Debtors would deposit $450,000 into a segregated deposit account to be held by Central Hudson subject only to Central Hudson’s post-petition claims.  Additionally, the parties agreed that if, during the pendency of the Chapter 11 Cases, the Debtors were to incur daily and/or cumulative penalties or overages to Central Hudson in excess of $75,000, the Debtors, upon notice from Central Hudson, would deliver to Central Hudson to fund Central Hudson’s segregated deposit account, an additional payment equal to 100% of the amount of penalties exceeding the $75,000 threshold.  On December 20, 2011, the Bankruptcy Court entered a final order, substantially in the form attached to the stipulation filed with the Bankruptcy Court, (i) prohibiting utility providers from altering, refusing or discontinuing Utility Services, (ii) deeming Utility Providers adequately assured of future performance, and (iii) establishing procedures for resolving requests for additional adequate assurance of future payment [Docket No. 228].

 

c.                                       Payment of Prepetition Claims of Critical Vendors, Shippers and Other Lien Claimants

 

While operating the power generation facilities for the benefit of the Owner Lessors until the transition of operational control, the Debtors need to ensure continuous delivery of goods and services necessary to ensure compliance with applicable regulatory requirements.  Any significant disruption in the Debtors’ vendor network, such as a vendor halting delivery of certain necessary materials or fuel, or a vendor refusing to perform duties necessary for the Debtors to comply with the multi-faceted regulatory regime governing the Debtors’ businesses, could result in one or both of the power generation facilities shutting down, potentially causing blackouts in the New York state area.  Such a result would have a devastating impact on the Debtors’ ability to maintain operations in accordance with regulatory requirements, pending regulatory approval to transition operational control of the power generation facilities to the Owner Lessors.  Accordingly, the Debtors sought, and on November 10, 2011, the Bankruptcy Court issued, an interim order authorizing the Debtors to pay, in their sole discretion, among other things, certain prepetition claims of critical vendors, shippers, lien claimants, and outstanding order vendors [Docket No. 44].  On January 26, 2012, the Bankruptcy Court entered the final order granting the Debtors’ motion to pay certain prepetition claims of critical vendors, shippers, and other lien claimants [Docket No. 368].

 

d.                                      Continued Marketing, Selling and Trading of Energy Through Dynegy Power Marketing, Inc.

 

As further described in the subsection of this Disclosure Statement entitled “General Information — Overview of the Debtors’ Businesses,” Dynegy Danskammer and Dynegy Roseton are not currently authorized NYISO customer and market participants.  DPM, a non-Debtor affiliate and an energy marketer that is a registered NYISO customer and market participant and that is authorized to sell energy, capacity and certain ancillary services at market-based rates,

 

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provides energy management services to Dynegy Roseton and Dynegy Danskammer pursuant to energy management agreements dated August 4, 2011 (the “EMAs”).  Dynegy Danskammer and Dynegy Roseton rely on DPM’s services under the EMAs to fulfill their regulatory obligations.  The Debtors sought the Bankruptcy Court’s authority to continue, in the ordinary course of business, the marketing, sale and trading of energy through DPM.  The Bankruptcy Court issued an interim order on November 9, 2011 and a final order on December 6, 2011 authorizing, but not requiring, the Debtors to continue operating, in the ordinary course of business, under the terms of the EMAs with DPM, including with respect to the marketing and sale of energy, capacity and certain ancillary services [Docket Nos. 38, 136].

 

e.                                       Payment of Prepetition Taxes and Assessments

 

The Debtors have several pre-petition tax obligations.  In certain instances during the ordinary course of business, the Debtors collect sales tax from their customers in connection with the sale of energy (the “Sales Taxes”) and periodically remit them to taxing authorities.  The Debtors also incur use taxes (the “Use Taxes”) in connection with the Debtors’ power generation activities, such as when the Debtors purchase tangible personal property and certain services, including power generation-related equipment.  The Debtors’ real and personal property is subject to state and local property taxes.  In addition, certain taxing authorities impose taxes on the Debtors for their use of petroleum, coal, natural gas and certain other hydrocarbons in connection with their generation of power.  The Debtors are also responsible for franchise taxes to certain taxing authorities to operate or otherwise do business in the applicable taxing jurisdiction.  Finally, due to the nature of the Debtors’ business, the federal government and various municipal and county governments require the Debtors to obtain permits or other business licenses and pay fees associated with such permits or licenses to conduct operations in their jurisdictions (the “Business License Fees”).  The Debtors estimated that the total amount of prepetition taxes and assessments owing to the various taxing authorities would not exceed approximately $1,205,000 and sought authorization to pay the total amount of prepetition taxes and assessments that they owe.  On November 9, 2011, the Bankruptcy Court issued an interim order authorizing, but not requiring, the Debtors to pay, in their sole discretion, all prepetition Sales Taxes, Use Taxes, and up to $105,000 in certain Business License Fees to all taxing authorities whether such taxes are currently determined to be owed or assessed at any time prior to a final hearing [Docket No. 37].  On December 6, 2011, the Bankruptcy Court entered a final order authorizing, but not requiring, the Debtors to pay all prepetition taxes and assessments to all taxing authorities, regardless of whether such prepetition taxes and assessments are presently determined to be owed or later assessed [Docket No. 135].

 

f.                                         Continuation of Prepetition Insurance Policies

 

In connection with their business operations, the Debtors maintain, both directly and through Dynegy, multiple insurance policies (collectively, the “Insurance Policies”) in respect of, among other things, environmental site liability, workers compensation, business automobiles, excess liability and property liability, directors and officers, foreign liability, marine open ocean cargo, charterer’s legal liability, special coverage, non-owned aviation, property damage and business interruption, commercial crime and fiduciary.  The continuation of the Insurance Policies is crucial given that they preserve the value of the Debtors’ assets and, in many cases, such coverage is required by various regulations, laws and contracts that govern the Debtors’

 

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business operations.  The Debtors sought authority to continue performing their obligations under the Insurance Policies, including the authority to pay any outstanding prepetition amounts, including adjusted premiums and installment payments that may come due in the ordinary course of business.  On November 9, 2011, the Bankruptcy Court issued an interim order authorizing the Debtors, in their discretion, to honor the terms of their Insurance Policies and pay installment payments that come due after the Petition Date but prior to the entry of a final order [Docket No. 36].  The Bankruptcy Court entered a final order on December 6, 2011 [Docket No. 134].

 

g.                                      Employee Wages and Benefits

 

Of particular importance to the Debtors’ efforts to stabilize their businesses and continue their operations uninterrupted was their ability to maintain the continued support and cooperation of their employees.  Accordingly, on the Petition Date, the Debtors filed a motion, in accordance with their existing plans, programs, and policies, but subject to certain limitations, to (i) pay prepetition wages, salaries, and other compensation to the Debtors’ employees, (ii) continue to pay and honor obligations relating to employee medical, insurance and other benefit programs, (iii) reimburse prepetition employee expenses, (iv) make payments relating to all deductions and withholdings, and (v) make all payments to third parties relating to the foregoing payments and contributions.  The Bankruptcy Court issued an interim order on November 16, 2011 and a final order granting the relief requested on December 6, 2011, substantially in the form requested by the Debtors [Docket Nos. 72, 133].

 

h.                                      Intercompany Funding

 

Prior to the Petition Date, DNE, Hudson Power, Dynegy Danskammer and Dynegy Roseton (collectively, the “Borrower Debtors”) funded their operations through cash flows generated by their businesses and certain intercompany funding provided by DH. Without such financing provided by DH, the Borrower Debtors would not have had the ability to continue operations at their energy-producing facilities and continue to generate revenues through the sale of such energy.  The Borrower Debtors had an immediate need to obtain funding in order to permit the orderly continuation of their business operations and implement the transition of the Leased Facilities to the Owner Lessors.  In addition, the Borrower Debtors continued to have other working capital and administrative funding needs.  Given the importance of the Debtors preserving and maintaining their estates during the transition period, the Debtors filed a motion (the “Intercompany Credit Facility Motion”) seeking authorization (i) to enter into secured post-petition financing arrangements (the “Intercompany Credit Facility”), pursuant to which DH would provide $15 million of intercompany financing on a revolving post-petition basis to the Borrower Debtors; and (ii) for the Borrower Debtors (a) to guaranty, on a joint and several basis, the obligations arising under the Intercompany Credit Facility, (b) use proceeds from the Intercompany Credit Facility for working capital, corporate needs and administrative costs, and (c) grant liens and provide super-priority administrative claims.

 

On November 15, 2011, the Bankruptcy Court issued an order granting the Intercompany Credit Facility Motion on a limited, interim basis [Docket No. 59].  Specifically, the Bankruptcy Court authorized (i) the Debtors to enter into the Intercompany Credit Facility with a limited borrowing capacity of $5 million, (ii) the Borrower Debtors to use the proceeds of the Intercompany Credit Facility for working capital, general corporate purposes, and certain

 

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administrative expenses, and (iii) the Borrower Debtors to provide DH senior superpriority administrative expense claims with priority over any and all other claims, subject only to limited exceptions, against the Borrower Debtors.  On December 6, 2011, the Bankruptcy Court entered a revised form of order granting the Intercompany Credit Facility Motion on a limited, interim basis [Docket No. 131].  Among other things, the revised form of interim order increased the Borrower Debtors’ borrowing capacity from $5 million to $7.5 million for the period pending the final hearing on the Intercompany Credit Facility Motion.

 

On December 19, 2011, the Bankruptcy Court entered a final order (the “Intercompany Credit Facility Order”) authorizing (i) the Debtors to enter into the Intercompany Credit Facility (to the extent not previously executed or delivered); and (ii) the Borrower Debtors (a) to borrow on an unsecured superpriority basis up to an aggregate principal amount of $15 million from DH for working capital, general corporate purposes, and certain administrative expenses incurred in their Chapter 11 Cases, including, without limitation, to pay interest in connection with the Intercompany Credit Facility, (b) to guaranty, on a joint and several basis, all obligations under the Intercompany Credit Facility, and (iii) to provide DH superpriority administrative expense claims with priority over any and all other claims, subject only to certain exceptions, against the Borrower Debtors [Docket No. 225].  The Intercompany Credit Facility Order contains no limitations on the use of the loans under the Intercompany Credit Facility to, among other things, assert any claims and defenses against DH or its respective agents, affiliates, subsidiaries, directors, officers, representatives, attorneys or advisors.  DH has largely funded the Intercompany Credit Facility with payments received from Dynegy pursuant to the Undertaking Agreement.  As of June 8, 2012, there is approximately $13 million outstanding under the Intercompany Credit Facility.

 

i.                                          Rejection of Lease Documents Nunc Pro Tunc to the Petition Date

 

On November 7, 2011, the Debtors filed the Motion to Reject the Lease Documents [Docket No. 5].(29)  As set forth in the Motion to Reject, the Debtors believed that the rejection of the Lease Documents was an appropriate exercise of their business judgment because the Lease Documents were significantly burdensome and impaired the Debtors’ ability to reorganize absent rejection.

 

The Leased Facilities have earned revenue principally in three ways:  (i) the sale of electricity and related services to either NYISO or through third-party bilateral agreements; (ii) the sale of their “capacity” to either NYISO or through third-party bilateral agreements; and (iii) to a lesser extent, the sale of ancillary electrical services.  With respect to the sale of electricity, NYISO dispatches power generated at the Leased Facilities to meet real-time electricity demand in New York.  Pricing for the electricity is generally determined by the least efficient unit that NYISO needs to meet demand for a respective zone.  For the Debtors to earn revenue from

 


(29)  On November 7, 2011, the Debtors also filed a Motion Pursuant to Section 365(d)(3) of the Bankruptcy Code and Federal Rule of Bankruptcy Procedure 9014 for Entry of an Order Extending the Time for Performance under the Lease Documents (which sought to temporarily extend the deadline by which they had to make a semiannual rent payment under the Lease Documents) [Docket No. 7], pending the Court’s decision on the rejection of the Lease Documents and the effective date of such rejection.  On November 8, 2011, the Debtors and the parties to the Lease Documents consensually agreed to extend the deadline for making such payment until after the hearing on the Motion to Reject.  See Consent Order [Docket No. 55].

 

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generating electricity, their costs for fuel and operations had to remain lower than the least efficient unit needed by NYISO.  To sell “capacity,” non-Debtor affiliate DPM marketed its commitment for the units to be available as needed during future market periods.  Pricing for these sales was calculated as a function of NYISO’s annual required reserve margin, the estimated net cost of “new entrant” generation, estimated peak demand, and the actual amount of capacity bid into the market at or below the demand curve.  Lastly, the Debtors received a relatively small amount of revenue in exchange for providing miscellaneous electrical services.

 

As explained in the Motion to Reject, the onerous terms of the Lease Documents impeded any possible improvement in the Debtors’ financial health.  In addition to cash payments totaling approximately $82.5 million due on November 8, 2011, the Lease Documents required future payments of approximately $179 million in 2012, $142 million in 2013, $143 million in 2014, $143 million in 2015 and $105 million in the aggregate due from 2016 through lease expiration (February 8, 2035 for Dynegy Roseton and May 8, 2031 for Dynegy Danskammer).  These upcoming lease payments would have dwarfed all current forecasts for potential cash flow that could be generated from the Leased Facilities over the remaining terms of the Facility Leases.

 

In addition to such large semiannual rent payments, the Lease Documents imposed significant ongoing operational costs on the Debtors.  Among other things, the Debtor Lessees were required to maintain the Leased Facilities in accordance with “prudent industry practice” and in compliance with environmental laws, which required the Debtor Lessees to make substantial capital expenditures to comply with environmental upgrade and regulatory requirements, as well as to make needed repairs.  In particular, the Lease Documents required that Dynegy Danskammer comply with newly enacted environmental regulations mandating upgrades to the Danskammer Facility by 2014 at a cost of approximately $375 million.  While these capital costs could have been avoided by completely switching the plants to natural-gas operations, conversion would have required additional upgrades to the gas delivery systems at the Leased Facilities (which would have entailed capital costs in an amount approaching $10-15 million) and, in any event, would have significantly diminished the amount of revenue generated by the Leased Facilities.  Dynegy Roseton would likewise have needed to make substantial capital expenditures pursuant to the Lease Documents to upgrade the Roseton Facility to comply with a number of federal and state regulations scheduled to become effective in the next few years.  These ongoing expenses would have exacerbated the economic burden to the Debtors caused by the Lease Documents.

 

The Debtor Lessees have remained in physical possession and have operated the Leased Facilities for the benefit of the PSEG Entities and the Lease Certificate Holders in order to comply, to the extent required, with applicable non-bankruptcy rules and regulations in connection with the turnover of the Leased Facilities, pending receipt of federal and state regulatory approval for the turnover of the Leased Facilities.  Specifically, section 203 of the FPA requires that public utilities such as the Debtor Lessees obtain prior authorization from FERC before changing control of facilities such as the interconnection facilities that connect with each of the Leased Facilities.  Section 70 of the New York Public Service Law similarly requires that the Owner Lessors obtain regulatory approval from the NYPSC before taking control of the Leased Facilities.

 

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On November 8, 2011, the Debtor Lessees filed an application with FERC requesting approval for the Owner Lessors to assume operational control of the plants and the associated interconnection facilities.  Also on November 8, 2011, the Debtor Lessees filed a verified petition with the NYPSC requesting a declaratory ruling disclaiming jurisdiction over the change in control or, in the alternative, expedited approval for the termination of the leasehold interests in the Leased Facilities and the reversion of the Leased Facilities and control over their operation to the Owner Lessors.  A number of parties intervened in one or both of these proceedings and commented on or protested the applications, addressing, among other things, issues relating to the continued operation and transition of control over the plants.  On January 17, 2012, the Debtor Lessees asked each of the FERC and the NYPSC, respectively, to hold the proceeding before it in abeyance until further notice to allow the Debtor Lessees time to pursue discussions that could resolve the issues raised by the intervenors in those proceedings.  The Debtor Lessees may amend the applications to provide for the assumption of operational control of the plants and associated interconnection facilities by a third party other than the Owner Lessors.

 

The Debtor Lessees have taken additional steps to facilitate an orderly and expeditious transition of operational control of the Leased Facilities for the benefit of the PSEG Entities and the Lease Certificate Holders, or any other potential transferee.  To ensure compliance pending regulatory approval, among other things, the Debtor Lessees have developed a transition plan, which sets forth the proposed terms and conditions pursuant to which the Debtor Lessees will continue to operate the Leased Facilities after the Lease Documents are rejected and until the Owner Lessors, any other PSEG Entity or the Lease Certificate Holders or any designee of the foregoing parties becomes eligible to control the Leased Facilities.  This transition plan was attached to the Declaration of Kent R. Stephenson in Support of First Day Motions filed on November 8, 2011 [Docket No. 18].

 

From and after the Petition Date, none of the Debtors have any financial obligations (including rent payment obligations) arising under the Facility Leases which relate to or otherwise result, arise or stem from the Debtor Lessees’ possession and operation of the Leased Facilities to any of the PSEG Entities, the Lease Certificate Holders or the Lease Trustee.  In addition, the Debtors have worked diligently to maintain the Leased Facilities in order to physically turn over the Leased Facilities, under applicable non-bankruptcy rules and regulations, to one or more of the Owner Lessors, any other PSEG Entity, or the Lease Certificate Holders or any designees of any of the foregoing (collectively, the “Transferees”) or any other potential purchasers as discussed below.

 

On January 18, 2012, the Debtors filed a Status Update Regarding Regulatory Matters and Transition of Operational Control of Leased Facilities, describing the Debtor Lessees’ continued maintenance and operation of the Leased Facilities, despite their interest in transitioning such facilities to a Transferee [Docket No. 335].  On January 24, 2012, the Lease Trustee filed a response to the Debtors’ Status Update Regarding Regulatory Matters and Transition of Operational Control of Leased Facilities [Docket No. 355].

 

Central Hudson Gas and Electric Corporation, the PSEG Entities, the Lease Trustee and the Creditors’ Committee filed objections to the Motion to Reject [Docket Nos. 103, 164, 167, 181].  The PSEG Entities’ objections to the Motion to Reject were resolved pursuant to the PSEG Settlement (defined below).  See PSEG Settlement at ¶¶ 1-3.  Thereafter, the other

 

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objections to the Motion to Reject were substantially resolved and the Bankruptcy Court entered the Stipulated Rejection Order on December 20, 2011 [Docket No. 227] and the Amended Stipulated Rejection Order on December 28, 2011 [Docket No. 273] authorizing the Debtors to reject the Lease Documents, subject to, among other things, continued litigation over and later determination of, (a) the effective date of the rejection, which is to be no later than December 2, 2011 pursuant to the Stipulated Rejection Order, and (b) the amount of the Lease Trustee’s damages claim arising from the rejection.

 

All remaining disputes and claims related to the rejection of the Lease Documents and the related Adversary Proceeding have been resolved by the Settlement Agreement.  Pursuant to the Settlement Agreement, the Lease Trustee was granted an Allowed Unsecured Claim against DH in the amount of $540,000,000, as well as certain Allowed Claims in the Chapter 11 Cases of Dynegy Roseton and Dynegy Danskammer, subject to an aggregate cap on recoveries on account of all such claims of $571,507,840 (the “Lessor Recovery Cap”).  Furthermore, on the Settlement Effective Date, the parties to the Adversary Proceeding filed a stipulation of dismissal with prejudice and released any potential claims relating to or arising from disputes with respect to, among other things, the Lease Documents and the Adversary Proceeding.  On June 8, 2012, the Bankruptcy Court “so ordered” the stipulation of dismissal [Adv. Docket No. 31].

 

Pursuant to the Settlement Agreement, the Debtors, with the cooperation of the PSEG Entities, will use their commercially reasonable efforts to sell the Roseton and Danskammer power generation facilities (including all of the power generation units and other structures and equipment, the related land and all other assets related to the operation thereof) (all such assets together, the “Facilities”), including all of the Debtors’ and the PSEG Entities’ interests in the Facilities, as soon as reasonably practicable; provided, that neither the Debtors nor the PSEG Entities will execute a binding sale agreement or related ancillary agreements with respect to the Facilities (or any portion thereof) without the prior written consent of the Lease Trustee and the Creditors’ Committee and without prior consultation with the Consenting Senior Noteholders, which consent and consultation is not to be unreasonably withheld, delayed, or conditioned.

 

The terms of any sale process with respect to either or both (or any portion of) the Facilities, will be mutually agreed upon among the Debtors, the Creditors’ Committee, RCM and the Lease Trustee, will be contingent on receipt of all required regulatory approvals (which the Debtors, the Lease Trustee and the PSEG Entities have agreed to cooperate with one another to obtain), and will include provisions to the effect that in connection with any such sale, the consideration to be attributed to the PSEG Entities’ interests shall equal the product of the percentage of PSEG Entities’ interests in such Facilities (based on the value of the PSEG Entities’ interests in such Facilities) and the total consideration for such Facilities; provided, that the percentages of the PSEG Entities’ and the Debtors’ respective interests in such Facilities will be determined by and among the Debtors, the PSEG Entities, the Creditors’ Committee and the Lease Trustee, in consultation with the Consenting Senior Noteholders, based on the values of the Debtors’ and the PSEG Entities’ respective interests in such Facility, and in the event of any dispute, the Bankruptcy Court will have jurisdiction to resolve such dispute.

 

For more information on the Settlement Agreement, see the section of this Disclosure Statement entitled “The Reorganization Cases — Settlement Agreement.”

 

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C.                                    Representation of DH

 

On or about September 27, 2011, DH and the other Debtors retained, subject to the Bankruptcy Court’s approval, Sidley Austin LLP (“Sidley”) as general bankruptcy counsel in connection with a potential chapter 11 filing of the Debtors in the event the Company’s restructuring efforts could not be completed fully out of court.  Sidley has been acting as lead counsel for the Debtors in the Chapter 11 Cases.  On November 15, 2011, the Debtors sought the Bankruptcy Court’s authority to employ and retain Sidley, as attorneys for the Debtors and Debtors in Possession, nunc pro tunc to the Petition Date pursuant to section 327(a) of the Bankruptcy Code [Docket No. 69] (the “Sidley Retention Motion”).  On December 6, 2011, the Bankruptcy Court entered an order granting the Sidley Retention Motion [Docket No. 138].

 

On or about April 11, 2011, White & Case LLP (“W&C”) was retained with the approval of Dynegy’s Board of Directors to represent Dynegy and its subsidiaries in connection with their Prepetition Restructurings and related matters.  Based on all facts and circumstances available to W&C, W&C advised that there was a commonality of interests as between Dynegy and its subsidiaries that permitted simultaneous joint representation in connection with the Prepetition Restructurings.  As indicated above, however, upon contemplation of a potential chapter 11 filing of the Debtors, Sidley was engaged as separate bankruptcy counsel for the Debtors in recognition of the statutory requirement of “disinterestedness” imposed by section 327 of the Bankruptcy Code (which has no application outside of bankruptcy).

 

Given, among other things, the substantial services relating to the Lease Documents performed by W&C in connection with Prepetition Restructurings and its particular expertise with the rejection of power plant leases, the Debtors determined that W&C should continue to represent the Debtors as special counsel in matters relating to the Lease Documents, including in connection with the Chapter 11 Cases, subject to the Bankruptcy Court’s approval.  On November 18, 2011, the Debtors sought the Bankruptcy Court’s authority to employ and retain W&C as special counsel to the Debtors nunc pro tunc to the Petition Date pursuant to section 327(e) of the Bankruptcy Code [Docket No. 91] (the “W&C Retention Motion”).  The United States Trustee for the Southern District of New York (the “United States Trustee”), the PSEG Entities, and the Lease Trustee each filed objections to the W&C Retention Motion [Docket Nos. 162, 166, 169], and the Creditors’ Committee filed a pleading expressing concerns about the W&C Retention Motion [Docket No. 181].  The objectors to the W&C Retention Motion generally argued that: (a) W&C’s representation of both the Debtors and of Dynegy prior to the commencement of these Chapter 11 Cases, and its continuing postpetition representation of Dynegy, created a conflict of interest and precluded W&C from being “disinterested” as required under the Bankruptcy Code; and (b) the proposed scope of W&C’s retention with respect to (i) the rejection of the Lease Documents and (ii) the Lease Guaranty Claims arising therefrom involved an issue central to the Debtors’ reorganization, which went beyond the “special counsel” role contemplated by the Bankruptcy Code section 327(e).  In accordance with the PSEG Settlement, the PSEG Entities withdrew their objection to the W&C Retention Motion on December 15, 2011 [Docket No. 206].  On December 23, 2011, the Debtors filed a response to the remaining objections to the W&C Retention Motion pursuant to which the W&C Retention Motion was withdrawn [Docket No. 253].  As set forth in the Debtors’ response, although W&C disputed the objections to its retention, to avoid any further opportunity for distraction which the objections created and to avoid even the appearance of a conflict, W&C and the Debtors

 

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determined to withdraw W&C’s retention application.  W&C continues to appear in the Chapter 11 Cases solely as counsel for Dynegy.

 

On November 15, 2011, the Debtors sought the Bankruptcy Court’s authority to employ and retain FTI Consulting, Inc., as financial advisor and consultant, nunc pro tunc to the Petition Date pursuant to section 327(a) of the Bankruptcy Code [Docket No. 64] (the “FTI Retention Motion”).  On December 16, 2011, the Bankruptcy Court entered an order granting the FTI Retention Motion [Docket No. 213].

 

On March 27, 2012, the Independent Manager retained YCST to serve as independent counsel to advise him in the exercise of his fiduciary duties.  On April 13, 2012, the Debtors sought the Bankruptcy Court’s authorization to retain YCST (the “Young Conaway Retention Application”) [Docket No. 575].  On April 25, 2012, DO S1 Limited (“CQS”) filed an objection to the Young Retention application [Docket No. 609].  The Bankruptcy Court approved the Young Conaway Retention Application at a hearing held on May 1, 2012 and entered an order approving the Young Conaway Retention Application on May 17, 2012 [Docket No. 700].

 

Prior to the Petition Date, the Debtors employed certain professionals, in the ordinary course of business, to render services to their estates (such professionals collectively, the “Ordinary Course Professionals”) which were necessary to the continuation of the Debtors’ day-to-day operations.  On November 15, 2011, the Debtors sought the Bankruptcy Court’s authority to retain, employ and compensate certain Ordinary Course Professionals [Docket No. 65] (the “Ordinary Course Professionals Retention Motion”).  On December 16, 2011, the Bankruptcy Court entered an order granting the Ordinary Course Professionals Retention Motion [Docket No. 214].

 

D.                                    Formation and Representation of the Creditors’ Committee.

 

On November 16, 2011, the United States Trustee appointed the Creditors’ Committee.  On December 9, 2011, the Creditors’ Committee filed an application to retain and employ as counsel the law firm of Akin Gump Strauss Hauer & Feld LLP, nunc pro tunc to November 16, 2011 [Docket No. 174], which application was approved by the Bankruptcy Court on December 27, 2011 [Docket No. 265].

 

On December 10, 2011, the Creditors’ Committee filed an application to employ Blackstone Advisory Partners L.P., as financial advisor to the Creditors’ Committee, nunc pro tunc to November 18, 2011 [Docket No. 177].  On January 19, 2012, the Bankruptcy Court entered an order approving the employment of Blackstone Advisory Partners L.P. [Docket No. 338].

 

On December 9, 2011, the Creditors’ Committee filed a motion for entry of an order (i) clarifying its requirements to provide unsecured creditors with access to information pursuant to sections 1102(b)(2)(A) and (B) of the Bankruptcy Code and (ii) authorizing the retention of Kurtzman Carson Consultants, LLC as information agent for the Creditors’ Committee nunc pro tunc to December 8, 2011 [Docket No. 175].  The Bankruptcy Court entered an order granting such motion on December 27, 2011 [Docket No. 264].

 

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On February 17, 2012, the Creditors’ Committee filed an application to employ ICF Resources, LLC as energy markets advisors to the Creditors’ Committee [Docket No. 420].  The Bankruptcy Court entered an order granting such application on March 14, 2012 [Docket No. 520].

 

The Creditors’ Committee is currently comprised of the following members:

 

Wilmington Trust, National Association

1100 N. Market Street

Wilmington, DE 19890

Attn:  Steven Cimalore

 

U.S Bank National Association

60 Livingston Avenue, EP-MN-WSID
St. Paul, MN 55107-2292
Attn:  Pamela J. Wieder

 

 

 

Wells Fargo Bank, N.A.

45 Broadway, 12th Floor
New York, NY 10006

Attn:  James R. Lewis

 

Roseton OL, LLC
The Nemours Building

1007 Orange St., Suite 1469

Wilmington, DE 19801

Attn:  Scott Jennings

 

 

 

Central Hudson Gas & Electric Corporation

284 South Avenue

Poughkeepsie, NY 12601

Phone: (845) 486-5831

Fax: (845) 486-5782

Attn: Paul A. Colbert

 

 

 

E.                                      Interim Compensation and Reimbursement of Professional Persons and Committee Members

 

In an effort to permit the Debtors to closely monitor the costs of administration of the Chapter 11 Cases, forecast cash flows, and implement efficient cash management procedures, and to allow the Bankruptcy Court and parties in interest, including the U.S. Trustee, to ensure the reasonableness and necessity of the compensation and reimbursement requested, the Debtors developed procedures for interim compensation and reimbursement of expenses of professionals whose services are authorized by the Bankruptcy Court pursuant to either section 327 or section 1103 of the Bankruptcy Code and for reimbursement of reasonable out-of-pocket expenses incurred by members of any statutory committee of unsecured creditors appointed in the Chapter 11 Cases.  On November 15, 2011, the Debtor moved for the entry of an order establishing an orderly, regular process for the monthly allowance and payment of compensation and reimbursement of expenses (the “Interim Compensation Motion”).  The Bankruptcy Court approved the Interim Compensation Motion on December 6, 2011 [Docket No. 137].

 

F.                                      Adversary Proceeding Filed by the Lease Trustee

 

On November 11, 2011, the Lease Trustee commenced an adversary proceeding against Dynegy Danskammer, Dynegy Roseton and DH (Adversary Proceeding No. 11-09083) (the “Adversary Proceeding”) seeking a declaration that: (i) the Lease Documents are not leases of real property; (ii) the Lease Documents are financings, not leases; and (iii) notwithstanding the lease rejection claims, Lease Guaranty Claims are not subject to a cap pursuant to section

 

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502(b)(6) of the Bankruptcy Code.  On January 6, 2012, the Lease Trustee filed its Amended Complaint [Adv. Docket No. 6] in which it added an additional claim for relief, seeking a determination of the allowed amount of the Lease Trustee’s claims against Dynegy Danskammer, Dynegy Roseton and DH and asserting that it was owed additional amounts by Dynegy Danskammer and Dynegy Roseton as post-petition administrative claims on account of the period from and after the Petition Date through the date of turnover of possession and control of the Leased Facilities and additional administrative claims related to environmental, maintenance and other issues concerning the Leased Facilities.

 

On January 25, 2012, Dynegy Danskammer, Dynegy Roseton and DH filed their Answer and Counterclaims to the Amended Complaint of the Lease Trustee [Adv. Docket No. 18].  Therein, Dynegy Danskammer, Dynegy Roseton and DH, among other things, (i) asserted that the Lease Trustee’s claims were limited as described therein, (ii) sought a judicial determination that the Lease Documents were true leases of real property subject to the damages cap of section 502(b)(6) of the Bankruptcy Code, (iii) sought a judicial determination that the Lease Guarantees were subject to the damages cap of 502(b)(6), (iv) sought a judicial determination that the effective date of the lease rejection was the Petition Date, (v) sought a judicial determination that no post-petition amounts were owed to the Lease Trustee as administrative claims, and (vi) asserted, by way of an affirmative counterclaim, that the Lease Trustee was required to turn over overpaid prepaid rent under the Facility Leases for periods after the Petition Date, which amounts constituted recoverable prepaid rent or security deposits.  Dynegy Danskammer, Dynegy Roseton and DH also objected on a number of grounds to the Lease Trustee’s assertion that it was entitled to administrative claims.  Each of Dynegy Danskammer, Dynegy Roseton and DH and the Lease Indenture Trustee subsequently, among other things, filed motions for judgment on the pleadings.

 

On March 21, 2012, a hearing was held on both motions for judgment on the pleadings and at the conclusion of the hearing, the Bankruptcy Court took under submission the issue of whether the Facility Leases were leases of real or personal property.  All disputes and claims related to the Adversary Proceeding or otherwise related to the rejection of the Lease Documents have been resolved by the Settlement Agreement.  On the Settlement Effective Date, the Adversary Proceeding was dismissed with prejudice and any potential claims relating to or arising from disputes with respect to, among other things, the Adversary Proceeding and the Lease Documents were released.  For more information on the Settlement Agreement see the section of this Disclosure Statement entitled “The Reorganization Cases — Settlement Agreement.”

 

G.                                    Motion to Dismiss

 

On November 18, 2011, the PSEG Entities filed a Motion for Entry of an Order Dismissing Debtors’ Chapter 11 Cases Pursuant to 11 U.S.C. § 1112(B)  [Docket No. 92] (the “Motion to Dismiss”).  In the Motion to Dismiss, the PSEG Entities sought to dismiss the Chapter 11 Cases, alleging, among other things, that the Debtors improperly filed these cases solely in order to cap damages related to the Facility Leases pursuant to section 502(b)(6) of the Bankruptcy Code.  In accordance with the PSEG Settlement, the PSEG Entities filed a notice of withdrawal of their Motion to Dismiss with the Bankruptcy Court on January 4, 2011 [Docket No. 292].

 

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H.                                    PSEG Settlement

 

On December 13, 2011, Dynegy, the Debtors and the PSEG Entities entered into a binding term sheet to settle and resolve all issues and disputes in lieu of further litigation (the “PSEG Settlement”) regarding (a) the Facility Leases, (b) the Motion to Reject, (c) the Motion to Dismiss, (d) the PSEG Entities’ complaint filed in New York Supreme Court, and (e) all of the parties’ rights and claims arising under the Lease Documents, including without limitation the Tax Indemnity Agreement (the “TIA”).  Pursuant to the PSEG Settlement, the parties agreed to ask the Bankruptcy Court to enter an order approving the rejection of the Lease Documents effective as of November 7, 2011, and the parties agreed that all of the PSEG Entities’ rights and claims under the TIA would be settled for (i) an allowed unsecured claim of RCM against DH in the amount of $110 million and (ii) a cash payment in the amount of $7.5 million to be paid to RCM by Dynegy or a non-debtor subsidiary of Dynegy within five days of the order approving the rejection of the Lease Documents becoming effective.

 

Pursuant to the PSEG Settlement, among other things, Dynegy and DH agreed to amend the Plan to implement the parties’ agreement and to provide the PSEG Entities with the benefit of certain releases, exculpations and injunctions provided in the Plan.  Such amendments are reflected in the Plan.  In exchange, the PSEG Entities, among other things, stipulated and agreed that the Lease Documents are true leases not subject to recharacterization as financings, and have stipulated and agreed that they would not take a position regarding whether the property covered by the Leases is real property or personal property.  The PSEG Entities also agreed to (a) support the confirmation of the Plan, (b) withdraw their Motion to Dismiss and their other opposition papers filed with the Bankruptcy Court, (c) continue the stay with respect to the PSEG Litigation in the New York Supreme Court, and upon the Plan becoming effective, dismiss with prejudice that action, and (d) transfer to Dynegy (1) their right to any recovery on their equity interests in the Leased Facilities and (2) any claims they have against the Lease Trustee for any damages arising from the Lease Trustee’s efforts to recharacterize the Lease Documents as financings.

 

On December 20, 2011, the Bankruptcy Court entered the Stipulated Rejection Order authorizing the Lease Documents to be rejected, subject to, among other things, the continued litigation over and later determination of, (a) the effective date of the rejection, which is to be no later than December 2, 2011, and (b) the amount of the Lease Trustee’s damages claim arising from the rejection [Docket No. 227].  The Stipulated Rejection Order approved the PSEG Settlement subject to any objections to be filed no later than December 26, 2011.  To address the Lease Trustee’s informal reservation, the parties to the Stipulated Rejection Order agreed that, to the extent that it is later determined that the PSEG Settlement assigns any rights or claims that the PSEG Entities have previously assigned to the Lease Trustee or may not otherwise properly assign, the PSEG Entities shall convey to the Debtors a one hundred percent (100%) economic participation in any interest otherwise sought to be assigned.  The parties submitted the Amended Stipulated Rejection Order to reflect this agreement, which was entered on December 28, 2011, no formal objections to the PSEG Settlement having been filed. [Docket No. 273].

 

All remaining disputes related to the PSEG Entities’ claims have been resolved by the Settlement Agreement, as described below.  On the Settlement Effective Date, the PSEG Litigation and Adversary Proceeding were dismissed with prejudice and any potential claims

 

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relating to or arising from disputes with respect to, among other things, the PSEG Litigation, the Adversary Proceeding, and the Lease Documents were released.

 

I.                                         Appointment of Examiner and Examiner’s Report

 

On November 11, 2011, the Lease Trustee filed a motion with the Bankruptcy Court seeking the appointment of an examiner pursuant to section 1104(c) of the Bankruptcy Code [Docket No. 48] (the “Examiner Motion”).  In the Examiner Motion, the Lease Trustee alleged, among other things, that the Prepetition Restructurings constituted a scheme, involving fraudulent transfers, breach of contract, and breach of fiduciary duties, to improperly benefit Dynegy and its equity holders at the expense of DH’s creditors, and requested that the Bankruptcy Court appoint an examiner to investigate and report on conduct of DH, certain affiliates of DH, the directors of the foregoing, and certain significant equity holders of Dynegy in connection with the Prepetition Restructurings.  The Debtors and Dynegy believed that the Lease Trustee’s allegations lacked merit, and on December 9, 2011, both Dynegy and the Debtors filed objections to the Examiner Motion [Docket Nos. 170, 173].

 

On November 12, 2011, the Creditors’ Committee filed a pleading expressing support for the Examiner Motion [Docket No. 181].  The Examiner Motion was later joined by Appaloosa Management L.P. and the PSEG Entities [Docket Nos. 90, 149], but in accordance with the PSEG Settlement, the PSEG Entities withdrew their joinder to the Examiner Motion on December 15, 2011 [Docket No. 207].  At a hearing held on December 16, 2011, the Bankruptcy Court approved the appointment of an independent examiner (the “Examiner”) and directed the United States Trustee to identify an appropriate candidate to serve as Examiner.

 

On December 29, 2011, the Bankruptcy Court entered an order (the “Examiner Order”) directing the appointment of the Examiner [Docket No. 276].  The Examiner Order provided, among other things, that the Examiner would investigate (i) the Debtors’ conduct in connection with the prepetition 2011 restructuring and reorganization of the Debtors and their non-Debtor affiliates, (ii) any possible fraudulent conveyances, and (iii) whether DH is capable of confirming a chapter 11 plan.  Pursuant to the Examiner Order, the Examiner’s investigation was to run for a 60-day period beginning on the appointment date of the Examiner, and at the end of which the Examiner was to file on the docket and provide to certain parties in interest a written report of its investigation, subject to certain restrictions as set forth in the Examiner Order.

 

On January 11, 2012, the United States Trustee filed an application for an order approving the appointment of Susheel Kirpalani, Esq. as Examiner [Docket No. 308], and on January 12, 2012, the Bankruptcy Court entered an order approving the appointment of Susheel Kirpalani, Esq. as Examiner [Docket No. 318].  On January 24, 2012, the Examiner filed his Proposed Work Plan, describing his activities to date, and planned next steps in his examination [Docket No. 356].  The Examiner issued twenty-one subpoenas to Dynegy, current and former directors and officers of Dynegy, W&C, Lazard, Goldman Sachs Lending Partners LLC, Credit Suisse AG Cayman Islands Branch, Barclays Capital, Houlihan Lokey, and Franklin Advisers Inc. [Docket Nos. 385, 394, 407, 437].

 

On March 9, 2012, the Examiner issued a report setting forth his findings and conclusions concerning potential claims and causes of action arising from the Prepetition Restructurings,

 

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including the September 1, 2011 transfer of Dynegy Coal Holdco (the “Examiner’s Report”).  The Examiner’s Report is available on the Debtors’ Claims Agent’s website at the URL: http://dm.epiq11.com/dynegyholdingsllc, with hard copies available upon request to counsel to the Debtors or counsel to the Creditors’ Committee.

 

On March 16, 2012, Dynegy filed a preliminary response to the Examiner’s Report [Docket. No. 531], which was corrected on March 20, 2012 [Docket No. 539] (as corrected, the “Examiner Report Response”) disagreeing with the Examiner’s findings and conclusions.  A copy of the Examiner Report Response is available on the Debtors’ Claims Agent’s website at the URL: http://dm.epiq11.com/dynegyholdingsllc, with hard copies available upon request to counsel to the Debtors or counsel to the Creditors’ Committee.(30)

 

On April 5, 2012, Claren Road Asset Management, LLC (“Claren Road”) filed a motion seeking to unseal the confidential and privileged portions of the Examiner’s Report [Docket No. 563], which motion was contested by the Debtors and Dynegy.  Following two hearings before the Bankruptcy Court, on May 16, 2012, the Bankruptcy Court entered an order denying Claren Road’s motion to unseal [Docket No. 693].  Claren Road then filed a notice of appeal with respect to the Bankruptcy Court’s order [Docket No. 699], which has been withdrawn pursuant to the Settlement Agreement [Docket No. 759].

 

Pursuant to the Settlement Agreement, the Settlement Parties have released any potential claims relating to or arising from disputes with respect to the matters investigated by the Examiner, including, among other things, the Prepetition Restructurings and including, without limitation, any claims that have been or could have been brought in connection with the transfer of the DCH Membership Interests to Dynegy, the Undertaking Agreement or the DH Note.  For more information on the Settlement Agreement, see the section of this Disclosure Statement entitled “The Reorganization Cases — Settlement Agreement.”

 

J.                                      Motions for Appointment of a Chapter 11 Trustee

 

On March 11, 2012, the United States Trustee filed a motion seeking the appointment of a chapter 11 trustee pursuant to section 1104 of the Bankruptcy Code (the “UST Trustee Motion”) [Docket No. 506].  On March 28, 2012, Claren Road and CQS each filed joinders to the UST Trustee Motion [Docket Nos. 554, 556] (respectively, the “Claren Joinder” and the “CQS Joinder”).  The original deadline for filing objections to the UST Trustee Motion was March 28, 2012.

 

On April 18, 2012, Claren Road filed its own motion seeking the appointment of a chapter 11 trustee [Docket No. 590] (the “Claren Trustee Motion” and together with the Claren Joinder, the “Claren Trustee Motions”).  On May 1, 2012, the Creditors’ Committee filed a response to the UST Trustee Motion and Claren Trustee Motions [Docket No. 641].  Also on May 1, 2012, the Debtors filed a preliminary opposition to the Claren Trustee Motions [Docket No. 642], and Dynegy filed an objection to the Claren Trustee Motions [Docket No. 643].  The

 


(30)  Except for the Examiner’s Report and the Examiner Report Response, information on Epiq’s website does not constitute part of this Disclosure Statement, is not incorporated by reference in this Disclosure Statement, and should not be relied upon in connection with making any decision with respect to voting for the Plan.

 

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UST Trustee Motion has been carried through the date of the next hearing as of the date of this Disclosure Statement.

 

Pursuant to the Settlement Agreement, the Claren Trustee Motions and CQS Joinder were deemed dismissed with prejudice upon entry of the Settlement Order (defined below).  For more information regarding the Settlement Agreement, see the section of this Disclosure Statement entitled “The Reorganization Cases — Settlement Agreement.”

 

K.                                    Mediation

 

On March 12, 2012, the Bankruptcy Court directed the Debtors to participate in mediation with certain of their creditor constituencies and other parties in interest under the auspices of the Examiner, in his capacity as mediator under the Examiner Order.  The Examiner conducted numerous mediation sessions over the course of more than six weeks attended by representatives of DH, Dynegy, the Consenting Senior Noteholders, the Lease Trustee, the PSEG Entities and the Creditors’ Committee, as well as representatives of the holders of Subordinated Notes Claims, and Wells Fargo Bank, N.A. (as indenture trustee for the Subordinated Notes) (the “Subordinated Notes Indenture Trustee”).

 

In addition to economic issues, the mediation addressed DH’s corporate governance.  As a result, on March 27, 2012, David Hershberg was appointed as the Independent Manager of DH.  The appointment of the Independent Manager was made after the Examiner reviewed Mr. Hershberg’s credentials and vetted his independence with certain creditor groups, including the Creditors’ Committee and certain of the Settlement Parties.  Each of those constituencies was satisfied that Mr. Hershberg would be able to make independent decisions in the Debtors’ — and only the Debtors’ — best interests.  The Independent Manager engaged in discussions with each of the Settlement Parties, and undertook an independent evaluation and analysis of the issues related to the Settlement Agreement and the Plan.  For more information regarding the Independent Manager, see “DH’s Independent Manager.”

 

During the mediation, Dynegy, DGIN, Dynegy Coal Holdco, LLC, each of the Debtors, the Consenting Senior Noteholders, the PSEG Entities, and the Lease Trustee reached an agreement in principle, subject to documentation and Bankruptcy Court approval, regarding the terms of a settlement and compromise that would resolve several of the highly contested issues in the Chapter 11 Cases, which agreement in principal was read into the record at an April 4, 2012 hearing before the Bankruptcy Court.  At the April 4 hearing, the Independent Manager stated on the record that he had not yet approved the terms of the settlement and was engaged in ongoing diligence and examination of the merits of the settlement, but was comfortable with the parties proceeding to documentation.  The Creditors’ Committee stated on the record at the April 4 hearing that it supported the terms read into the record.  The parties then documented the agreement in principle and, on May 1, 2012, after the Independent Manager performed an extensive examination of the merits of the settlement, with the advice of his counsel and after discussions with the other parties in interest, the Debtors, Dynegy, DGIN, Dynegy Coal HoldCo, LLC, the Consenting Senior Noteholders, the PSEG Entities and the Lease Trustee (the “Original Settlement Parties”) executed a settlement agreement that documented and provided for the implementation of certain of the provisions of the agreement in principle reached prior to the April 4 hearing (the “Original Settlement Agreement”).  Also on May 1, 2012, the Original

 

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Settlement Parties other than the Lease Trustee (but together with the Consenting Lease Certificate Holders) executed a plan support agreement that provided for the documentation and implementation of other provisions of the agreement in principal pursuant to the Plan (the “Original Plan Support Agreement”).

 

Following the execution of the Original Settlement Agreement and Original Plan Support Agreement on May 1, 2012, certain holders of Subordinated Notes Claims (which would later become the Consenting Subordinated Noteholders) issued numerous subpoenas (the “Subpoenas”) seeking discovery in connection with the Original Settlement Agreement.  Those parties receiving Subpoenas included DH, Dynegy, the Independent Manager, Blackstone, FTI and Houlihan Lokey Capital, Inc. (“Houlihan”), financial advisor to the Ad Hoc Senior Noteholder Committee.  In response to the document requests contained in the Subpoenas, and subject to the rulings of the Bankruptcy Court, the holders of the Subordinated Notes Claims received substantial document discovery, and deposed the Independent Manager.  On May 22, 2012, the holders of Subordinated Notes Claims, as well as the Subordinated Notes Indenture Trustee, filed objections to the Settlement Agreement.

 

During that same period, the Original Settlement Parties continued to engage in mediation and negotiations with holders of Subordinated Notes Claims, which ultimately culminated in the agreement of the Settlement Parties (including the Consenting Subordinated Noteholders) to the resolution of certain contested issues concerning the treatment of Subordinated Notes Claims.  To document such agreement, the Settlement Parties amended and restated the Original Settlement Agreement (such amended and restated agreement is referred to herein as the Settlement Agreement) and executed the Settlement Agreement on May 30, 2012.

 

Also on May 30, 2012, the Settlement Parties (together with the Consenting Lease Certificate Holders) executed an amended and restated version of the Original Plan Support Agreement (such amended and restated agreement is referred to herein as the Plan Support Agreement) that provides for the documentation and implementation of other provisions of the Settlement Agreement pursuant to the Plan, and pursuant to which the parties thereto agreed, subject to the terms and conditions thereof, to pursue or support (as applicable) a plan of reorganization containing the terms and conditions set forth in the Plan Support Agreement and as otherwise agreed upon by such parties.

 

For more information on the Settlement Agreement and Plan Support Agreement, see “The Reorganization Cases — Settlement Agreement” and “The Reorganization Cases — Plan Support Agreement.”

 

L.                                     Settlement Agreement

 

On May 1, 2012, the Debtors filed a motion seeking approval of the Original Settlement Agreement pursuant to Bankruptcy Rule 9019 (the “Settlement Approval Motion”) [Docket No. 640].  On May 30, 2012, the Settlement Parties executed the Settlement Agreement, which amended and restated the Original Settlement Agreement, and filed such Settlement Agreement with the Court [Docket No. 739].  On June 1, 2012, the Bankruptcy Court held a hearing to consider the Settlement Approval Motion, after which the Bankruptcy Court entered an order approving the Settlement Agreement (the “Settlement Order”) [Docket No. 758].  The Settlement

 

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Effective Date occurred on June 5, 2012.

 

The Settlement Agreement, a copy of which is attached to the Disclosure Statement as Exhibit “G”, provided for, among other things:(31)

 

a.                                       The assignment, transfer and delivery by Dynegy to DH of 100% of the DCH Membership Interests, free and clear of any liens, on the Settlement Effective Date, so that upon the consummation of such transfer, DH would own, directly or indirectly, all of the DCH Membership Interests.

 

b.                                      In full consideration for the receipt by DH of the DCH Membership Interests from Dynegy (and Dynegy’s other covenants and agreements as set forth in the Settlement Agreement and Plan Support Agreement), (a) Dynegy shall be granted the Dynegy Administrative Claim (to be assigned or otherwise transferred by Dynegy prior to the occurrence of the Merger (x) to a trust established to hold and distribute the proceeds of the Dynegy Administrative Claim or (y) in some other efficient manner determined by Dynegy, in each case for the benefit of the holders of Dynegy’s common stock; provided, that in the event such transfer of the Dynegy Administrative Claim shall occur prior to the confirmation of the Plan, the material documentation necessary to effect such transfer shall be subject to the prior review of, and shall be in form and substance reasonable acceptable to DH, the Majority Consenting Senior Noteholders, the Lease Trustee and the Creditors’ Committee), (b) the Prepetition Lawsuits and the Adversary Proceeding shall be dismissed with prejudice, and (c) the Settlement Parties shall issue and receive the releases of, among other things, all actions, claims and causes of action to the extent relating to or arising from disputes with respect to the matters investigated by the Examiner (including, the Prepetition Restructurings), the Prepetition Lawsuits, the Adversary Proceeding, the Lease Documents or the Intercompany Receivable, including, without limitation, any claims that have been or could have been brought in connection with the transfer of the DCH Membership Interests to Dynegy or the Undertaking Agreement, subject to certain express limitations, as set forth in the Settlement Agreement.

 

c.                                       The agreement among the Settlement Parties that the Dynegy Administrative Claim will be satisfied in full under the Plan by the following consideration: (1) newly issued common shares of Reorganized Dynegy Common Stock (defined below) equal to one percent (1%) of the fully-diluted common shares of Reorganized Dynegy Common Stock to be outstanding immediately following the Effective Date, subject to dilution by the Warrants and any options, restricted stock or other Equity Interests issued as equity compensation to officers, employees or directors of Reorganized Dynegy or its affiliates, (2) the Warrants (clauses (1) and (2) together, the “Equity Consideration”) and (3) the release of Dynegy and its present and former parents, affiliates, direct and indirect subsidiaries, shareholders, directors, officers, managers, predecessors, successors

 


(31)  The description contained herein is for summary purposes only, and in the event of any conflict between the description contained herein and the terms of the Settlement Agreement, the terms of the Settlement Agreement will govern.

 

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and assigns, and its and each of their respective agents, attorneys, advisors, accountants, restructuring consultants, financial advisors and investment bankers, and any Person claimed to be liable derivatively through any of the foregoing as described in Section 2 of the Plan Support Agreement.(32)

 

d.                                      The agreement by each of Dynegy and Dynegy Coal Holdco, as of May 1, 2012, that it has not and will not transfer, directly or indirectly, any cash or other assets from Dynegy Coal Holdco or its subsidiaries to Dynegy; provided, that Dynegy Coal Holdco and its subsidiaries shall, (x) subject to any restrictions contained in the CoalCo Credit Facility, be permitted to transfer to Dynegy, on or prior to the Settlement Effective Date, the amounts required to (1) make any payments (or reimbursements to Dynegy) of fees and expenses of the Lease Indenture Trustee, the Ad Hoc Senior Noteholder Committee, the other Consenting Senior Noteholder, the PSEG Entities (collectively, the “Settling Claimants”), CQS and Claren Road (in an aggregate amount not to exceed $2,000,000), and the Subordinated Notes Indenture Trustee (in an aggregate amount not to exceed $300,000), and their professionals and advisors required under Section II.e of the Settlement Agreement, (2) make payments of expenses of Dynegy related to the Chapter 11 Cases and the Plan, and (3) pay the fees and expenses of Dynegy’s advisors up to a reasonable estimated amount; and (4) continue to be permitted to make payments to Dynegy in the ordinary course required to be made pursuant to those certain cash management agreements, energy management agreements, service agreements, tax sharing agreements, trademark license agreements and other intercompany agreements entered into in connection with the Prepetition Restructurings in August 2011, so long as such amounts are either transferred by Dynegy to Dynegy Administrative Services Company for purposes of facilitating payments or reimbursements under such agreements or used by Dynegy in accordance with any tax sharing agreement.

 

e.                                       The termination of each of the Undertaking Agreement and the DH Note, and all obligations thereunder, on the Settlement Effective Date.

 

f.                                         In connection with the settlement of the Adversary Proceeding, the receipt by the Lease Trustee on the Settlement Effective Date of an allowed, senior general unsecured claim equal to $540,000,000, on account of all claims against DH arising under or relating to the Lease Guarantees, as well as certain allowed and

 


(32)  Pursuant to the Settlement Agreement, the Settlement Parties further agreed that if the Plan is not confirmed, then the amount of the Dynegy Administrative Claim may be determined by an arbitration proceeding, with such amount to be equal to the value of the Equity Consideration as if the Plan had been confirmed, but in any event, not less than $70 million nor more than $130 million, which amount shall be entitled to payment in cash in full on the effective date of any plan for DH, unless otherwise agreed by Dynegy; provided that if the Plan is not confirmed because (1) Dynegy breaches the Plan Support Agreement, Dynegy terminates its obligations under the Plan Support Agreement in certain circumstances, or any Settlement Party terminates the Plan Support Agreement in certain circumstances, or (2) Dynegy and DH are unable to be combined other than as a result of any action or any inaction on the part of DH, then the amount of the Dynegy Administrative Claim will take into account (and shall be reduced in respect of) any value lost by DH as a result of the failure of Dynegy and DH to be combined and may be satisfied with plan securities (including the Equity Consideration with any necessary adjustments) or other non-cash consideration of equivalent value as determined by the Bankruptcy Court in connection with confirmation of any DH plan.

 

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general unsecured claims against Dynegy Danskammer and Dynegy Roseton (collectively, the “Lease Trustee Claims”), provided that, the aggregate recovery of the Lease Trustee and the Lease Certificate Holders (exclusive of the amounts received on account of trustee and professional fees and expenses) on account of the Lease Trustee Claims may not exceed the Lessor Recovery Cap.  If the Lease Trustee receives distributions on account of the Lease Trustee Claims or as proceeds from the sale of the Roseton and Danskammer Facilities, with an aggregate value in excess of the Lessor Recovery Cap, the Lease Trustee is required to immediately turn over any such excess distributions received by it to DH for distribution to holders of Allowed General Unsecured Claims against DH (other than the Lease Trustee and the Lease Certificate Holders) pursuant to the Plan, subject to certain restrictions as described in the Settlement Agreement.

 

g.                                      The agreement by the Debtors, with the cooperation of the PSEG Entities, to use their commercially reasonable efforts to sell the Danskammer and Roseton Facilities, including all of the Debtors’ and the PSEG Entities’ interests in the Facilities, as soon as reasonably practicable; provided, that neither the Debtors nor the PSEG Entities will execute a binding sale agreement or related ancillary agreements with respect to the Facilities (or any portion thereof) without the prior written consent of the Lease Trustee and the Creditors’ Committee (if in existence) and without prior consultation with the Consenting Senior Noteholders, which consent and consultation shall not be unreasonably withheld, delayed, or conditioned.  The terms of any sale process shall also be mutually agreed upon among the Debtors, the Creditors’ Committee (if in existence), RCM and the Lease Trustee, shall be contingent on receipt of all required regulatory approvals, and shall include various other provisions as described in the Settlement Agreement.  The proceeds of such sale are to be distributed first, to pay reasonable and documented fees and expenses incurred by the Debtors in connection with the sale of the Facilities.  Thereafter, the portion of the remaining proceeds attributable to the Debtors’ interest in the Facilities shall be retained by the Debtor Entities for distribution to creditors and interest holders of Dynegy Danskammer and Dynegy Roseton (including, without limitation, to DH to pay any and all outstanding amounts owed to DH pursuant to the DIP Credit Facility); provided, that all proceeds to be distributed to the Lease Trustee on account of its administrative and general unsecured claims against Dynegy Roseton and Dynegy Danskammer will be in full and final satisfaction of such claims and will instead be distributed: first, to the other holders of allowed general unsecured claims against Dynegy Danskammer and Dynegy Roseton in an amount not to exceed $500,000, and second, 50% each to the Lease Trustee (up to the Lessor Recovery Cap) and DH, to be distributed to holders of allowed general unsecured claims against DH pursuant to the Plan (or any other chapter 11 plan which is ultimately confirmed for DH); provided, that the Lease Trustee (on behalf of itself and the Lease Certificate Holders) shall disclaim any rights to a distribution of the amounts paid to DH in its capacity as a creditor of DH and shall turn over any such distribution it receives to DH for distribution to the other creditors pursuant to the Plan (or any other chapter 11 plan ultimately confirmed for DH)).

 

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h.                                      Effective as of the Settlement Effective Date, releases by and among each of Settlement Parties, and, except to the extent expressly provided therein, each of their direct and indirect non-debtor subsidiaries, affiliates, predecessors, successors and assigns of the other Settling Claimants and their present and former parents, affiliates, direct and indirect subsidiaries, shareholders, directors, officers, managers, predecessors, successors and assigns, and its and each of their respective agents, attorneys, advisors, accountants, restructuring consultants, financial advisors and investment bankers, and any Person claimed to be liable derivatively through any of the foregoing, from, among other things, all claims, actions and causes of action, solely to the extent that they relate to or arise from disputes with respect to matters investigated by the Examiner (including the Prepetition Restructurings), the Prepetition Lawsuits, the Adversary Proceeding, the Lease Documents, or the Intercompany Receivable (in each case except with respect to the obligations created by or arising out of the Settlement Agreement), and subject to certain specified carve-outs as set forth in the Settlement Agreement.

 

i.                                          Payment by Dynegy (i) on or prior to the Settlement Effective Date, in cash, of all reasonable and documented pre-petition and post-petition fees and expenses accrued through the Settlement Effective Date (or earlier date of payment, as applicable) of (1) the Lease Trustee, as successor lease indenture trustee and successor pass through trustee and its professionals and advisors (to the extent not previously paid by Dynegy), (2) the Ad Hoc Senior Noteholder Committee and its professionals and advisors, (3) the other Consenting Senior Noteholders and their respective professionals and advisors, (4) the PSEG Entities and their professionals and advisors (all of the entities in subclauses (1) through (4), the “Settling Claimant Fee Recipients”), (5) CQS and Claren Road and their respective professionals and advisors in an aggregate amount not to exceed $2,000,000 and (6) the Subordinated Notes Indenture Trustee, and its professionals and advisors, in an aggregate amount not to exceed $300,000, (ii) after the Settlement Effective Date, on a monthly basis, all of the reasonable and documented fees and expenses of the Settling Claimant Fee Recipients accrued on and after the Settlement Effective Date through the Effective Date, (iii) the respective reasonable and documented fees and expenses of the Lease Trustee and its professionals and advisors through May 1, 2012.  Dynegy made payment of such fees and expenses pursuant to clause (i) on the Settlement Effective Date.  Additionally, Dynegy will not be obligated to pay any fees and expenses referred to in clause (ii) in excess of the estimated aggregate amount of such fees and expenses, which estimate was provided to Dynegy, and (iv) nothing in section II.e. of the Settlement Agreement shall be deemed to impair, waive, discharge or negatively affect the Indenture Trustee Charging Liens.

 

j.                                          On the Settlement Effective Date, (x) the filing by the Lease Trustee, DH, Dynegy Roseton and Dynegy Danskammer with the Bankruptcy Court of a stipulation of dismissal, irrevocably and unconditionally dismissing the Adversary Proceeding with prejudice, (y) the filing by the Settling Claimants who are plaintiffs and the named defendants in the Noteholder Litigation and the Lease Trustee Litigation,

 

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respectively, of a stipulation of dismissal irrevocably and unconditionally dismissing such Prepetition Lawsuits with prejudice as to all parties and all claims and without costs to any party, and (z) the filing and service by each of the Settling Claimants who are plaintiffs in the PSEG Litigation of a notice of discontinuance irrevocably and unconditionally dismissing the PSEG Litigation with prejudice as to all parties and all claims and without costs to any party.

 

k.                                       Upon execution of the Settlement Agreement, (i) Claren Road’s immediate withdrawal of its objection to the Settlement Approval Motion and related discovery and adjournment and/or staying of any related deadlines or discovery with respect to its Notice of Appeal of Order Denying Public Access to Judicial Documents filed on May 17, 2012 [Docket No. 699] and the Claren Trustee Motions (as defined below); (ii) CQS’s immediate withdrawal of its objection to the Settlement Approval Motion and related discovery, and adjournment of the CQS Joinder (as defined below) and staying of all discovery requests related thereto; and (iii) the Subordinated Notes Indenture Trustee’s immediate withdrawal of its objection to the Settlement Approval Motion.  Upon entry of the order approving the Settlement Agreement, the actions withdrawn in (i)-(iii) above were deemed to have been withdrawn with prejudice, and Claren Road and CQS took all necessary actions to withdraw, with prejudice, all adjourned matters described in (i) and (ii) above.(33)

 

l.                                          The Debtors’ and Dynegy’s (i) agreement to provide the Subordinated Notes Indenture Trustee, solely as trustee for the holders of the Subordinated Notes Claims, with an allowed subordinated unsecured claim in the amount of $222,513,384.51, consisting of (a) $206,200,000.00 in the principal amount of the Subordinated Notes and (b) $16,313,384.51 in accrued but unpaid interest at the applicable rates specified in the Subordinated Notes Indenture, the Subordinated Notes, the NGC Trust Declaration, the NGC Trust Capital Income Securities, the NGC Trust Capital Income Securities Guarantee, NGC Trust Common Securities and related and ancillary documents and instruments and (ii) agreement for purposes of treatment of and distribution on the allowed subordinated unsecured claim to amend the Plan to provide the Subordinated Notes Indenture Trustee, solely on behalf of the holders of the Subordinated Notes Claims, with solely an Allowed General Unsecured Claim in the amount of $55,000,000 against DH in

 


(33)  On May 30, Claren Road filed its Notice of Withdrawal of Objection of Claren Road Asset Management, LLC to Debtors Motion for Approval of Settlement Between the Debtors and the Settlement Parties Pursuant to Rule 9019 of the Federal Rules of Bankruptcy Procedure [Docket No. 741], and on June 1, 2012, Claren Road filed its Notice of Withdrawal of Claren Road Asset Management, LLC’s Notice of Appeal of Order Denying Public access to Judicial Documents [Docket No. 759].  On May 31, 2012, Cleo A. Zahariades filed his Notice of Withdrawal of Partial Joinder of Equity Securities Holder Cleo A. Zahariades to Objection of Claren Road Asset Management, LLC to Debtors Motion for Approval of Settlement Between the Debtors and the Settlement Parties Pursuant to Rule 9019 of the Federal Rules of Bankruptcy Procedure [Docket No. 750].  On May 31, 2012, CQS filed its Notice of Withdrawal of Objection to Debtors’ Motion for Approval of Global Settlement Pursuant to Rule 9019 of the Federal Rules of Bankruptcy Procedure [Docket No. 746].  On May 30, 2012, Wells Fargo filed its Notice of Withdrawal of Objection of Wells Fargo Bank, N.A. to Debtors Motion for Approval of Settlement Between the Debtors and the Settlement Parties Pursuant to Rule 9019 of the Federal Rules of Bankruptcy Procedure [Docket No. 742].

 

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exchange for and in full satisfaction of all Subordinated Notes Claims.  Such Allowed General Unsecured Claims shall be treated as set forth in the Plan Support Agreement (which treatment shall be the same as that received by the holders of Senior Notes) on a pari passu basis with all other Allowed General Unsecured Claims and shall not be subject to subordination.  Notwithstanding the foregoing, DH and any of its successors, assigns or transferees shall waive any and all rights it may have to receive a distribution on account of the $6,200,000 principal amount of NGC Trust Common Securities, and such distribution shall instead be made to the holders of the NGC Trust Capital Income Securities.

 

m.                                    The non-severability of the Settlement Agreement.  Because the Settlement Agreement is to be construed on the whole, in the event that (i) a court of competent jurisdiction enters a final order ruling that the Settlement Order or any of the transactions contemplated in the Settlement Agreement or the Settlement Order are void, invalid, illegal or unenforceable in any material respect, (ii) any of the transactions contemplated by the Settlement Agreement or the Settlement Order are reversed, vacated, overturned, voided or unwound in any material respect, or (iii) the Settlement Order is reversed, vacated, overturned or amended in any material respect, then in each case, the entirety of the Settlement Agreement and the Settlement Order (other than the non-severability provisions set forth in Section III.y. of the Settlement Agreement and the paragraph in the Settlement Order with respect thereto) shall be void ab initio and of no force and effect and, during any subsequent proceeding, the Parties and the Creditors’ Committee shall not assert claim preclusion, issue preclusion, estoppel or any similar defense in respect of rights and claims of the Parties that were the subject of the Settlement Agreement and the Settlement Order prior to the Settlement Agreement and the Settlement Order being of no force or effect.

 

M.                                  Plan Support Agreement

 

Simultaneously with the May 30, 2012 execution of the Settlement Agreement, (i) DH and each of the other Debtors in the Chapter 11 Cases, (ii) Dynegy, (iii) Dynegy Coal Holdco, (iv) DGIN, (v) the PSEG Entities, (vi) the Consenting Senior Noteholders, (vii) the Consenting Subordinated Noteholders and (viii) the Consenting Lease Certificate Holders entered into the Plan Support Agreement, pursuant to which the parties thereto agreed, subject to the terms and conditions thereof, to pursue or support, as applicable, the Plan, including that the Plan provide, among other things, the following:(34)

 

a.                                       The Merger of DH and Dynegy on or prior to the Effective Date, whereupon all DH equity interests issued and outstanding immediately prior to the Merger Effective Time will be cancelled.

 


(34)  The description of the Plan Support Agreement contained herein is for summary purposes only, and in the event of any conflict between the terms of the Plan Support Agreement and the description herein, the terms of the Plan Support Agreement will govern.  The executed copy of the Plan Support Agreement is attached hereto as Annex A to Exhibit “G” (the Settlement Agreement).

 

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b.                                      Selection of the Board of Directors of Reorganized Dynegy by holders of Allowed General Unsecured Claims against DH (who are not insiders of DH), in a process to be specified by the Plan, provided that the current directors of Dynegy and DH are to be eligible to be, but there shall be no obligation that they be, selected for the Board of Directors of Reorganized Dynegy, pursuant to sections 1123(a)(7) and 1129(a)(5) of the Bankruptcy Code.

 

c.                                       Holders of Allowed General Unsecured Claims to receive under the Plan a Pro Rata Share of (i) common equity representing a 99% stake in Reorganized Dynegy, subject to dilution by the Warrants and any options, restricted stock or other equity interests issued as equity compensation to officers, employees or directors of Reorganized Dynegy or its affiliates, (ii) any amounts to which they may be entitled as a result of the sale of the Roseton and Danskammer Facilities, and (iii) a cash payment of not less than $200 million to be allocated and/or distributed as determined by Dynegy, DH, the Creditors’ Committee, the Majority Consenting Senior Noteholders, and the Lease Trustee.

 

d.                                      Holders of Equity Interests in Dynegy, DH or the Surviving Entity shall not receive any distribution or retain any interest or property under the Plan on account of such holder’s Equity Interests.

 

e.                                       Treatment of the Dynegy Administrative Claim as provided in the Settlement Agreement.

 

f.                                         Full releases under the Plan of all Settlement Parties (and their respective officers, directors, managers, employees, attorneys and advisors), subject in each case to the extent permitted by applicable law, which in the case of any third-party releases shall be subject to customary carve-outs.

 

g.                                      Treatment of the fees and expenses of (i) the Lease Trustee, its professionals and advisors and the professionals and advisors of the Consenting Lease Certificate Holders, (ii) the professionals and advisors of the Ad Hoc Senior Noteholder Committee and of each of the Consenting Senior Noteholders, and (iii) the professionals and advisors of the PSEG Entities, from and after the Settlement Effective Date, to the extent not paid by Dynegy pursuant to the Settlement Agreement, as allowed administrative claims under the Plan and shall be paid in full, in cash, on the Effective Date, in each case solely with respect to the specific advisors referenced in the Plan Support Agreement, as set forth in the Plan Support Agreement.  In addition, payment of reasonable fees and expenses of trustees (including the Lease Trustee) incurred in connection with distributing plan consideration and otherwise effectuating the Plan.

 

h.                                      Provision for a registration rights agreement, including a customary shelf registration, for the benefit of any holder of Allowed General Unsecured Claims who would be, immediately following the Plan Effective Date, a holder of 10% or more of the common shares of Reorganized Dynegy Common Stock, the terms of which shall be in form and substance satisfactory to Dynegy, DH, the Majority

 

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Consenting Senior Noteholders, the Majority Consenting Lease Certificate Holders and the Creditors’ Committee.

 

i.                                          Treatment of the Subordinated Notes Claims and allowance thereof as provided in the Settlement Agreement.

 

The Plan Support Agreement and the obligations of the parties thereunder will terminate on the Effective Date (or the effective date of any other bankruptcy plan for DH), if not previously terminated pursuant to the terms of the Plan Support Agreement.  In addition, the Plan Support Agreement and the obligations of the parties thereunder may be terminated either (a) as to all parties and all obligations by mutual written agreement of each of Dynegy, DH, the Majority Consenting Senior Noteholders, the Majority Consenting Lease Certificate Holders, the Majority Consenting Subordinated Noteholders, and RCM, or (b) by any of (i) Dynegy, (ii) DH, (iii) the Majority Consenting Senior Noteholders, or (iv) the Majority Consenting Lease Certificate Holders, in the event certain milestones are not met, including, among others, if the Bankruptcy Court fails to enter the Disclosure Statement Order on or prior July 20, 2012; if the Bankruptcy Court fails to enter the Confirmation Order on or prior to September 10, 2012, or if the Effective Date does not occur by October 1, 2012, as well as in the event (i) the Settlement Agreement is terminated, (ii) any court of competent jurisdiction or other competent governmental or regulatory authority issues an order making it illegal or otherwise restricting, preventing or prohibiting the transactions contemplated by the Plan in a manner that cannot reasonably be remedied by Dynegy, the Debtors or the Supporting Creditors; (iii) a trustee, receiver, examiner with expanded powers, responsible person or responsible officer is appointed in any bankruptcy case of Dynegy; or (iv) there is a material breach of the Plan Support Agreement by any of the parties of any of its obligations thereunder, and any such breach is either unable to be cured or is not cured within five (5) Business Days after receipt of written notice from any non-breaching party delivered to all other parties (in such case, the termination cannot be by the breaching party).  Any Consenting Senior Noteholder or Consenting Lease Certificate Holder may also, in its individual capacity, terminate its obligations under the Plan Support Agreement in the event that one of the milestones identified above is not met.

 

Pursuant to the Plan Support Agreement, each Supporting Creditor has agreed that prior to the termination of the Plan Support Agreement, it will not (a) sell, transfer, assign, pledge, convey, hypothecate, grant a participation interest in, or otherwise dispose of, directly or indirectly, its right, title, or interest in respect of any of such Supporting Creditor’s interest in its applicable Claim(s) in whole or in part (including any voting rights associated with such Claims), or (b) grant any proxies, deposit any of such Supporting Creditor’s interests in the applicable Claim(s) into a voting trust, or enter into a voting agreement with respect to any such interest (collectively, the actions described in clauses (a) and (b), a “Transfer”), unless such Transfer is to another Supporting Creditor that is party to the Plan Support Agreement or any other entity that first agrees in an enforceable writing to be bound by the terms of the Plan Support Agreement by executing and delivering to the Plan Proponents and the Creditors’ Committee an acceptable joinder to thereto. Any Transfer made in violation of the Plan Support Agreement will be deemed null and void and of no force or effect, regardless of any prior notice provided to the Plan Proponents, and will not create any obligation or liability of the Plan Proponents to the purported transferee (the putative transferor will continue to be bound by the terms and conditions set forth in the Plan Support Agreement). Notwithstanding the foregoing,

 

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pursuant to the Plan Support Agreement, to the extent an entity that holds itself out to the public or the applicable private markets as standing ready in the ordinary course of business to purchase from customers and sell to customers Claims of the Debtors (or enter with customers into long and short positions in Claims against the Debtors), in its capacity as a deal or market maker in Claims against the Debtors (a “Qualified Marketmaker”) acquires any of the Claims subject to the Plan Support Agreement with the purpose and intent of acting as a Qualified Marketmaker for such Claims, such entity will not be required to execute a joinder to the Plan Support Agreement or otherwise agree to be bound by the terms and conditions set forth therein, if such Qualified Marketmaker sells or assigns such Claims within ten (10) Business Days of its acquisition and the purchaser or assignee of such Claims from the Qualified Marketmaker is a Supporting Creditor that is party to the Plan Support Agreement or any other entity that first agrees in an enforceable writing to be bound by the terms of the Plan Support Agreement by executing and delivering to the Plan Proponents an acceptable joinder thereto.

 

N.                                    Bar Date Order

 

On January 18, 2012, the Bankruptcy Court entered the Order Establishing Deadlines for Filing Proofs of Claim and Approving the Form and Notice Thereof [Docket No. 331] (the “Bar Date Order”).  Subject to certain limited exceptions contained in the Bankruptcy Code and in the Bar Date Order, all persons and entities who hold a claim against a Debtor that arose on or prior to the Petition Date and desire to share in any distribution made in these Chapter 11 Cases must file a written proof of claim on or before the following applicable deadline (the “Bar Date”), in a manner consistent with the procedures set forth in the Bar Date Order.  As established in the Bar Date Order, the general Bar Date to file proofs of claim based on prepetition claims was February 24, 2012 at 5:00 p.m. (Prevailing Eastern Time).  The governmental Bar Date to file proofs of claim against the Debtors was May 7, 2012 at 5:00 p.m. (Prevailing Eastern Time).

 

O.                                   Exclusivity

 

Pursuant to sections 1121(b) and (c)(3) of the Bankruptcy Code, the Debtors have a certain amount of time within which (a) to file plan of reorganization, the Exclusive Filing Period; and (b) to solicit acceptances of their timely filed plan, the Exclusive Solicitation Period, before other parties in interest are permitted to file plans.  On February 23, 2012, the Debtors moved to extend the Debtor’s initial Exclusive Filing Period for an additional 120 days through and including July 5, 2012 and the Debtors’ Exclusive Solicitation Period for an additional 180 days through and including September 3, 2012 (the “Exclusivity Motion”) [Docket No. 435].  A hearing on the Exclusivity Motion was scheduled for March 21, 2012 but was later adjourned to April 4, 2012.  On March 8, 2012, the Bankruptcy Court entered an ex parte bridge order extending DH’s Exclusive Filing Period through the March 21, 2012 hearing date [Docket No. 485], and on March 23, 2012, the Bankruptcy Court entered another ex parte bridge order extending DH’s Exclusive Filing Period through the April 4, 2012 hearing date [Docket No. 548], which was then extended by the Bankruptcy court at the April 4 hearing through the June 1, 2012 hearing to approve the Settlement Agreement.  On June 1, 2012, the Bankruptcy Court further extended DH’s Exclusive Filing Period through July 16, 2012 and DH’s Exclusive Solicitation Period through September 14, 2012 [Docket No. 789].

 

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XI.

 

THE CHAPTER 11 PLAN

 

As a result of the chapter 11 process and through the Plan, the Plan Proponents expect that impaired creditors will obtain a substantially greater recovery than what would be available if the Surviving Entity’s Assets had been liquidated under chapter 7 of the Bankruptcy Code.  The Plan is annexed hereto as Exhibit “A” and forms part of this Disclosure Statement.  The summary of the Plan set forth below is qualified in its entirety by the more detailed provisions set forth in the Plan.

 

A.                                    Classification and Treatment of Claims and Equity Interests

 

For the purposes of organization, voting, all confirmation matters, and the receipt of distributions under the Plan except as otherwise provided in the Plan, upon the Merger Effective Time, any Claims against DH and Dynegy shall be Claims against the Surviving Entity, and Equity Interests in Dynegy shall be Equity Interests in the Surviving Entity, and are classified as set forth in Article II of the Plan.  Upon the Merger Effective Time, all Equity Interests in DH will be cancelled pursuant to the Merger.

 

1.                                 Unclassified Claims

 

Administrative Claims and Priority Tax Claims are not classified under the Plan.  The treatment of such Claims under the Plan is described in the subsection of this Disclosure Statement entitled “Provisions for Treatment of Unclassified Claims under the Plan.”

 

2.                                 Classified Claims and Equity Interests

 

The Claims against and Equity Interests in the Surviving Entity that are classified under the Plan shall be classified as follows:

 

Class 1 — Priority Claims.  Class 1 shall consist of all Priority Claims (which excludes Priority Tax Claims) against the Surviving Entity.

 

Class 2 — Secured Claims.  Class 2 shall consist of all Secured Claims against the Surviving Entity.

 

Class 3 — General Unsecured Claims.  Class 3 shall consist of all General Unsecured Claims against the Surviving Entity.

 

Class 4 — Convenience Claims.  Class 4 shall consist of all Convenience Claims against the Surviving Entity.

 

Class 5 — Securities Claims.  Class 5 shall consist of all Securities Claims against the Surviving Entity.

 

Class 6 — Equity Interests.  Class 6 shall consist of all Equity Interests in the Surviving Entity.

 

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Treatment of the Claims against and Equity Interests in the Surviving Entity that are classified under the Plan is described in the subsection of this Disclosure Statement entitled “Provisions for Treatment of Classified Claims and Equity Interests Under the Plan.”

 

B.                                    Identification of Impaired Classes of Claims and Equity Interests

 

1.                                 Unimpaired Classes of Claims

 

Class 1 — Priority Claims, Class 2 — Secured Claims, and Class 4 — Convenience Claims are not impaired under the Plan.

 

2.                                 Impaired Classes of Claims and Equity Interests

 

Class 3 — General Unsecured Claims, Class 5 — Securities Claims, and Class 6 — Equity Interests are impaired under the Plan.

 

3.                                 Impairment Controversies

 

If a controversy arises as to whether any Claim or Equity Interest, or any class of Claims or Equity Interests, is impaired under the Plan, the Bankruptcy Court shall determine such controversy at the Confirmation Hearing.  Prior to the determination by the Bankruptcy Court with respect to any such controversy, each holder of a Claim or Equity Interest within the class of Claims or Equity Interests with respect to which such controversy has arisen may be provided a provisional ballot to cast a vote to accept or reject the Plan pursuant to the procedures approved by the Bankruptcy Court in the Disclosure Statement Order.

 

C.                                    Provisions for Treatment of Classified Claims and Equity Interests Under the Plan

 

The Plan treats the classes of Claims and Equity Interests as follows:

 

1.                                 Class 1 — Priority Claims

 

Each holder of an Allowed Priority Claim shall be left unimpaired under the Plan and, pursuant to section 1124 of the Bankruptcy Code, all of the legal, equitable and contractual rights to which such Claim entitles such holder in respect of such Claim shall be left unaltered, and except to the extent that a holder of an Allowed Priority Claim and the Plan Proponents (or, if after the Effective Date, the Disbursing Agent) agree on less favorable treatment for such holder, such Allowed Priority Claim (including any amounts to which such holder is entitled pursuant to section 1124(2) of the Bankruptcy Code) shall be paid in full in accordance with such rights on the Plan Distribution Date.

 

2.                                 Class 2 — Secured Claims

 

Each holder of an Allowed Secured Claim shall be left unimpaired under the Plan and, pursuant to section 1124 of the Bankruptcy Code, all of the legal, equitable and contractual rights to which such Claim entitles such holder in respect of such Claim shall be left unaltered, and except to the extent that a holder of an Allowed Secured Claim and the Plan Proponents (or, if after the Effective Date, the Disbursing Agent) agree on less favorable treatment for such holder,

 

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such Allowed Secured Claim (including any amounts to which such holder is entitled pursuant to section 1124(2) of the Bankruptcy Code) shall be paid in full in accordance with such rights on the Plan Distribution Date or, if after the Plan Distribution Date, as and when such payment is due.

 

3.                                 Class 3 — General Unsecured Claims

 

Except to the extent that a holder of an Allowed General Unsecured Claim and the Plan Proponents (or, if after the Effective Date, the Disbursing Agent) agree on less favorable treatment for such holder, each holder of an Allowed General Unsecured Claim shall receive, on the Plan Distribution Date (or with regard to Allocated Facilities Sale Proceeds (if received by the Disbursing Agent after the Effective Date), promptly after receipt by the Disbursing Agent) its Pro Rata Share of (i) the Class 3 Stock Pool, (ii) the Allocated Facilities Sale Proceeds, and (iii) the Plan Cash Payment; provided, however, that with respect to sub-clause (ii), the Lease Trustee (on behalf of itself and the Lease Certificate Holders) shall not receive a Pro Rata distribution of the Allocated Facilities Sale Proceeds in its capacity as holder of the Lease Guaranty Claim.

 

Each holder of an Allowed General Unsecured Claim shall also receive, to the extent available, on a date that is as soon as reasonably practicable after the date that the last Contested General Unsecured Claim is resolved pursuant to Section 9.9 of the Plan, its Pro Rata Share of any Distribution Reserve Excess.

 

4.                                 Class 4 — Convenience Claims

 

Each holder of an Allowed Convenience Claim shall be left unimpaired under the Plan, and, pursuant to section 1124 of the Bankruptcy Code, all of the legal, equitable and contractual rights to which such Claim entitles such holder in respect of such Claim shall be left unaltered, and such Allowed Convenience Claim (including any amounts to which such holder is entitled pursuant to section 1124(2) of the Bankruptcy Code) shall be paid in full in accordance with such rights on the Plan Distribution Date or, if after the Plan Distribution Date, as and when such payment is due.

 

5.                                 Class 5 — Securities Claims

 

No holder of a Securities Claim shall be entitled to any distribution under the Plan on account of such Securities Claim, which Securities Claims have the same respective priority as the Equity Interests in Class 6 pursuant to section 510(b) of the Bankruptcy Code.

 

6.                                 Class 6 — Equity Interests

 

All Equity Interests in DH shall be cancelled pursuant to the Merger upon the Merger Effective Time, and are not classified in Class 6 or any other class under the Plan.  All Equity Interests in the Surviving Entity shall be extinguished, cancelled and discharged on the Effective Date, and the holders of Equity Interests in the Surviving Entity shall not be entitled to any monetary distributions or other property on account of such Equity Interests under the Plan.

 

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D.                                    Provision for Treatment of Intercompany Claims

 

The Intercompany Claims shall, solely for purposes of receiving distributions under the Plan, be treated as having been resolved by compromise or otherwise eliminated, and thus, holders of Intercompany Claims shall receive no distribution under the Plan on account of such Intercompany Claims.  After the Effective Date, Intercompany Claims, if any, may be compromised or otherwise eliminated as determined by Reorganized Dynegy.  Holders of Intercompany Claims shall not be entitled to vote on the Plan.

 

E.                                      Provisions for Treatment of Unclassified Claims Under the Plan.

 

The Plan provides that Administrative Claims (other than the Dynegy Administrative Claim and the Settling Creditor Professional Fee Claims) and Priority Tax Claims shall be treated in accordance with sections 1129(a)(9)(A) and 1129(a)(9)(C) of the Bankruptcy Code, respectively.  Such Claims are not designated as classes of Claims for the purposes of the Plan or for the purposes of sections 1123, 1124, 1125, 1126 or 1129 of the Bankruptcy Code.  Article V of the Plan shall apply to unclassified Claims against DH and Dynegy (as applicable) and their respective Estates, which shall become unclassified Claims against the Surviving Entity upon the Merger Effective Time.

 

1.                                 Treatment of Administrative Claims

 

All Administrative Claims, other than the Dynegy Administrative Claim and the Settling Creditor Professional Fee Claims, shall be treated as follows:

 

·                                          Time for Filing Administrative Claims.  Each holder of an Administrative Claim, other than (i) a Fee Claim, (ii) a liability incurred and payable in the ordinary course of business by DH (or Dynegy or the Surviving Entity, as applicable) (and not past due), or (iii) an Administrative Claim that has been Allowed on or before the Effective Date, must file with the Bankruptcy Court and serve on (A) the Plan Proponents or, if after the Effective Date, the Disbursing Agent, (B) the Creditors’ Committee, and (C) the Office of the United States Trustee, notice of such Administrative Claim within thirty (30) days after service of the Notice of Confirmation.  Such notice of Administrative Claim must include at a minimum (x) the name of the holder of the Administrative Claim, (y) the amount of the Administrative Claim, and (z) a detailed description of the basis for the Administrative Claim.  Failure to file and serve such notice timely and properly shall result in the Administrative Claim being forever barred and discharged.

 

·                                          Time for Filing Fee Claims.  Each Professional Person who holds or asserts a Fee Claim shall be required to file with the Bankruptcy Court, and serve on all parties required to receive notice, a Fee Application within forty (40) days after the Effective Date.  The failure to timely file and serve such Fee Application shall result in the Fee Claim being forever barred and discharged.

 

·                                          Allowance of Administrative Claims/Fee Claims.  An Administrative Claim with respect to which notice has been properly filed and served pursuant to Section 5.2(a) of the Plan shall become an Allowed Administrative Claim if no objection is filed within thirty (30) days after the later of (i) the Effective Date, (ii) the date of service of the

 

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applicable notice of Administrative Claim, or (iii) such later date as may be (A) agreed to by the holder of such Administrative Claim or (B) approved by the Bankruptcy Court on motion of a party in interest, without notice or a hearing.  If an objection is filed within such thirty (30) day period (or any extension thereof), the Administrative Claim shall become an Allowed Administrative Claim only to the extent Allowed by Final Order.  A Fee Claim in respect of which a Fee Application has been properly filed and served in pursuant to Section 5.2(b) of the Plan shall become an Allowed Administrative Claim only to the extent allowed by order of the Bankruptcy Court.

 

·                                          Payment of Allowed Administrative Claims.  On the Plan Distribution Date, each holder of an Allowed Administrative Claim shall receive (i) the amount of such holder’s Allowed Administrative Claim in one Cash payment or (ii) such other treatment as may be agreed upon in writing by (A) the Plan Proponents or, if after the Effective Date, the Disbursing Agent and (B) such holder; provided, that such treatment shall not provide a recovery to such holder having a present value as of the Effective Date in excess of such holder’s Allowed Administrative Claim; and provided, further, that an Administrative Claim representing a liability incurred in the ordinary course of business of DH (or Dynegy or the Surviving Entity, as applicable) may be paid at the Plan Proponents’ (or, if after the Effective Date, the Disbursing Agent’s) election in the ordinary course of business.

 

2.                                 Treatment of Dynegy Administrative Claim

 

On the Effective Date, in full satisfaction of the Dynegy Administrative Claim, the beneficial holder or holders of the Dynegy Administrative Claim shall receive their Pro Rata Share of (i) the Settlement Stock Pool, and (ii) the Warrants.

 

3.                                 Treatment of Settling Creditor Professional Fee Claims

 

The Settling Creditor Professional Fee Claims constitute Allowed Administrative Claims and shall be paid in full, in Cash on the Effective Date; provided, that the fees and expenses comprising such Claims (other than those incurred pursuant to an engagement letter disclosed to DH, Dynegy and the Creditors’ Committee) shall be submitted to DH, the Office of the United States Trustee and the Creditors’ Committee in the form of customary summary invoices of the relevant law firms and institutions not less than fifteen (15) Business Days prior to the Effective Date (including a good faith estimate for fees and expenses anticipated to be incurred through the Effective Date) for review in accordance with the standards set forth in the Settlement Agreement.  In the event of any dispute with respect to such submitted costs and expenses, the undisputed portion shall be paid by DH, the Surviving Entity, or Reorganized Dynegy on the Effective Date, and the disputed portion shall not be paid on the Effective Date but shall be reserved pending resolution of such dispute, either by mutual agreement or, in the event such dispute cannot be resolved by agreement, by order of the Bankruptcy Court; provided, further, that fees and expenses incurred pursuant to an engagement letter shall be subject to the standard of review and conditions set forth in the applicable engagement letter.

 

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4.                                 Treatment of Priority Tax Claims

 

At the election of the Plan Proponents (or, if after the Effective Date, the Disbursing Agent) and with the reasonable consent of the Creditors’ Committee, each holder of an Allowed Priority Tax Claim shall receive in full satisfaction of such Allowed Priority Tax Claim: (a) payments in Cash, in regular installments over a period ending not later than five (5) years after the Petition Date, of a total value, as of the Effective Date, equal to the Allowed amount of such Claim and paid in a manner that is not less favorable than the treatment provided to the most favored nonpriority unsecured Claims under the Plan (exclusive of Convenience Claims); or (b) a lesser amount in one Cash payment as may be agreed upon in writing by the Plan Proponents (or, if after the Effective Date, the Disbursing Agent) and such holder; or (c) such other treatment as may be agreed upon in writing by the Plan Proponents (or, if after the Effective Date, the Disbursing Agent) and such holder; provided, that such agreed upon treatment may not provide such holder with a recovery having a present value as of the Effective Date that is greater than the amount of such holder’s Allowed Priority Tax Claim.  The Confirmation Order shall enjoin any holder of an Allowed Priority Tax Claim from commencing or continuing any action or proceeding against any responsible person, officer or manager of DH, Dynegy, the Surviving Entity or Reorganized Dynegy that otherwise would be (or may be asserted to be) liable to such holder for payment of a Priority Tax Claim so long as DH, Dynegy, the Surviving Entity or Reorganized Dynegy is in compliance with its obligations under the Plan as described in this paragraph.  So long as the holder of an Allowed Priority Tax Claim is enjoined from commencing or continuing any action or proceeding against any responsible person, officer or manager of DH, Dynegy, the Surviving Entity or Reorganized Dynegy under the Plan as described in this paragraph or pursuant to the Confirmation Order, the statute of limitations for commencing or continuing any such action or proceeding shall be tolled.

 

F.                                      Acceptance or Rejection of the Plan

 

1.                                 Class Entitled to Vote

 

Only Class 3 — General Unsecured Claims is entitled to vote on the Plan.

 

2.                                 Classes of Claims Deemed to Accept the Plan

 

Class 1 — Priority Claims, Class 2 — Secured Claims and Class 4 — Convenience Claims are unimpaired under the Plan and are therefore deemed to have accepted the Plan pursuant to section 1126(f) of the Bankruptcy Code.

 

3.                                 Classes of Claims and Equity Interests Deemed to Reject the Plan

 

Class 5 — Securities Claims and Class 6 — Equity Interests are not entitled to any recovery under the Plan and are therefore deemed to have rejected the Plan pursuant to section 1126(g) of the Bankruptcy Code.

 

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4.                                 Class Acceptance Requirement

 

A class of Claims shall have accepted the Plan if it is accepted by the holders of at least two-thirds (2/3) in amount and more than one-half (1/2) in number of the Allowed Claims in such class that have voted on the Plan.

 

G.                                    Settlements and Compromises

 

The Settlement Agreement is incorporated into the Plan in Article VI of the Plan.  To the extent there is any conflict between the Settlement Agreement and the Plan, the Plan shall prevail.

 

H.                                    Means for Implementation of the Plan

 

1.                                 Operations Between the Confirmation Date and the Effective Date

 

During the period from the Confirmation Date through and until the Effective Date, DH (and, if applicable, Dynegy or the Surviving Entity) shall continue to operate their businesses as a Debtor in Possession, subject to the oversight of the Bankruptcy Court as provided in the Bankruptcy Code, the Bankruptcy Rules and all orders of the Bankruptcy Court that are then in full force and effect.

 

2.                                 Implementing Transactions on or Prior to the Effective Date

 

The transactions described below shall occur and be implemented pursuant to section 1123(a)(5) of the Bankruptcy Code (to the extent not already implemented prior to the Confirmation Date) on or prior to the Effective Date:

 

a.                                       Merger

 

On or prior to the Effective Date, DH will be merged with and into Dynegy in accordance with Section 18-209 of the Delaware Limited Liability Company Act and Section 264 of the DGCL, whereupon the separate existence of DH shall cease and Dynegy will be the Surviving Entity in the Merger and will emerge on the Effective Date as Reorganized Dynegy.

 

The Merger will become effective upon the Merger Effective Time.  By virtue of the Merger and without any action on the part of the Surviving Entity, upon the Merger Effective Time (i) each share of Dynegy Common Stock issued and outstanding immediately prior to the Merger Effective Time shall be converted into one share of the Surviving Entity common stock (subject to the treatment of such shares of capital stock as Class 6 — Equity Interests as provided in Section 4.1(f) of the Plan) and (ii) the membership interests of DH issued and outstanding immediately prior to the Merger Effective Time will be cancelled and retired for no consideration and will cease to exist.  In addition, the Merger will have the effect set forth in Section 259 of the DGCL and Section 18-209 of the Delaware Limited Liability Company Act, including that (A) all the property, rights, privileges, powers and franchises of Dynegy and DH shall be vested in the Surviving Entity, (B) all the debts, liabilities and duties of Dynegy and DH shall be the debts, liabilities and duties of the Surviving Entity, and (C) all claims or judgments against Dynegy or DH may be enforced against the Surviving Entity, in each case subject to the

 

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discharge and treatment of such claims and liabilities under the Plan.  Upon the Merger Effective Time and by virtue of the Merger, (x) all claims and liabilities between Dynegy and DH will be cancelled, and (y) all guarantees by DH or Dynegy of the obligations of any non-Debtor Affiliate shall become a guarantee obligation of the Surviving Entity and shall remain in full force and effect against Reorganized Dynegy in accordance with the terms of such guarantee, notwithstanding the occurrence of the Effective Date.

 

The Merger Agreement and related documentation shall be in form and substance reasonably acceptable to the Plan Proponents, the Creditors’ Committee, the Majority Consenting Senior Noteholders, and the Lease Trustee.  The Merger will not occur prior to the Effective Date without the prior written approval of the Plan Proponents, the Creditors’ Committee, the Majority Consenting Senior Noteholders, and the Lease Trustee.

 

b.                                      Re-Vesting of Assets

 

Upon the occurrence of the Effective Date, except as otherwise expressly provided in the Plan or the Confirmation Order, title to all of the Assets of the Surviving Entity shall vest in Reorganized Dynegy free and clear of all liens, mortgages, Claims, Causes of Action, interests, security interests and other encumbrances and without further order of the Bankruptcy Court.  On and after the occurrence of the Effective Date, Reorganized Dynegy may operate its business and may use, acquire and dispose of its Assets free of any restrictions of the Bankruptcy Code.

 

EXCEPT AS OTHERWISE PROVIDED IN THE PLAN, INCLUDING, WITHOUT LIMITATION, SECTION 8.11 OF THE PLAN, AFTER THE EFFECTIVE DATE, NEITHER REORGANIZED DYNEGY NOR ANY OF ITS AFFILIATES SHALL HAVE, OR BE CONSTRUED TO HAVE OR MAINTAIN, ANY LIABILITY, CLAIM, OR OBLIGATION THAT IS BASED IN WHOLE OR IN PART ON ANY ACT, OMISSION, TRANSACTION, EVENT, OR OTHER OCCURRENCE OR THING OCCURRING OR IN EXISTENCE ON OR PRIOR TO THE EFFECTIVE DATE OF THE PLAN (INCLUDING, WITHOUT LIMITATION, ANY LIABILITY, CLAIM OR OBLIGATION ARISING UNDER APPLICABLE NON-BANKRUPTCY LAW AS A SUCCESSOR TO DH OR DYNEGY) AND NO SUCH LIABILITY, CLAIM, OR OBLIGATION FOR ANY ACTS SHALL ATTACH TO REORGANIZED DYNEGY OR ANY OF ITS AFFILIATES; PROVIDED, THAT NOTHING IN THIS SECTION SHALL BE CONSTRUED TO BE OR SHALL BE A RELEASE, WAIVER, DISCHARGE OR IMPAIRMENT OF ANY CLAIMS OR CAUSES OF ACTION THAT ANY PERSON WHO IS A PARTY TO THE GASCO CREDIT FACILITY OR THE COALCO CREDIT FACILITY, OR THEIR SUCCESSORS AND ASSIGNS, MAY HAVE ARISING FROM OR IN CONNECTION WITH THE GASCO CREDIT FACILITY OR THE COALCO CREDIT FACILITY; PROVIDED, FURTHER, THAT NOTHING IN THIS SECTION SHALL BE CONSIDERED TO BE OR SHALL BE A RELEASE, WAIVER, DISCHARGE OR IMPAIRMENT OF ANY CLAIMS OR CAUSES OF ACTION AGAINST ANY DEBTOR, OTHER THAN DH (OR DYNEGY OR THE SURVIVING ENTITY, AS APPLICABLE), ARISING FROM OR IN CONNECTION WITH THE LEASE DOCUMENTS.

 

3.                                 Corporate Action

 

The entry of the Confirmation Order shall constitute authorization for DH, Dynegy, the Surviving Entity and their Affiliates to take or cause to be taken all corporate actions necessary

 

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or appropriate to implement all provisions of, and to consummate, the Plan prior to, on and after the Effective Date and all such actions taken or caused to be taken shall be deemed to have been authorized and approved by the Bankruptcy Court without further approval, act or action under any applicable law, order, rule or regulation, including, without limitation, any action required by the members, directors, officers, or managers of DH, Dynegy, the Surviving Entity and their Affiliates, including, among other things: (a) all transfers of assets (including Equity Interests) that are to occur pursuant to the Plan and the Merger Agreement, (b) the incurrence of all obligations contemplated by the Plan and the making of Plan Distributions, (c) the execution and delivery of all applicable Plan Documents, (d) the implementation of all settlements and compromises as set forth in, incorporated by reference, or otherwise contemplated by the Plan, and (e) the execution and delivery or consummation of any and all transactions, contracts, or arrangements permitted by applicable law, order, rule or regulation, (f) the adoption of the By-Laws and Certificate of Incorporation, and (g) the selection of the Board.  Following entry of the Confirmation Order, the members, directors, managers and/or officers of DH, Dynegy, the Surviving Entity and their Affiliates are authorized and directed to do all things and to execute and deliver all agreements, documents, instruments, notices and certificates as are contemplated by the Plan and to take all necessary actions required in connection therewith, in the name of and on behalf of DH, Dynegy, the Surviving Entity and their Affiliates.  Subject to the provisions of the next sentence of this paragraph, all obligations of DH, Dynegy and the Surviving Entity to indemnify and hold harmless their current and former directors, members, managers, officers and employees, whether arising under constituent documents or under any contract, law or equitable principle, shall be assumed by Reorganized Dynegy upon the occurrence of the Effective Date with the same effect as though such obligations constituted executory contracts that are assumed under section 365 of the Bankruptcy Code, and all such obligations shall be fully enforceable on their terms from and after the Effective Date.  The prosecution of any so-indemnified Causes of Action against the Persons to whom such right(s) of indemnification are owed shall be, upon the occurrence of the Effective Date, enjoined and prohibited pursuant to the Plan and the Confirmation Order.

 

4.                                 Allowance of Senior Notes Claims and Subordinated Notes Claims

 

a.                                       Senior Notes Claims.

 

Upon the entry of the Confirmation Order, the Senior Notes Claims shall be Allowed in full in the aggregate amounts set forth in Exhibit “B” to the Plan.  The Senior Notes Claims shall constitute Allowed General Unsecured Claims for all purposes under the Plan and shall not be subject to defense, offset, counterclaim, subordination, recoupment, reduction or recharacterization by DH, the Surviving Entity, Reorganized Dynegy or any party in interest.

 

b.                                      Subordinated Notes Claims.

 

In accordance with the Settlement Agreement, upon the entry of the Confirmation Order, the Subordinated Notes Claims shall be Allowed on a subordinated basis in the aggregate amount of $222,513,384.51, consisting of (a) $206,200,000.00 in principal amount of the Subordinated Notes and (b) $16,313,384.51 in accrued but unpaid interest at the applicable rates specified in the Subordinated Notes Indenture, the Subordinated Notes, the NGC Trust Declaration, the NGC Trust Capital Income Securities, the NGC Trust Capital Income Securities Guarantee, the NGC

 

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Trust Common Securities and related and ancillary documents and instruments.  In exchange for and in full and final satisfaction of such Allowed Subordinated Notes Claims in the aggregate amount of $222,513,384.51 and by way of settlement of any and all disputes with respect to the subordinated nature of such claims, the Subordinated Notes Indenture Trustee, on behalf of the holders of the Subordinated Notes Claims, shall receive, in exchange for and in full and final satisfaction of all Subordinated Notes Claims, an Allowed General Unsecured Claim in the amount of $55,000,000, which Claim shall receive the same treatment provided with respect to all other Allowed General Unsecured Claims pursuant to Section 4.1(c) and shall not be subject to defense, offset, counterclaim, subordination, recoupment, reduction or recharacterization by DH, the Surviving Entity, Reorganized Dynegy or any other party in interest (including, without limitation, the Senior Notes Indenture Trustee); provided, that notwithstanding the foregoing, DH and any of its successors, assigns or transferees shall waive any and all rights it may have to receive a distribution under Section 4.1(c) of the Plan on account of the NGC Trust Common Securities, and such distribution shall instead be made to holders of the NGC Trust Capital Income Securities.

 

5.                                 Transfer of Dynegy Administrative Claim

 

Prior to the Merger Effective Time, and to the extent not already transferred prior to the confirmation of the Plan, Dynegy shall assign or otherwise transfer the Dynegy Administrative Claim (a) to a trust established to hold and distribute the proceeds of the Dynegy Administrative Claim or (b) in some other efficient manner determined by Dynegy, in each case in accordance with the Settlement Agreement and Settlement Order or other order of the Bankruptcy Court concerning such assignment or transfer.

 

6.                                 Initial Board of Directors

 

The Board shall be comprised of the persons identified in Exhibit “I” of the Plan (to be filed as a Plan Document).  The Board shall be selected in a manner to be agreed to among the Majority Consenting Senior Noteholders, the Lease Trustee and the Creditors’ Committee.  The term of any current members of the board of managers of DH shall expire upon the Merger Effective Time and the term of any current members of the board of directors of Dynegy not identified as members of the Board shall expire upon the Effective Date.

 

In accordance with Section 1129(a)(5) of the Bankruptcy Code, the Plan Proponents will disclose in Exhibit “I” of the Plan (to be filed as a Plan Document) the identity and affiliations of any person proposed to serve on the Board, and to the extent such person is an insider other than by virtue of being a director, the nature of any compensation for such person.  Each director of Reorganized Dynegy shall serve from and after the Effective Date pursuant to the terms of the Certificate of Incorporation, the By-Laws, and applicable law.

 

From and after the Effective Date, the members of the board of directors of Reorganized Dynegy shall be selected and determined in accordance with the provisions of the Certificate of Incorporation, the By-Laws, and applicable law.  The current directors of Dynegy and DH shall be eligible to be, but there shall be no obligation that they be, selected for the board of directors of the Surviving Entity pursuant to sections 1123(a)(7) and 1129(a)(5) of the Bankruptcy Code.

 

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7.                                 Management and Officers of Reorganized Dynegy

 

On the Effective Date, the officers of the Surviving Entity as of the Effective Date shall continue in such positions after the Effective Date for Reorganized Dynegy in accordance with their respective Employment Contracts, if any, the Certificate of Incorporation, the By-Laws, and applicable law.  Subject to any applicable Employment Contracts and applicable law, from and after the Effective Date, the officers of Reorganized Dynegy will be selected and appointed by the board of directors of Reorganized Dynegy in accordance with, and pursuant to, the provisions of the Certificate of Incorporation, the By-Laws, and applicable law.

 

8.                                 Long Term Management Incentive Plan

 

On the Effective Date, Reorganized Dynegy will implement the Long Term Management Incentive Plan.  The Long Term Management Incentive Plan is set forth in Exhibit “C” to the Plan (to be filed as a Plan Document).

 

9.                                 Employment Contracts

 

On the Effective Date, Reorganized Dynegy shall assume all Employment Contracts in accordance with sections 365(a) and 1123(b)(2) of the Bankruptcy Code, and to the extent the respective employees choose to remain with Reorganized Dynegy after the Effective Date, such Employment Contracts shall remain in full force and effect after the Effective Date for the terms provided thereunder.

 

10.                           Compensation and Benefit Programs

 

The pension plans and all savings plans, retirement plans, health care plans (including retiree medical benefits), performance based incentive plans, retention plans, severance plans, workers’ compensation programs and life, disability, directors and officers liability, and other insurance plans of the Surviving Entity are treated as executory contracts under the Plan and shall, on the Effective Date, be assumed by Reorganized Dynegy in accordance with sections 365(a) and 1123(b)(2) of the Bankruptcy Code.

 

11.                           Termination of Certain Debt Obligations

 

Subject to Section 9.10 of the Plan, upon the occurrence of the Effective Date, all notes, instruments, certificates and other documents evidencing the Allowed Senior Notes Claims, Allowed Subordinated Notes Claims, and Allowed Lease Guaranty Claims shall be cancelled and annulled to the extent such documents relate to DH, Dynegy, the Surviving Entity or Reorganized Dynegy or any of their Affiliates other than Dynegy Roseton, Dynegy Danskammer, DNE, and Hudson Power (but shall survive to the extent that such documents relate to any other Person), and the holders of such Claims shall only be entitled to receive, from DH, Dynegy, the Surviving Entity or Reorganized Dynegy or any of their Affiliates other than Dynegy Roseton, Dynegy Danskammer, DNE, and Hudson Power, the treatment provided under the Plan.

 

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12.                           Cancellation of Liens

 

Except as otherwise provided in the Plan, on the Effective Date, in consideration for the distributions to be made on the Effective Date pursuant to the Plan, all liens, charges, encumbrances and rights against DH, Dynegy, the Surviving Entity or their respective Estates or Assets, related to any Claim or Equity Interest, shall be terminated, null and void and of no effect.

 

13.                           Issuance of Reorganized Dynegy Common Stock and Warrants

 

a.                                       Issuance of Reorganized Dynegy Common Stock

 

On the Effective Date, Reorganized Dynegy shall issue the Reorganized Dynegy Common Stock required to be issued in accordance with the Plan and all related instruments, certificates and other documents required to be issued or distributed pursuant to the Plan without the necessity of any further act or action under applicable law, regulation, order or rule.

 

b.                                      Issuance of Warrants

 

On the Effective Date, Reorganized Dynegy shall issue 100% of the Warrants without the necessity of any further act or action under applicable law, regulation, order or rule.

 

14.                           Registration Rights of Holders of Reorganized Dynegy Common Stock

 

Each Registration Rights Holder shall have the right to become a party to the Registration Rights Agreement providing such holder with customary registration rights, including a customary shelf registration to be filed with the Securities Exchange Commission as required under the Registration Rights Agreement.  The Registration Rights Agreement shall be in form and substance reasonably satisfactory to the Plan Proponents, the Majority Consenting Senior Noteholders, the Majority Consenting Lease Certificate Holders and the Creditors’ Committee.

 

15.                           Causes of Action

 

Except as otherwise set forth in the Plan and except to the extent previously released pursuant to the Settlement Agreement, the Settlement Order, or other prior order of the Bankruptcy Court, (a) all Causes of Action of DH, Dynegy, the Surviving Entity and their Estates shall be transferred to, and be vested in, Reorganized Dynegy, and (b) the right of Reorganized Dynegy to commence, prosecute or settle such Causes of Action, in its sole discretion, shall be preserved notwithstanding the occurrence of the Effective Date.

 

No Person (other than the Released Parties to the extent of the relevant release or releases) may rely on the absence of a specific reference in the Plan or the Disclosure Statement to any Cause of Action against them as any indication that DH, Dynegy, the Surviving Entity, or Reorganized Dynegy, as applicable, will not pursue any and all available Causes of Action against them.  DH, Dynegy, the Surviving Entity, and Reorganized Dynegy, as applicable, expressly reserve all rights to prosecute any and all Causes of Action against any Person (other than the Released Parties to the extent of the relevant release or releases), except as otherwise provided in the Plan.  Unless any Cause of

 

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Action against a Person (other than a Released Party to the extent of the relevant release or releases) is expressly waived, relinquished, exculpated, released, compromised or settled in the Plan or pursuant to a Final Order, DH, Dynegy, the Surviving Entity, and Reorganized Dynegy, as applicable, expressly reserve all Causes of Action for later adjudication, and, therefore, no preclusion doctrine, including without limitation, the doctrines of res judicata, collateral estoppel, issue preclusion, claim preclusion, estoppel (judicial, equitable or otherwise) or laches, shall apply to such Causes of Action upon or after the confirmation or consummation of the Plan.

 

16.                           Appointment of the Disbursing Agent

 

Upon the occurrence of the Effective Date, Reorganized Dynegy shall be appointed to serve as the Disbursing Agent and shall have all of the powers, rights, duties and protections afforded the Disbursing Agent under the Plan.

 

17.                           [Intentionally Omitted]

 

18.                           Investment of Funds Held by the Disbursing Agent; Tax Reporting by the Disbursing Agent

 

The Disbursing Agent may, but shall not be required to, invest any funds held by the Disbursing Agent pending the distribution of such funds pursuant to the Plan in investments that are exempt from federal, state and local taxes.  Subject to definitive guidance from the IRS or a court of competent jurisdiction to the contrary (including the receipt by the Disbursing Agent of a private letter ruling if the Disbursing Agent so requests one, or the receipt of an adverse determination by the IRS upon audit if not contested by the Disbursing Agent), the Disbursing Agent may (a) treat the funds and other property held by it as held in a single trust for federal income tax purposes in accordance with the trust provisions of the Internal Revenue Code (sections 641, et seq.), and (b) to the extent permitted by applicable law, report consistently with the foregoing for state and local income tax purposes.

 

19.                           Releases by the Surviving Entity, its Estate and Non-Debtor Affiliates, and the Plan Proponents

 

Subject to the occurrence of the Effective Date, for good and valuable consideration, the (i) Plan Proponents and (ii) DH, Dynegy, the Surviving Entity and their Estates and non-Debtor Affiliates shall release and forever waive and discharge any and all Claims, obligations, suits, judgments, damages, demands, debts, rights, Causes of Action and liabilities, whether liquidated or unliquidated, fixed or contingent, matured or unmatured, known or unknown, foreseen or unforeseen, then existing or thereafter arising, in law, equity or otherwise that are based in whole or part on any act, omission, transaction, event or other occurrence taking place on or prior to the Effective Date in any way relating to DH, DH’s Chapter 11 Case, Dynegy, the Settlement Agreement, the Merger and the Surviving Entity, the Plan, the Disclosure Statement, or solicitation of the Plan, and that could have been asserted by or on behalf of (a) the Plan Proponents, or (b) DH, Dynegy, the Surviving Entity or their Estates and non-Debtor Affiliates against the Released Parties; except, that nothing in this Section shall be construed to release any party or entity from intentional fraud, willful misconduct, gross negligence, or criminal conduct as determined by a Final Order.

 

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20.                           Releases by Creditors and Equity Interest Holders

 

Subject to the occurrence of the Effective Date, for good and valuable consideration, any holder of a Claim or Equity Interest that is impaired or unimpaired under the Plan shall be presumed conclusively to have released the Released Parties from any Cause of Action based on the same subject matter as such Claim against or Equity Interest in the Surviving Entity; provided, however, that nothing in this Section shall be construed to release any party from intentional fraud, willful misconduct, gross negligence, or criminal conduct as determined by a Final Order or to release any party from any Claim or Cause of Action which any Person who is a party to the GasCo Credit Facility or the CoalCo Credit Facility, or their successors and assigns, may have in respect of the GasCo Credit Facility or the CoalCo Credit Facility, or to release Dynegy Roseton, Dynegy Danskammer, DNE, or Hudson Power from any Claim or Cause of Action arising from or in connection with the Lease Documents; provided, further, however, that the releases provided in Section 8.20 of the Plan shall not apply to any holder of a Claim or Equity Interest (other than any party to the Plan Support Agreement, except as otherwise provided therein) that elects to “opt out” of such releases by making such election on its timely submitted ballot (to the extent it receives a ballot) or in a written notice submitted to the Solicitation Agent on or before the Plan Objection Deadline.

 

I.                                         Plan Distribution Provisions

 

1.                                 Plan Distributions

 

The Disbursing Agent shall make, or cause to be made, all Plan Distributions.  In the event a Plan Distribution shall be payable on a day other than a Business Day, such Plan Distribution shall instead be paid on the immediately succeeding Business Day, but shall be deemed to have been made on the date otherwise due.  Except as otherwise provided in the Plan, Plan Distributions shall be made to the holders of Allowed Claims as reflected in the registry of Claims maintained by the Claims Agent on the Effective Date.  As of the close of business on the Effective Date, the registry of Claims maintained by the Claims Agent shall be closed.  For all purposes of the Plan, the Plan Proponents, the Surviving Entity, Reorganized Dynegy the Disbursing Agent, the Indenture Trustees, and all of their respective agents, as applicable, shall have no obligation to recognize any transfer after the Effective Date of a Claim, and shall be entitled to recognize and deal with only the holder of record of such Claim as of the close of business on the Effective Date.

 

2.                                 Timing of Plan Distributions

 

Except for Plan Distributions that shall be made on the Effective Date in accordance with the Plan, each Plan Distribution shall be made on the relevant Plan Distribution Date therefor and shall be deemed to have been timely made if made on such date or within five (5) Business Days thereafter.

 

3.                                 Address for Delivery of Plan Distributions/Unclaimed Plan Distributions

 

Subject to Bankruptcy Rule 9010, any Plan Distribution or delivery to a holder of an Allowed Claim shall be made at the address of such holder as set forth in the latest-dated of the

 

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following actually held or received by the Disbursing Agent prior to the Plan Distribution Date applicable to such Plan Distribution: (a) the Schedules; (b) the Proof of Claim filed by such holder; (c) any notice of assignment filed with the Bankruptcy Court with respect to such Claim pursuant to Bankruptcy Rule 3001(e); or (d) any notice served by such holder giving details of a change of address.  If any Plan Distribution sent to the holder of a Claim is returned to the Disbursing Agent as undeliverable, no Plan Distributions shall be made to such holder unless the Disbursing Agent is notified of such holder’s then current address within one hundred and twenty (120) days after such Plan Distribution was returned.  After such date, if such notice was not provided, such holder shall have forfeited its right to such Plan Distribution, and the undeliverable Plan Distribution shall revert to Reorganized Dynegy.  Upon such reversion, the Claim of any holder or its successors with respect to such property shall be cancelled, discharged and forever barred notwithstanding any applicable federal or state escheat, abandoned or unclaimed property laws to the contrary.

 

4.                                 De Minimis Plan Distributions

 

No Plan Distribution of less than twenty dollars ($20.00) shall be made by the Disbursing Agent to the holder of any Claim unless a request therefor is made in writing to the Disbursing Agent.  If no request is made as provided in the preceding sentence within ninety (90) days after the Effective Date, all such Plan Distributions shall revert to Reorganized Dynegy.

 

5.                                 Time Bar to Cash Payments

 

Checks issued in respect of Allowed Claims shall be null and void if not negotiated within one hundred and eighty (180) days after the date of issuance thereof.  Requests for reissuance of any voided check shall be made directly to the Disbursing Agent by the holder of the Allowed Claim to whom such check was originally issued.  Any claim in respect of such a voided check shall be made within two hundred (200) days after the date of issuance of such check.  If no request is made as provided in the preceding sentence, any claims in respect of such voided check shall be discharged and forever barred and such unclaimed Plan Distribution shall revert to Reorganized Dynegy.

 

6.                                 Manner of Payment Under the Plan

 

Unless the Person receiving a Plan Distribution agrees otherwise, any Plan Distribution to be made in Cash under the Plan shall be made, at the election of the Disbursing Agent, by check drawn on a domestic bank or by wire transfer from a domestic bank.  Cash payments to foreign creditors may be, in addition to the foregoing, made at the option of the Disbursing Agent in such funds and by such means as are necessary or customary in a particular foreign jurisdiction.  The Disbursing Agent may cause all Cash Plan Distributions in respect of the Senior Notes Claims, Subordinated Notes Claims and Lease Guaranty Claims to be paid (i) to the applicable Indenture Trustee or (ii) with the prior written consent of the applicable Indenture Trustee, through DTC for payment to the holders of such Claims similar to the manner in which DH previously made payments with respect to the Senior Notes and Subordinated Notes.

 

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7.                                 Fractional Plan Distributions

 

Notwithstanding anything to the contrary contained in the Plan, no Plan Distributions of fractional securities or fractions of dollars will be made.  Fractional securities and fractions of dollars shall be rounded to the nearest whole unit (with any amount equal to or less than one-half security or one-half dollar, as applicable, to be rounded down).

 

8.                                 Special Distribution Provisions Concerning Senior Notes Claims, Subordinated Notes Claims, and Lease Guaranty Claims

 

The following additional provisions shall apply specifically to Plan Distributions to be made on account of Allowed Senior Notes Claims, Allowed Subordinated Notes Claims, and Allowed Lease Guaranty Claims, as applicable:

 

Service of Indenture Trustees.  Each Indenture Trustee and its respective agents, successors and assigns or such entity appointed by such Indenture Trustee shall facilitate the making of Plan Distributions to the holders of Allowed Senior Notes Claims, Allowed Subordinated Notes Claims, or Allowed Lease Guaranty Claims, as applicable, in accordance with the Plan and the applicable Indenture for which it serves as Indenture Trustee, and upon the completion thereof, shall be discharged of all of its obligations associated with the Senior Notes Claims, Subordinated Notes Claims, and Lease Guaranty Claims.  The Indenture Trustees shall only be required to act and make distributions in accordance with the terms of the Plan and shall have no liability for actions taken in accordance with the Plan or in reliance upon information provided to them in accordance with the Plan, except solely for actions or omissions arising out of the Indenture Trustees’ intentional fraud, willful misconduct, gross negligence or criminal conduct.  Further, the Indenture Trustees shall have no obligation or liability for distributions under the Plan to any party who does not (i) hold a Claim against the Debtor as of the Distribution Record Date or (ii) otherwise comply with the terms of the Plan, except solely for actions or omissions arising out of the Indenture Trustees’ intentional fraud, willful misconduct, gross negligence or criminal conduct.

 

Substitution of the Indenture Trustees; Distributions.  Upon the occurrence of the Effective Date, the Claims of the Indenture Trustees shall be, for all purposes under the Plan, including, without limitation, the right to receive Plan Distributions, substituted for all Claims of individual holders of Allowed Senior Notes Claims, Allowed Subordinated Notes Claims, and Allowed Lease Guaranty Claims, as applicable.  Plan Distributions on account of such Claims shall be made by the Disbursing Agent to (i) the applicable Indenture Trustee or (ii) with the prior written consent of the applicable Indenture Trustee, by means of book-entry exchange through the facilities of DTC in accordance with DTC’s customary practices.  If a Plan Distribution is made to an Indenture Trustee, such Indenture Trustee, in its capacity as a disbursing agent, shall administer the Plan Distributions in accordance with the Plan and the applicable Indenture and will be compensated for such services pursuant to and in accordance with Section 9.8(c) of the Plan; provided, however, that nothing in the Plan shall be deemed to impair, waive or extinguish any rights of the Indenture Trustees with respect to the Indenture Trustee Charging Liens.

 

On the Plan Distribution Date, which for the purposes of Section 9.8 of the Plan shall be the Effective Date, all Senior Notes Claims, Subordinated Notes Claims, and Lease Guaranty

 

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Claims shall be settled and compromised in exchange for the distribution to the applicable Indenture Trustee of the applicable Plan Distributions to the holders of such Allowed Claims as specified in Section 4.1(c) of the Plan, subject to the rights of the applicable Indenture Trustee to assert its Indenture Trustee Charging Lien against the applicable Plan Distribution; provided, that each Indenture Trustee shall return to the Disbursing Agent any Plan Distributions held on account of any Allowed Senior Notes Claims, Allowed Subordinated Notes Claims, or Allowed Lease Guaranty Claims, as applicable, as to which the requirements of Section 9.10 of the Plan are not satisfied by the second (2nd) anniversary of the Effective Date.

 

Article XV of the Subordinated Notes Indenture shall not be enforced and Allowed Subordinated Notes Claims shall not be subordinated to Senior Notes Claims, Lease Guaranty Claims, or any other General Unsecured Claim, solely with respect to the right to receive Plan Distributions under Section 4.1(c) of the Plan, and any and all such rights to enforce such subordination for Plan Distributions under Section 4.1(c) of the Plan are settled, compromised, and released pursuant to the Plan.  As of the Effective Date, all persons and entities, including, without limitation, the Senior Notes Indenture Trustee and each holder of a Senior Notes Claim, are enjoined from enforcing or attempting to enforce any contractual, legal and/or equitable right of subordination against the Subordinated Notes Indenture Trustee or any holder of a Subordinated Notes Claim, solely with respect to the right to receive Plan Distributions under Section 4.1(c) of the Plan.  As such, notwithstanding Article XV of the Subordinated Notes Indenture, the holders of Allowed Subordinated Notes Claims shall receive, and shall be entitled to retain, their Pro Rata Share of the Plan Distributions as provided under Sections 4.1(c) and 8.4(b) of the Plan in respect of the Allowed General Unsecured Claim in favor of the Subordinated Notes Indenture Trustee (for the benefit of the holders of Allowed Subordinated Notes Claims) in the amount of $55,000,000.

 

Except as provided in Section 9.10 of the Plan, all Plan Distributions to holders of Allowed Senior Notes Claims, Allowed Subordinated Notes Claims or Allowed Lease Guaranty Claims shall only be made to such holders after the surrender by each such holder of the certificates representing such Claim, or in the event that such certificate is lost, stolen, mutilated or destroyed, upon the holder’s compliance with the requirements set forth in Section 9.10 of the Plan.  Upon surrender of such certificates, the applicable Indenture Trustee shall cancel and destroy such certificates.

 

Indenture Trustee Fees.  Notwithstanding anything in the Plan to the contrary, on the Effective Date, the Disbursing Agent shall pay in Cash, without the need for any application to, or approval of, any court, all documented Indenture Trustee Fees owed in accordance with the applicable Indenture as of the Effective Date.  The Indenture Trustees shall provide reasonably detailed invoices to the Plan Proponents or the Surviving Entity (as applicable) and the Creditors’ Committee no later than five (5) days prior to the Effective Date (subject to redaction to preserve attorney-client privilege).

 

The Bankruptcy Court shall retain jurisdiction over any disputes regarding the reasonableness of the requested Indenture Trustee Fees.  If the Disbursing Agent or the Creditors’ Committee disputes any requested Indenture Trustee Fees, the Disbursing Agent shall (i) pay any undisputed portion of the Indenture Trustee Fees and (ii) notify the applicable Indenture Trustee of such dispute within five (5) days after presentation of the invoices by the

 

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Indenture Trustee.  Upon such notification, the applicable Indenture Trustee may (i) assert its Indenture Trustee Charging Lien to pay the disputed portion of the Indenture Trustee Fees or (ii) submit such dispute for resolution to the Bankruptcy Court.  Nothing in the Plan shall be deemed to impair, waive, discharge or negatively affect the Indenture Trustee Charging Liens.

 

To the extent that an Indenture Trustee provides services related to the Plan, Confirmation Order, or the applicable Indenture before, on or after the Effective Date, such Indenture Trustee shall be entitled to receive from the Disbursing Agent, without further court approval, reasonable compensation for such services and reimbursement of reasonable out-of-pocket expenses incurred in connection with such services.  The payment of such compensation and expenses will be made on the terms provided in the Plan or as otherwise agreed to between the applicable Indenture Trustee and the Disbursing Agent and the Creditors’ Committee.

 

9.                                 Reserve for Contested Claims

 

Plan Distributions to be distributed to the holders of Allowed General Unsecured Claims shall be distributed as provided in Article IX of the Plan.  The Pro Rata Share of Plan Distributions reserved in the Distribution Reserve for holders of Contested General Unsecured Claims shall not exceed the amount estimated by the Bankruptcy Court with respect to such Claims, if any, without the consent of the Majority Consenting Senior Noteholders, the Creditors’ Committee and the Lease Trustee, which consent shall not be unreasonably withheld or delayed.  After a Final Order has been entered, or other final resolution has been reached, with respect to all Contested General Unsecured Claims, the Distribution Reserve Excess shall be distributed to the holders of Allowed General Unsecured Claims pursuant to Section 4.1(c) of the Plan.

 

10.                           Surrender and Cancellation of Instruments

 

As a condition to receiving any Plan Distribution, on or before the Plan Distribution Date, the holder of an Allowed Claim evidenced by a certificate, instrument or note, other than any such certificate, instrument or note that is being reinstated under the Plan, shall (a) surrender such certificate, instrument or note representing such Claim, including, without limitation, any guarantees, and (b) execute and deliver such other documents as may be necessary to effectuate the Plan; provided, however, that the Lease Trustee and Lease Certificate Holders shall not be required to surrender any certificate, instrument or note evidencing their Claims, but the Lease Trustee shall surrender the Lease Guaranties.  If the record holder of a note is DTC or its nominee, or another securities depository or custodian thereof, and such note is represented by a global security held by or on behalf of DTC or such other securities depository or custodian, then the beneficial holder of such note shall be deemed to have surrendered such holder’s security, note, debenture or other evidence of indebtedness upon surrender of such global security by DTC or its nominee, or another securities depository or custodian thereof.

 

Any certificate, instrument or note, including any such guarantees, surrendered pursuant to the immediately preceding paragraph shall thereafter be cancelled and extinguished; provided, however, that the Senior Notes, the Subordinated Notes, NGC Trust Capital Income Securities, the Lease Guaranties and the Indentures (other than the Lease Indentures and the Pass Through Trust Agreement in respect of Dynegy Danskammer, Dynegy Roseton, DNE and Hudson Power) shall continue in effect solely to the extent necessary to (i) allow the Disbursing Agent to make

 

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Plan Distributions on account of Allowed Senior Notes Claims, Allowed Subordinated Notes Claims, and Allowed Lease Guaranty Claims, as applicable, (ii) allow the Indenture Trustees to make distributions on account of Allowed Senior Notes Claims, Allowed Subordinated Notes Claims, and Allowed Lease Guaranty Claims, as applicable, (iii) permit the Indenture Trustees to assert their Indenture Trustee Charging Liens against Plan Distributions for payment of the Indenture Trustee Fees, (iv) allow the Indenture Trustees to maintain any right of indemnification, contribution subrogation or any other Claim they may have under the Indentures, (v) permit each Indenture Trustee to appear in the Chapter 11 Cases or in any other matter described in Article XIV which, absent such cancellation or extinguishment, such Indenture Trustee would otherwise have the right to appear, and (vi) permit the Indenture Trustees to perform any functions that are necessary to effectuate the foregoing.  The Disbursing Agent shall have the right to withhold any Plan Distribution to be made to or on behalf of any holder of such Claims unless and until (x) such certificates, instruments or notes, including any such guarantees, are surrendered to the extent required in the immediately preceding paragraph, or (y) any relevant holder provides to the Disbursing Agent an affidavit of loss or such other documents as may be required by the Disbursing Agent together with an appropriate indemnity in the customary form.  Any such holder who fails to surrender such certificates, instruments or notes, including any such guarantees, or otherwise fails to deliver an affidavit of loss and indemnity prior to the second (2nd) anniversary of the Effective Date, shall be deemed to have forfeited its Claims and shall have no further Claims against DH, Dynegy, the Surviving Entity, Reorganized Dynegy, their property and Estates, or against the Indenture Trustees, as applicable, in respect of such Claim and shall not participate in any Plan Distribution.  All property in respect of such forfeited Claims shall revert to Reorganized Dynegy.

 

Subsequent to the performance by the Indenture Trustees or their agents of any duties that are required under the Plan, the Confirmation Order and/or under the terms of the Indentures, the Indenture Trustees and their agents shall be relieved of, and released from, all obligations associated with the Senior Notes, Subordinated Notes and (with respect to DH and the Lease Guaranty Claims) Lease Certificates or under other applicable trust agreements or law and the Indentures (other than the Lease Indentures and the Pass Through Trust Agreement) shall be deemed to be discharged and released.

 

Upon receipt and distribution of the Class 3 Stock Pool, the Allocated Facilities Sale Proceeds, and the Plan Cash Payment and after payment of the Subordinated Notes Indenture Trustee Fees (each as provided under the Plan), the NGC Trust shall be deemed terminated and dissolved and, if necessary or desirable, Reorganized Dynegy or the Subordinated Notes Indenture Trustee may file a certificate of cancellation with the Secretary of State of Delaware, and upon such termination and dissolution, the NGC Capital Income Securities Guarantee shall be deemed terminated.

 

J.                                      Procedures for Resolving and Treating Contested Claims

 

1.                                 Claim Objection Deadline

 

As soon as practicable, but in no event later than one hundred and eighty (180) days after the Effective Date (subject to being extended by order of the Bankruptcy Court upon motion of

 

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the Disbursing Agent), objections to Claims shall be filed with the Bankruptcy Court and served upon the holders of each of the Claims to which objections are made.

 

2.                                 Prosecution of Contested Claims

 

The Plan Proponents or the Surviving Entity, as applicable (or, if after the Effective Date, the Disbursing Agent), and the Creditors’ Committee may object to the allowance of Claims filed with the Bankruptcy Court with respect to which liability is disputed in whole or in part.  Except as otherwise set forth in the Plan, all objections that are filed and prosecuted as provided therein shall be litigated to Final Order or compromised and settled in accordance with Section 10.3 of the Plan.

 

3.                                 Settlement of Claims and Causes of Action

 

Notwithstanding any requirements that may be imposed pursuant to Bankruptcy Rule 9019, from and after the Effective Date, the Disbursing Agent shall have authority to settle or compromise all Claims and Causes of Action (to the extent not previously compromised, settled and released under the Plan) without further review or approval of the Bankruptcy Court.

 

4.                                 Entitlement to Plan Distributions Upon Allowance

 

Notwithstanding any other provision of the Plan, no Plan Distribution or partial Plan Distribution shall be made with respect to any Claim to the extent it is a Contested Claim, unless and until such Contested Claim becomes an Allowed Claim, subject to the setoff rights as provided in Section 15.20 of the Plan.  When a Claim that is not an Allowed Claim as of the Effective Date becomes an Allowed Claim (regardless of when) the holder of such Allowed Claim shall thereupon become entitled to receive the Plan Distributions in respect of such Claim, the same as though such Claim had been an Allowed Claim on the Effective Date.

 

5.                                 Indenture Trustee as Claim Holder

 

Consistent with Bankruptcy Rule 3003(c), the Disbursing Agent shall recognize a Proof of Claim filed by an Indenture Trustee in respect of any Allowed Senior Notes Claims, Allowed Subordinated Notes Claims (but subject to Section 8.4(b) of the Plan), and Allowed Lease Guaranty Claims for purposes of Plan Distributions.  Accordingly, any Senior Notes Claim, Subordinated Notes Claim, or Lease Guaranty Claim, proof of which is filed by the registered or beneficial holder of such Claim, may be disallowed as duplicative of the Claim of the applicable Indenture Trustee, without need for any further action or Bankruptcy Court order.

 

6.                                 Estimation of Claims

 

The Plan Proponents (or either of them), the Surviving Entity or, following the Effective Date, the Disbursing Agent, may, at any time, request that the Bankruptcy Court estimate any Contested Claim pursuant to section 502(c) of the Bankruptcy Code regardless of whether the Plan Proponents (or either of them), the Surviving Entity, or the Disbursing Agent has previously objected to such Claim or whether the Bankruptcy Court has ruled on any such objection, and the Bankruptcy Court shall retain jurisdiction to estimate any Claim at any time during litigation concerning any objection to any Claim, including during the pendency of any appeal relating to

 

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any such objection.  In the event that the Bankruptcy Court estimates any Contested Claim, that estimated amount shall constitute the Allowed amount of such Claim for all purposes under the Plan except with respect to Plan Distributions, and with respect to Plan Distributions the estimated amount shall constitute the maximum Allowed amount of such Claim.  All of the objection, estimation, settlement, and resolution procedures set forth in the Plan are cumulative and not necessarily exclusive of one another.  Claims may be estimated and subsequently compromised, settled, withdrawn or resolved by any mechanism approved by the Bankruptcy Court.

 

K.                                    Conditions Precedent to Confirmation of the Plan and the Occurrence of the Effective Date

 

1.                                 Conditions Precedent to Confirmation

 

The following are conditions precedent to confirmation of the Plan:

 

·                                          The Bankruptcy Court shall have issued, and the Clerk of the Bankruptcy Court shall have entered, the Disclosure Statement Order, in form and substance reasonably acceptable to the Plan Proponents, the Creditors’ Committee, the Majority Consenting Senior Noteholders, and the Lease Trustee;

 

·                                          The Settlement Order shall be in full force and effect and not be subject to any stay or injunction, and shall not have been amended, modified, reversed or vacated (except for any amendments or modifications as may be reasonably acceptable, in form and substance, to the Plan Proponents, the Creditors’ Committee, the Majority Consenting Senior Noteholders, RCM, and the Lease Trustee);

 

·                                          The Bankruptcy Court shall have issued, and the Clerk of the Bankruptcy Court shall have entered, a Confirmation Order, in form and substance reasonably acceptable to the Plan Proponents, the Creditors’ Committee, the Majority Consenting Senior Noteholders, and the Lease Trustee; provided, that if the Confirmation Order is not entered by September 21, 2012, each Plan Proponent will have no obligation to pursue confirmation of the Plan and either Plan Proponent may, notwithstanding any other provision of the Plan, without any consent or action by or from the other Plan Proponent, but, in the case of DH only, with the consent of the Creditors’ Committee, the Majority Consenting Senior Noteholders, and the Lease Trustee, (i) amend the Plan in accordance with Section 15.17 hereof or (ii) revoke or withdraw the Plan in accordance with Section 15.18 hereof, without prejudice to DH’s or Dynegy’s right to file an amended plan of reorganization; and

 

·                                          The Plan, the Plan Documents, and all of the documents, schedules, supplements, exhibits and appendices contained therein or related thereto, are each in form and substance reasonably acceptable to the Plan Proponents, the Creditors’ Committee, the Majority Consenting Senior Noteholders, and the Lease Trustee.

 

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2.                                 Conditions Precedent to the Occurrence of the Effective Date

 

The following are conditions precedent to the occurrence of the Effective Date:

 

·                                          The Confirmation Order shall have been entered by the Bankruptcy Court on or before September 21, 2012, be in full force and effect and not be subject to any stay or injunction;

 

·                                          The Settlement Order shall be in full force and effect and not be subject to any stay or injunction, and shall not have been amended, modified, reversed or vacated (except for any amendments or modifications as may be reasonably acceptable, in form and substance, to the Plan Proponents, the Creditors’ Committee, the Majority Consenting Senior Noteholders, RCM, and the Lease Trustee);

 

·                                          All conditions to the obligations of the Plan Proponents and the Surviving Entity, as applicable, under the Plan and the Plan Documents shall have been satisfied or waived in accordance with the terms of the Plan or the applicable Plan Documents;

 

·                                          The Confirmation Order, the Plan, the Plan Documents, and all of the documents, schedules, supplements, exhibits and appendices contained therein shall not have been amended, supplemented or otherwise modified from the form and substance reasonably acceptable to the Plan Proponents, the Majority Consenting Senior Noteholders, the Lease Trustee and the Creditors’ Committee, as applicable, unless such amendments, supplements or modifications are in form and substance reasonably acceptable to such Persons, as applicable; and

 

·                                          The transactions authorized pursuant to Section 8.2 of the Plan and all material documents, instruments and agreements necessary to implement such transactions, shall be in form and substance reasonably acceptable to the Plan Proponents, the Majority Consenting Senior Noteholders, the Lease Trustee, and the Creditors’ Committee;

 

3.                                 Waiver of Conditions

 

The Plan Proponents or the Surviving Entity, as applicable, may waive with the prior written consent of each of the Plan Proponents, the Creditors’ Committee, the Majority Consenting Senior Noteholders, and the Lease Trustee, without further order of the Bankruptcy Court, any one or more of the conditions set forth in Section 11.1 or Section 11.2 of the Plan.

 

4.                                 Effect of Non-Occurrence of the Effective Date

 

If the Effective Date does not occur on or prior to December 31, 2012, the Plan shall be null and void and nothing contained in the Plan shall:  (a) constitute a waiver or release of any Claims against or Equity Interests in DH or Dynegy; (b) prejudice in any manner the rights of the Plan Proponents, DH, Dynegy or any other Person; or (c) constitute an admission,

 

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acknowledgement, offer or undertaking by the Plan Proponents, DH, Dynegy or any other Person as to any matter or thing.

 

L.                                     The Disbursing Agent

 

1.                                       Powers and Duties of the Disbursing Agent

 

The Disbursing Agent shall be empowered to (a) take all steps and execute all instruments and documents necessary to make Plan Distributions to holders of Allowed Claims; (b) comply with the Plan and the obligations thereunder; (c) employ, retain or replace professionals to represent it with respect to its responsibilities under the Plan; (d) object to Claims as specified in Article X of the Plan, and prosecute such objections; (e) compromise and settle any issue or dispute regarding the amount, validity, priority, treatment or Allowance of any Claim as provided in Article X of the Plan; (f) make, in its sole discretion, annual and other periodic reports regarding the status of distributions under the Plan to the holders of Allowed Claims that are outstanding at such time, with such reports to be made available upon request to the holder of any Contested Claim; and (g) exercise such other powers as may be vested in the Disbursing Agent pursuant to the Plan, the Plan Documents, the Confirmation Order, or any other order of the Bankruptcy Court.

 

2.                                       Plan Distributions

 

The Disbursing Agent shall make or cause to be made the required Plan Distributions specified under the Plan on the relevant Plan Distribution Date therefor, except as otherwise provided in Section 9.8 of the Plan.

 

3.                                       Exculpation of the Disbursing Agent

 

Except as otherwise provided below, the Disbursing Agent, and its officers, directors, employees, agents and representatives, are exculpated pursuant to the Plan by all Persons, holders of Claims and Equity Interests, and all other parties in interest, from any and all Claims or Causes of Action arising out of the discharge of the powers and duties conferred upon the Disbursing Agent (and each of its respective paying agents), by the Plan, any Final Order of the Bankruptcy Court entered pursuant to or in furtherance of the Plan, or applicable law, except solely for actions or omissions arising out of the Disbursing Agent’s intentional fraud, willful misconduct, gross negligence, or criminal conduct.  No holder of a Claim or Equity Interest, or representative thereof, shall have or pursue any Claim or Cause of Action against (a) the Disbursing Agent or its respective officers, directors, employees, agents and representatives for making Plan Distributions in accordance with the Plan, or (b) any holder of a Claim or Equity Interest receiving or retaining Plan Distributions as provided for by the Plan.  Nothing contained in this Section shall preclude or impair any holder of an Allowed Claim from bringing an action in the Bankruptcy Court to compel the making of Plan Distributions contemplated by the Plan on account of such Allowed Claim.

 

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M.                                  Treatment of Executory Contracts and Unexpired Leases

 

1.                                       Assumption and Rejection of Executory Contracts and Unexpired Leases

 

On the Effective Date, all executory contracts and unexpired leases of the Surviving Entity, shall be rejected pursuant to the provisions of section 365 of the Bankruptcy Code, except: (i) any executory contracts or unexpired leases that are the subject of a separate motion to reject, assume, or assume and assign that is filed pursuant to section 365 of the Bankruptcy Code by DH, Dynegy or the Surviving Entity before the Effective Date; (ii) any contracts and leases listed in the “Schedule of Assumed and Assigned Executory Contracts and Unexpired Leases”, attached to the Plan as Exhibit “J”, to be filed by the Plan Proponents as a Plan Document; (iii) all executory contracts and unexpired leases assumed or assumed and assigned under the Plan (including under Sections 8.9 and 8.10 of the Plan) or by order of the Bankruptcy Court entered before the Effective Date; (iv) any executory contract or unexpired lease that is the subject of a dispute over the amount or manner of cure pursuant to Article XIII of the Plan and for which DH, Dynegy, the Surviving Entity, or the Disbursing Agent (as applicable) makes a motion to reject such contract or lease based upon the existence of such dispute filed at any time; and (v) any agreement, obligation, security interest, transaction or similar undertaking that DH, Dynegy, the Surviving Entity or the Disbursing Agent (as applicable) believes is not executory.

 

The Plan shall constitute a motion to reject such executory contracts and unexpired leases rejected pursuant to Section 13.1(a) of the Plan, and DH, Dynegy, the Surviving Entity and Reorganized Dynegy shall have no liability thereunder except as is specifically provided in the Plan.  Entry of the Confirmation Order by the Bankruptcy Court shall constitute approval of such rejections pursuant to section 365(a) of the Bankruptcy Code and a finding by the Bankruptcy Court that each such rejected agreement, executory contract or unexpired lease is burdensome and that the rejection thereof is in the best interests of DH and its Estate, Dynegy and its Estate (if applicable) or the Surviving Entity and its Estate.

 

The Plan shall constitute a motion to assume or assume and assign to Reorganized Dynegy (unless another Person is otherwise listed) such executory contracts and unexpired leases as set forth in the Schedule of Assumed and Assigned Executory Contracts and Unexpired Leases, and, if assigned to a Person other than Reorganized Dynegy, Reorganized Dynegy shall have no liability thereunder for any breach of such assumed and assigned executory contract or unexpired lease occurring after such assignment pursuant to section 365(k) of the Bankruptcy Code, except as is specifically provided in the Plan.  Issuance of the Confirmation Order by the Bankruptcy Court, upon entry of such Confirmation Order by the Clerk of the Bankruptcy Court, shall constitute approval of such assumption or assumption and assignment pursuant to sections 365(a), (b) and (f) of the Bankruptcy Code, as applicable, and a finding by the Bankruptcy Court that the requirements of section 365(f) of the Bankruptcy Code have been satisfied.  Any counterparty to an agreement listed on the Schedule of Assumed and Assigned Executory Contracts and Unexpired Leases filed by the Plan Proponents who disputes the assumption or assignment of an executory contract or unexpired lease must file with the Bankruptcy Court, and serve upon the Plan Proponents and the Creditors’ Committee a written objection to the assumption or assumption and assignment, which objection shall set forth the basis for the dispute by no later than seven (7) Business Days prior to the Confirmation Hearing.  The failure to timely object shall be deemed a waiver of any and all objections to the assumption, or

 

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assumption and assignment, of executory contracts and unexpired leases listed in the Schedule of Assumed and Assigned Executory Contracts and Unexpired Leases timely filed by the Plan Proponents.

 

The inclusion of a contract, lease or other agreement on any Schedule of Assumed and Assigned Executory Contracts and Unexpired Leases shall not constitute an admission by the Plan Proponents as to the characterization of whether any such included contract, lease, or other agreement is, or is not, an executory contract or unexpired lease or whether any claimants under any such contract, lease or other agreement are time-barred from asserting Claims against DH, Dynegy, the Surviving Entity or Reorganized Dynegy.  The Plan Proponents reserve all rights with respect to the characterization of any such agreements.

 

2.                                       Cure

 

At the election of the Plan Proponents, any monetary defaults under each executory contract and unexpired lease to be assumed under the Plan shall be satisfied pursuant to section 365(b)(1) of the Bankruptcy Code: (a) by payment of the default amount in Cash on the Effective Date or as soon thereafter as practicable, or (b) on such other terms as agreed upon in writing by (i) the Plan Proponents, the Surviving Entity or the Disbursing Agent (as applicable), and the Creditors’ Committee, and (ii) the counter-party to such executory contract or unexpired lease.  In the event of a dispute regarding: (A) the amount of any cure payments, (B) the ability to provide adequate assurance of future performance under the contract or lease to be assumed or assigned, or (C) any other matter pertaining to assumption or assignment, the cure payments required by section 365(b)(1) of the Bankruptcy Code, if any, shall be made following the entry of a Final Order resolving the dispute and approving assumption or assignment, as applicable.  The Schedule of Assumed and Assigned Executory Contracts and Unexpired Leases filed by the Plan Proponents shall set forth the cure obligations, if any, for each agreement for which a cure obligation must be satisfied as a condition to the assumption or assumption and assignment of such agreement.  Any counterparty to an agreement listed on the Schedule of Assumed and Assigned Executory Contracts and Unexpired Leases filed by the Plan Proponents who disputes the scheduled cure obligation with respect to the executory contract or unexpired lease to which it is a party or regarding the provision of adequate assurance, or any other matter relating to assumption or assignment, must file with the Bankruptcy Court, and serve upon the Plan Proponents and the Creditors’ Committee, a written objection, which objection shall set forth the basis for the dispute, the alleged correct cure obligation, if applicable, and/or any other objection related to the assumption or assignment of the relevant agreement by no later than seven (7) Business Days prior to the Confirmation Hearing.  If a counterparty to an executory contract or unexpired lease to be assumed, or assumed and assigned, fails to file and serve an objection that complies with the foregoing, such counterparty shall be deemed to have waived any and all objections to the assumption and assignment of the relevant agreement, including with respect to any cure obligations.

 

3.                                       Claims Arising from Rejection, Expiration or Termination

 

Claims created by the rejection of executory contracts and unexpired leases or the expiration or termination of any executory contract or unexpired lease prior to the Confirmation Date must be filed with the Bankruptcy Court and served on the Plan Proponents, Surviving

 

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Entity or Disbursing Agent, as applicable, and the Creditors’ Committee, (a) in the case of an executory contract or unexpired lease rejected prior to the Confirmation Date, no later than the later of (i) the applicable bar date set forth in the Bar Date Notice and (ii) the date that is thirty (30) days after the date of notice of such rejection, (except to the extent the order authorizing such rejection specifies a different deadline), or (b) in the case of an executory contract or unexpired lease that (i) was terminated or expired by its terms prior to the Confirmation Date, or (ii) is rejected pursuant to Article XIII of the Plan, no later than thirty (30) days after the Effective Date.  Any such Claims for which a Proof of Claim is not filed and served by the deadlines set forth in Section 13.3 of the Plan, as applicable, shall be forever barred from assertion and shall not be enforceable against DH, Dynegy, the Surviving Entity or their Estates (as applicable), Assets, or non-Debtor Affiliates or any of their assets or property, or Reorganized Dynegy or any of its assets or property.  Unless otherwise ordered by the Bankruptcy Court, all such Claims that are timely filed as provided in the Plan shall be treated as General Unsecured Claims or Convenience Claims therein, as applicable, subject to objection by the Disbursing Agent.

 

N.                                    Retention of Jurisdiction

 

Pursuant to sections 105(a) and 1142 of the Bankruptcy Code, the Bankruptcy Court shall retain and shall have exclusive jurisdiction over any matter (a) arising under the Bankruptcy Code, (b) arising in or related to the Chapter 11 Case of DH (or any chapter 11 case of any Plan Proponent or the Surviving Entity) or the Plan or (c) that relates to the following:

 

·                                          To determine any and all adversary proceedings, applications, motions, and contested or litigated matters that may be pending on the Effective Date or that, pursuant to the Plan, may be instituted by the Disbursing Agent after the Effective Date;

 

·                                          To hear and determine any objections to the allowance of Claims, whether filed, asserted, or made before or after the Effective Date, including, without express or implied limitation, to hear and determine any objections to the classification of any Claim and to allow, disallow or estimate any Contested Claim in whole or in part;

 

·                                          To issue such orders in aid of execution of the Plan to the extent authorized or contemplated by section 1142 of the Bankruptcy Code;

 

·                                          To consider any modifications of the Plan, remedy any defect or omission, or reconcile any inconsistency in any order of the Bankruptcy Court, including, without limitation, the Confirmation Order;

 

·                                          To hear and determine all Fee Applications and applications for allowances of compensation and reimbursement of any other fees and expenses authorized to be paid or reimbursed under the Plan or the Bankruptcy Code;

 

·                                          To hear and determine all controversies, suits and disputes that may relate to, impact upon or arise in connection with the Settlement Agreement or its

 

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interpretation, implementation, enforcement or consummation (subject to the terms thereof);

 

·                                          To hear and determine all controversies, suits and disputes that may relate to, impact upon or arise in connection with the Plan, the Plan Documents or their interpretation, implementation, enforcement or consummation;

 

·                                          To hear and determine all controversies, suits and disputes that may relate to, impact upon, or arise in connection with the Confirmation Order (and all exhibits to the Plan) or its interpretation, implementation, enforcement or consummation;

 

·                                          To the extent that Bankruptcy Court approval is required and to the extent not released pursuant to the Plan, to consider and act on the compromise and settlement of any Claim or Cause of Action by, on behalf of, or against DH, Dynegy, the Surviving Entity or their Estates, or Reorganized Dynegy;

 

·                                          To hear and determine such other matters that may be set forth in the Plan, or the Confirmation Order, or that may arise in connection with the Plan, or the Confirmation Order;

 

·                                          To hear and determine matters concerning state, local and federal taxes, fines, penalties or additions to taxes for which Reorganized Dynegy may be liable, directly or indirectly, in accordance with sections 346, 505 and 1146 of the Bankruptcy Code;

 

·                                          To hear and determine all controversies, suits and disputes that may relate to, impact upon, or arise in connection with any setoff and/or recoupment rights of DH, Dynegy, the Surviving Entity, or Reorganized Dynegy, or any Person under the Plan;

 

·                                          To hear and determine all controversies, suits, and disputes that may relate to, impact upon, or arise in connection with Causes of Action of DH, Dynegy, or the Surviving Entity (including Avoidance Actions) commenced by DH, Dynegy, the Surviving Entity, Reorganized Dynegy, or any third parties, as applicable, before or after the Effective Date, except to the extent compromised, settled and released under the Plan;

 

·                                          To enter an order or final decree closing the Chapter 11 Case of DH (and any chapter 11 case of any Plan Proponent or the Surviving Entity);

 

·                                          To issue injunctions, enter and implement other orders or take such other actions as may be necessary or appropriate to restrain interference by any Person with consummation, implementation or enforcement of the Plan or the Confirmation Order; and

 

·                                          To hear and determine any other matters related hereto and not inconsistent with chapter 11 of the Bankruptcy Code.

 

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O.                                   Miscellaneous Provisions

 

1.                                       Substantial Consummation

 

On the Effective Date, the Plan shall be deemed to be substantially consummated under sections 1101 and 1127(b) of the Bankruptcy Code.

 

2.                                       Confirmation Over Non-Accepting Classes

 

The Plan Proponents intend to confirm the Plan notwithstanding the non-acceptance of one or more classes of Claims and/or Equity Interests pursuant to section 1129(b) of the Bankruptcy Code.

 

3.                                       Payment of Statutory Fees

 

All fees due and payable with respect to DH’s Chapter 11 Case (and any chapter 11 case of any Plan Proponent or the Surviving Entity) as of the Effective Date pursuant to section 1930 of title 28 of the United States Code, together with interest, if any, pursuant to section 3717 of title 31 of the United States Code, each as determined by the Bankruptcy Court at the Confirmation Hearing, shall be paid by DH, Dynegy, or the Surviving Entity, as applicable, on or before the Effective Date.  Following the Effective Date, Reorganized Dynegy shall pay all fees incurred pursuant to section 1930 of title 28 of the United States Code, together with interest, if any, pursuant to section 3717 of title 31 of the United States Code, with respect to DH’s Chapter 11 Case (and any chapter 11 case of any Plan Proponent or the Surviving Entity) until such time as a final decree is entered closing DH’s Chapter 11 Case (and any chapter 11 case of any Plan Proponent or the Surviving Entity), a Final Order converting DH’s Chapter 11 Case (and any chapter 11 case of any Plan Proponent or the Surviving Entity) to a case under chapter 7 of the Bankruptcy Code or a Final Order dismissing DH’s Chapter 11 Case (and any chapter 11 case of any Plan Proponent or the Surviving Entity) is entered.

 

4.                                       Satisfaction of Claims

 

The rights afforded in the Plan and the treatment of all Claims and Equity Interests provided for therein shall be in exchange for and in complete satisfaction, discharge and release of all Claims and Equity Interests of any nature whatsoever against DH, Dynegy, the Surviving Entity and their Estates, Assets, properties and interests in property.  Except as otherwise provided in the Plan, on the Effective Date, all Claims against and Equity Interests in the Surviving Entity shall be satisfied, discharged and released in full.  Reorganized Dynegy shall not be responsible for any pre-Effective Date obligations of DH, Dynegy or the Surviving Entity, except those expressly assumed by Reorganized Dynegy, or as otherwise provided in the Plan.  Except as otherwise provided in the Plan, all Persons shall be precluded and forever barred from asserting against Reorganized Dynegy, or its successors or assigns, Assets, properties, or interests in property any event, occurrence, condition, thing, or other or further Claims or Causes of Action based upon any act, omission, transaction, or other activity of any kind or nature that occurred or came into existence prior to the Effective Date, whether or not the facts of or legal bases therefor were known or existed prior to the Effective Date.

 

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5.                                       Special Provisions Regarding Insured Claims

 

The Plan Distributions to each holder of an Allowed Insured Claim against the Surviving Entity shall be made in accordance with the treatment provided under the Plan for the Class in which such Allowed Insured Claim is classified; except, that there shall be deducted from any Plan Distribution on account of an Insured Claim, for purposes of calculating the Allowed amount of such Claim, the amount of any insurance proceeds actually received by such holder in respect of such Allowed Insured Claim.  Nothing in Section 15.5 of the Plan shall (i) constitute a waiver of any Claim, right, or Cause of Action of DH, Dynegy, the Surviving Entity or their Estates may hold against any Person, including any insurer, or (ii) provide for the Allowance of any Insured Claim.  Pursuant to section 524(e) of the Bankruptcy Code, nothing in the Plan shall release or discharge any insurer from any obligations to any Person under applicable law or any policy of insurance under which DH, Dynegy or the Surviving Entity is an insured or a beneficiary.

 

6.                                       Third Party Agreements; Subordination

 

Except as provided in Sections 8.4 and 9.8(b) of the Plan, the Plan Distributions to the various classes of Claims under the Plan shall not affect the right of any Person to levy, garnish, attach, or employ any other legal process with respect to such Plan Distributions by reason of any claimed subordination rights or otherwise.  All such rights and any agreements relating thereto shall remain in full force and effect.  The right of DH, the Surviving Entity and, after the Effective Date, the Disbursing Agent, to seek subordination of any Claim (other than a Senior Notes Claim, a Subordinated Notes Claim, or a Lease Guaranty Claim) pursuant to section 510 of the Bankruptcy Code is fully reserved, and the treatment afforded any Claim that becomes a subordinated Claim at any time shall be modified to reflect such subordination.

 

7.                                       Exculpation

 

None of DH, Dynegy, the Surviving Entity, its non-Debtor Affiliates, the Plan Proponents, the Consenting Senior Noteholders, Franklin, the Lease Trustee, the Consenting Lease Certificate Holders, the PSEG Entities, the members of the Creditors’ Committee (solely in their capacity as such), the Indenture Trustees, or any of their respective officers, directors, managers, equity holders, employees, agents, representatives, advisors, attorneys or successors and assigns shall have or incur any liability to any Person for any act or omission in connection with, or arising out of, the pursuit of confirmation of the Plan, the consummation of the Plan, or the implementation or administration of the Plan or the property to be distributed under the Plan, except for willful misconduct or gross negligence as finally determined by the Bankruptcy Court, and, in all respects shall be entitled to rely upon the advice of counsel and all information provided by other exculpated persons in the Plan without any duty to investigate the veracity or accuracy of such information with respect to their duties and responsibilities under the Plan. Nothing in the Plan shall limit the liability of the professionals of DH and the Surviving Entity to their clients pursuant to N.Y. Comp. Codes R. & Regs. tit. 22 § 1200.8 Rule 1.8(h)(1) (2009).

 

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8.                                       Discharge

 

Except as otherwise provided in the Plan or the Confirmation Order, on the Effective Date, without further notice or order, all Claims and Causes of Action against DH, the Surviving Entity and their Estates and all successors thereto of any nature whatsoever shall be automatically discharged forever.  Except as otherwise provided in the Plan or the Confirmation Order, on the Effective Date, DH, the Surviving Entity and their Estates, Reorganized Dynegy and all successors thereto shall be deemed fully discharged and released from any and all Claims and Causes of Action, including, but not limited to, demands and liabilities that arose before the Effective Date, and all debts of the kind specified in sections 502(g), 502(h), and 502(i) of the Bankruptcy Code, whether or not (a) a Proof of Claim based upon such debt is filed or deemed filed under section 501 of the Bankruptcy Code; (b) a Claim based upon such debt is allowed under section 502 of the Bankruptcy Code; or (c) the holder of a Claim based upon such debt has accepted the Plan.  The Confirmation Order shall be a judicial determination of discharge of all liabilities of DH, the Surviving Entity, their Estates, Reorganized Dynegy and all successors thereto.  As provided in section 524 of the Bankruptcy Code, such discharge shall void any judgment against DH, the Surviving Entity and their Estates or property, Reorganized Dynegy or any successors thereto at any time obtained to the extent it relates to a discharged Claim, and operates as an injunction against the prosecution of any action against DH, the Surviving Entity and their Estates or property, Reorganized Dynegy or any successors thereto to the extent it relates to a discharged Claim.

 

9.                                       Notices

 

Any notices, requests or demands to or upon the Plan Proponents, the Consenting Senior Noteholders, the Consenting Lease Certificate Holders, RCM, the PSEG Entities, the Lease Trustee, or the Creditors’ Committee, in order to be effective, shall be in writing (including, without express or implied limitation, those delivered by facsimile transmission), and, unless otherwise expressly provided in the Plan, shall be deemed to have been duly given or made when actually delivered or, in the case of notice by facsimile transmission, when received and telephonically confirmed, addressed in accordance with Section 15.9 of the Plan.

 

10.                                 Headings

 

The headings used in the Plan are inserted for convenience only, and neither constitute a portion of the Plan nor in any manner affect the construction of the provisions of the Plan.

 

11.                                 Governing Law

 

Unless a rule of law or procedure is supplied by federal law (including the Bankruptcy Code and the Bankruptcy Rules), the laws of the State of New York, without giving effect to the conflicts of laws principles thereof, shall govern the construction of the Plan and any agreements, documents and instruments executed in connection with the Plan, except as otherwise expressly provided in such instruments, agreements or documents.

 

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12.                                 Expedited Determination

 

The Disbursing Agent is authorized under the Plan to file a request for expedited determination under section 505(b) of the Bankruptcy Code for all tax returns filed with respect to DH, Dynegy, or the Surviving Entity.

 

13.                                 Exemption from Transfer Taxes

 

Pursuant to section 1146 of the Bankruptcy Code, the issuance, transfer, or exchange of notes or equity securities under the Plan, the creation of any mortgage, deed of trust, lien, pledge or other security interest, the making or assignment of any lease or sublease, or the making or delivery of any deed or other instrument of transfer under, in furtherance of, or in connection with the Plan, shall not be subject to any stamp, real estate transfer, mortgage recording or other similar tax.  The Bankruptcy Court may enter any order necessary or appropriate to implement this exemption from transfer taxes.

 

14.                                 Exemption from Registration

 

The issuance of the Reorganized Dynegy Common Stock and the Warrants under the Plan and the distribution thereof shall be exempt from registration under applicable securities laws pursuant to section 1145(a) of the Bankruptcy Code.

 

15.                                 Notice of Entry of Confirmation Order and Relevant Dates

 

Promptly upon entry of the Confirmation Order, the Plan Proponents shall publish as directed by the Bankruptcy Court and serve on all known parties in interest and holders of Claims against and Equity Interests in the Surviving Entity, notice of the entry of the Confirmation Order and all relevant deadlines and dates under the Plan, including, but not limited to, the deadline for filing notice of Administrative Claims, and the deadline for filing rejection damage Claims.

 

16.                                 Interest and Attorneys’ Fees

 

Interest accrued after the Petition Date will accrue and be paid on Claims only to the extent specifically provided for in the Plan, the Plan Documents, the Confirmation Order, or as otherwise required by the Bankruptcy Court or by applicable law.  No award or reimbursement of attorneys’ fees or related expenses or disbursements shall be allowed on, or in connection with, any Claim, except as set forth in the Plan (including under Section 5.4 and Section 9.8(c) of the Plan) or as ordered by the Bankruptcy Court.

 

17.                                 Modification of the Plan

 

Subject to Article XI of the Plan, and as provided in section 1127 of the Bankruptcy Code, the Plan Proponents or the Surviving Entity, as applicable, may modify the Plan at any time after confirmation and before substantial consummation, provided that the Plan, as modified, meets the requirements of sections 1122 and 1123 of the Bankruptcy Code and the Bankruptcy Court, after notice and a hearing, confirms the Plan as modified, under section 1129 of the Bankruptcy Code, and the circumstances warrant such modifications; provided, however,

 

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(a) the Plan Proponents or the Surviving Entity, as applicable, shall not modify or amend (i) the Plan without the consent of the Creditors’ Committee, the Majority Consenting Senior Noteholders, the Lease Trustee, and each Plan Proponent, (ii) Section 8.4(b) or Section 9.8(b), without the prior consent of the Majority Consenting Subordinated Noteholders and the Subordinated Notes Indenture Trustee, or (iii) any provision of the Plan with respect to the payment of reasonable fees and expenses of the Subordinated Notes Indenture Trustee and its advisors without the prior consent of the Subordinated Notes Indenture Trustee; and (b) if the Confirmation Order is not entered by September 21, 2012, each Plan Proponent may, subject to each Plan Proponent’s respective rights, but without any consent or action by or from the other Plan Proponent (but, in the case of DH only, with the consent of the Creditors’ Committee, the Majority Consenting Senior Noteholders and the Lease Trustee), modify the Plan to convert the Plan to a plan that does not include the other Plan Proponent or provide for the treatment of Claims against and Equity Interests in such Plan Proponent.

 

A holder of a Claim that has accepted the Plan shall be deemed to have accepted such Plan as modified if the proposed alteration, amendment or modification does not materially and adversely change the treatment of the Claim of such holder.

 

18.                                 Revocation of the Plan

 

Subject to Article XI of the Plan, the Plan Proponents reserve the right to revoke and withdraw the Plan prior to the Effective Date and/or to adjourn the Confirmation Hearing; provided, however, that nothing contained in the Plan shall be deemed to prevent DH, Dynegy, or the Surviving Entity, as applicable, from taking or failing to take any action that it is obligated to take (or refrain from taking) in the performance of its fiduciary or similar duty which it owes to any other Person; provided, further, however, that if the Confirmation Order is not entered by September 21, 2012, each Plan Proponent will have no obligation to pursue confirmation of the Plan and either Plan Proponent may, subject to each Plan Proponent’s respective rights,  notwithstanding any other provision of the Plan, without any consent or action by or from the other Plan Proponent (but, in the case of DH only, with the consent of the Creditors’ Committee, the Majority Consenting Senior Noteholders and the Lease Trustee), (a) amend the Plan in accordance with Section 15.17 of the Plan or (b) revoke or withdraw the Plan in accordance with Section 15.18 of the Plan without prejudice to DH’s or Dynegy’s right to file an amended plan of reorganization.

 

If the Plan Proponents (or, in accordance with the paragraph above, either Plan Proponent) revoke or withdraw the Plan, or if the Effective Date does not occur as provided in Section 11.4 of the Plan, then the Plan and all settlements and compromises set forth in the Plan and not otherwise approved by a separate Final Order (to be clear, this paragraph shall not impact the Settlement Agreement and Settlement Order) shall be deemed null and void and nothing contained in the Plan and no acts taken in preparation for consummation of the Plan shall be deemed to constitute a waiver or release of any Claims against or Equity Interests in DH or its Estate, Dynegy or its Estate, or the Surviving Entity or its Estate, as applicable, or to prejudice in any manner the rights of DH, Dynegy, the Surviving Entity or any other Person in any other further proceedings involving DH, Dynegy or the Surviving Entity or to constitute an admission, acknowledgement, offer or undertaking by DH, Dynegy, the Surviving Entity, or any Person as to any matter or thing.

 

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19.                                 Corrective Action

 

Subject to Article XI of the Plan, the Plan Proponents may make appropriate technical adjustments and modifications to the Plan prior to the Effective Date without further order or approval of the Bankruptcy Court, provided that such technical adjustments and modifications do not adversely affect in a material way the treatment of holders of Claims against or Equity Interests under the Plan.

 

20.                                 Application of Plan Cash Payment

 

Each holder of Senior Notes shall have the option to apply such holder’s Pro Rata Share of the Plan Cash Payment to satisfy outstanding principal of or interest on its Senior Notes, as such allocation is determined by such holder in its sole discretion.

 

21.                                 Creditors’ Committee

 

Upon the Effective Date, except with respect to (1) applications for Fee Claims or reimbursement of expenses incurred as a member of the Creditors’ Committee, (2) Settling Creditor Professional Fee Claims and Indenture Trustee Fees, (3) appealing and taking any action concerning an appeal of the Plan or the Settlement Order in any court, and (4) continuing any pending litigation or contested matter, if any, to which the Creditors’ Committee is a party, the Creditors’ Committee shall automatically dissolve for the purposes of DH’s and the Surviving Entity’s chapter 11 cases only, whereupon (a) the members, professionals and agents of the Creditors’ Committee shall be released from any further duties and responsibilities in the chapter 11 cases of DH or the Surviving Entity and under the Bankruptcy Code and (b) any and all consent, approval, participation, or other rights provided to the Creditors’ Committee pursuant to the Plan shall terminate, and be of no further force or effect.

 

22.                                 Setoff Rights

 

In the event that either DH, Dynegy or the Surviving Entity has a Claim of any nature whatsoever against the holder of a Claim against the Surviving Entity, then the Disbursing Agent may, but is not required to, set off any such Claim against the Claim against the Surviving Entity (and any payments or other Plan Distributions to be made in respect of such Claim hereunder), subject to the provisions of sections 553, 556 and 560 of the Bankruptcy Code; provided, however, that there shall be no right of setoff against the Senior Notes Claims, Subordinated Notes Claims, the TIA Claim, or Lease Guaranty Claims, and the Surviving Entity and Reorganized Dynegy hereby waive any right to set off against any such Claims.  The failure to exercise any right of setoff shall not constitute a waiver or release of any Claims that DH, Dynegy or Reorganized Dynegy may have against the holder of any Claim.

 

23.                                 Compliance with Tax Requirements

 

In connection with the Plan, the Disbursing Agent shall comply with all withholding and reporting requirements imposed by federal, state, local and foreign taxing authorities and all Plan Distributions hereunder shall be subject to such withholding and reporting requirements.  Notwithstanding the foregoing, each holder of an Allowed Claim that is to receive a Plan Distribution shall have the sole and exclusive responsibility for the satisfaction and payment of

 

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any tax obligations imposed by any government unit, including income, withholding and other tax obligations, on account of such Plan Distribution.  The Disbursing Agent has the right, but not the obligation, to not make a Plan Distribution until such holder has made arrangements satisfactory to the Disbursing Agent for payment of any such tax obligations.

 

24.                                 Rates

 

The Plan does not provide for the change of any rate that is within the jurisdiction of any governmental regulatory commission after the occurrence of the Effective Date.  Where a Claim has been denominated in foreign currency on a Proof of Claim, the Allowed amount of such Claim shall be calculated in legal tender of the United States based upon the conversion rate in place as of the Petition Date and in accordance with section 502(b) of the Bankruptcy Code.

 

25.                                 Injunctions

 

On the Effective Date and except as otherwise provided in the Plan, all Persons who have been, are, or may be holders of Claims against or Equity Interests in the Surviving Entity shall be permanently enjoined from taking any of the following actions against or affecting the Surviving Entity, its Estate, its non-Debtor Affiliates, or its Assets, or Reorganized Dynegy, or any of their current or former respective members, equity holders, directors, managers, officers, employees, agents, and professionals, successors and assigns or their respective assets and property with respect to such Claims (other than actions brought to enforce any rights or obligations under the Plan):

 

·                                          commencing, conducting or continuing in any manner, directly or indirectly, any suit, action or other proceeding of any kind (including, without limitation, all suits, actions and proceedings that are pending as of the Effective Date, which must be withdrawn or dismissed with prejudice);

 

·                                          enforcing, levying, attaching, collecting or otherwise recovering by any manner or means, whether directly or indirectly, any judgment, award, decree or order;

 

·                                          creating, perfecting or otherwise enforcing in any manner, directly or indirectly, any encumbrance; and

 

·                                          asserting any setoff, right of subrogation or recoupment of any kind; provided, that any defenses, offsets or counterclaims which DH, Dynegy, the Surviving Entity or Reorganized Dynegy may have or assert in respect of the above referenced Claims are fully preserved to the extent provided in Section 15.22 of the Plan.

 

Further, on the Effective Date, pursuant to section 105(a) of the Bankruptcy Code, all Persons shall be permanently and forever stayed, restrained and enjoined from taking any of the following actions against or affecting Reorganized Dynegy and all successors thereto or its Affiliates, or any of their current or former respective members, equity holders, directors, managers, officers, employees, agents, and professionals, successors and assigns, and any Person claimed to be liable derivatively through any of the foregoing, or

 

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their respective assets and property for the purpose of, directly or indirectly, collecting, recovering or receiving payment of, on or with respect to any Claim or Cause of Action arising from or in connection with the Prepetition Restructurings (including any claims asserted in any of the Prepetition Lawsuits related to the Prepetition Restructurings), including, but not limited to:

 

·                                          commencing, conducting or continuing in any manner, directly or indirectly, any suit, action or other proceeding of any kind (including a judicial, arbitral, administrative or other proceeding);

 

·                                          enforcing, levying, attaching, collecting or otherwise recovering by any manner or means, whether directly or indirectly, any judgment, award, decree or order;

 

·                                          creating, perfecting or otherwise enforcing in any manner, directly or indirectly, any encumbrance;

 

·                                          asserting any setoff, right of subrogation, reimbursement, contribution or recoupment of any kind; and

 

·                                          proceeding in any manner in any place whatsoever that does not conform to or comply with the provisions of the Plan.

 

Nothing contained in Section 15.23 the Plan shall stay, restrain or enjoin any Person who is a party to the GasCo Credit Facility or the CoalCo Credit Facility, or their successors and assigns, from taking any actions with respect to any Claim or Cause of Action arising from or in connection with the GasCo Credit Facility or the CoalCo Credit Facility.

 

26.                                 Binding Effect

 

The Plan shall be binding upon DH, Dynegy, the Surviving Entity and their non-Debtor Affiliates, the Plan Proponents, Reorganized Dynegy, the holders of all Claims against and Equity Interests in the Surviving Entity, parties in interest, all Persons and their respective successors and assigns.  To the extent any provision of the Disclosure Statement or any other solicitation document may be inconsistent with the terms of the Plan, the terms of the Plan shall be binding and conclusive.  To the extent there is any conflict or inconsistency between the Settlement Agreement and the Plan, the terms and conditions of the Plan shall prevail and be binding and conclusive.

 

27.                                 Successors and Assigns

 

The rights, benefits and obligations of any Person named or referred to in the Plan shall be binding on, and shall inure to the benefit of, any heir, executor, administrator, successor or assign of such Person.

 

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28.                                 Severability

 

IN THE EVENT THE BANKRUPTCY COURT DETERMINES THAT ANY PROVISION OF THE PLAN IS UNENFORCEABLE EITHER ON ITS FACE OR AS APPLIED TO ANY CLAIM OR EQUITY INTEREST OR TRANSACTION, THE PLAN PROPONENTS MAY MODIFY THE PLAN IN ACCORDANCE WITH SECTION 15.17 OF THE PLAN SO THAT SUCH PROVISION SHALL NOT BE APPLICABLE TO THE HOLDER OF ANY SUCH CLAIM OR EQUITY INTEREST OR TRANSACTION.  SUCH A DETERMINATION OF UNENFORCEABILITY SHALL NOT (A) LIMIT OR AFFECT THE ENFORCEABILITY AND OPERATIVE EFFECT OF ANY OTHER PROVISION OF THE PLAN OR (B) REQUIRE THE RESOLICITATION OF ANY ACCEPTANCE OR REJECTION OF THE PLAN.

 

29.                                 No Admissions

 

None of the filing of the Plan or the taking by DH, Dynegy, the Surviving Entity, the Plan Proponents or Reorganized Dynegy of any action with respect to the Plan or any statement or provision contained in the Plan shall be or be deemed to be (a) an admission by any such party or any other Person against its interest, or (b) a waiver of any rights, claims or remedies that such parties may have, and all such rights and remedies are and shall be specifically reserved.  In the event the Plan is not confirmed and the Confirmation Order is not entered, the Plan, the Disclosure Statement and the Plan Documents, and any statement contained in any of those documents, may not be used by any Person, party or entity against DH, Dynegy, or the Plan Proponents or any other Person.

 

AS TO CONTESTED MATTERS, ADVERSARY PROCEEDINGS AND OTHER CAUSES OF ACTION OR THREATENED CAUSES OF ACTION, THE PLAN SHALL NOT CONSTITUTE OR BE CONSTRUED AS AN ADMISSION OF ANY FACT OR LIABILITY, STIPULATION, OR WAIVER, BUT RATHER AS A STATEMENT MADE IN SETTLEMENT NEGOTIATIONS.  THE PLAN SHALL NOT BE ADMISSIBLE IN ANY NON-BANKRUPTCY PROCEEDING EXCEPT AS NECESSARY TO ENFORCE THE PROVISIONS OF THE PLAN, NOR SHALL IT BE CONSTRUED TO BE CONCLUSIVE ADVICE ON THE TAX, SECURITIES, AND OTHER LEGAL EFFECTS OF THE PLAN AS TO HOLDERS OF CLAIMS AGAINST AND EQUITY INTERESTS IN DH, THE SURVIVING ENTITY, OR ANY OF THEIR SUBSIDIARIES AND AFFILIATES.

 

XII.

 

RISK FACTORS

 

The holders of Claims against DH, Dynegy and the Surviving Entity should read and carefully consider the following factors, as well as the other information set forth in this Disclosure Statement, before deciding whether to vote to accept or reject the Plan, as applicable.

 

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A.                                    General Considerations

 

The formulation of a reorganization plan is a principal purpose of a chapter 11 case.  The Plan sets forth the means for satisfying the Claims against and Equity Interests in the Surviving Entity.  Reorganization of the businesses and operations of DH and the Surviving Entity under the proposed Plan also avoids the potentially adverse impact of a protracted and costly reorganization.

 

B.                                    Certain Bankruptcy Considerations

 

1.                                       Plan Proponents may not be able secure confirmation or consummation of the Plan.

 

The Plan requires the acceptance of a requisite number of holders of Claims in Class 3 — General Unsecured Claims that are entitled to vote on the Plan, and the approval of the Bankruptcy Court, as described in the section hereof entitled “Confirmation and Consummation Procedures — Overview.”  There can be no assurance that such acceptances and approvals will be obtained and therefore, that the Plan will be confirmed.  In addition, a condition to confirmation of the Plan is that the Confirmation Order confirming the Plan be entered by the Bankruptcy Court on or prior to September 21, 2012.

 

In addition, confirmation of the Plan and the occurrence of the Effective Date of the Plan are subject to the satisfaction of certain conditions precedent, which are further described in the subsection of this Disclosure Statement entitled “The Chapter 11 Plan — Conditions Precedent to Confirmation of the Plan and the Occurrence of the Effective Date.” Although the Plan Proponents believe that the conditions precedent to the confirmation of the Plan and to the occurrence of the Effective Date of the Plan will be met, there can be no assurance that all such conditions precedent will be satisfied.  If any conditions precedent is not satisfied or waived pursuant to section 11.3 of the Plan, the Plan may not be confirmed or the Effective Date may not occur.

 

Furthermore, although the Plan Proponents believe that the Plan will be confirmed and the Effective Date will occur reasonably soon after the Confirmation Date, there can be no assurance as to the timing or as to whether the Effective Date will occur.  If the Plan is not confirmed or the Effective Date does not occur, there can be no assurance that any alternative plan of reorganization would be on terms as favorable to the holders of Claims and Equity Interests as the terms of the Plan.  In addition, if a protracted reorganization or liquidation were to occur, there is a substantial risk that holders of Claims would receive less than they would receive under the Plan.  The liquidation analysis prepared by the Plan Proponents is attached hereto as Exhibit “E” (the “Liquidation Analysis”).

 

The Plan contemplates the Merger of DH with and into Dynegy, with Dynegy as the Surviving Entity.  The Merger may be subject to the prior approval of one or more regulatory bodies and/or, depending on the mechanics for effectuating the Merger, the stockholders of Dynegy.  In addition, the Merger will be subject to the authorization of the Bankruptcy Court.  Such approvals and authorization may be denied, conditioned or delayed and therefore may not be available when required to facilitate the Merger.  The Plan also requires that the Merger and all material documents, instruments and agreements necessary to implement the Merger, be in

 

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form and substance reasonably acceptable to the Plan Proponents, the Majority Consenting Senior Noteholders, the Lease Trustee, and the Creditors’ Committee.  If the Merger is not consummated for any reason and DH decides to prosecute a stand-alone plan of reorganization on similar terms to those set forth in the Plan, including in particular the extinguishment of all Equity Interests in DH and, as a result, DH and its subsidiaries cease to be subsidiaries of Dynegy, there could be an adverse impact on each of DH and Dynegy. Specifically, such an occurrence may constitute a “Change of Control” as such term is defined in each of the New Credit Facilities. A Change of Control is an “Event of Default” under the New Credit Facilities and, as a result, amounts outstanding under the New Credit Facilities may be declared immediately due and payable. This could have a negative impact on DH’s financial condition and future operations if DH were unable to timely obtain waivers under or refinance the New Credit Facilities on reasonable terms, and recoveries to holders of Claims against DH may be negatively impacted. Such negative impact may not be fully offset by any reduction in the amount of the Dynegy Administrative Claim pursuant to the terms of the Settlement Agreement and the fact that DH would not be liable for any liabilities of Dynegy.  In addition, any assets currently held by Dynegy, including any cash, may remain assets of Dynegy only, and therefore would not inure to the benefit of DH. This may also have a negative impact on Dynegy’s financial condition and future operations, as well on recoveries to holders of Claims against and Equity Interests in Dynegy.

 

If the Plan is confirmed but the Effective Date does not occur, it may become necessary to amend the Plan to provide for alternative treatment of Claims and Equity Interests.  There can be no assurance that any such alternative treatment would be on terms as favorable to the holders of Claims and Equity Interests as the treatment provided under the Plan.  If any modifications to the Plan are material, it would be necessary to resolicit votes from holders of Claims and Equity Interests adversely affected by the modifications with respect to such amended Plan.

 

2.                                       Claims Estimation Considerations.

 

There can be no assurance that the estimated Claim amounts set forth herein are correct, and the actual amount of such Allowed Claims may differ from the estimates.  The estimated amounts are subject to certain risks, uncertainties and assumptions.  Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, the actual amount of Allowed Claims may vary from those estimated herein, and could change the actual recoveries provided for herein.

 

3.                                       The Plan may not be confirmed by the Bankruptcy Court and the value of the Dynegy Administrative Claim and Equity Interests in the Surviving Entity is therefore uncertain.

 

The Settlement Agreement and the Plan Support Agreement contemplate a Plan in which, if confirmed by the Bankruptcy Court, Dynegy and DH are merged and the holders of Equity Interests in the Surviving Entity (which may be the current stockholders of Dynegy) will not receive any distribution or retain any interest in or property on account of such holders’ Equity Interests. Consequently, in such a circumstance the common stock of Dynegy shall not be entitled to any recovery under the Plan, other than a distribution of recoveries on account of the Dynegy Administrative Claim. The Plan, however, may not be confirmed. If the Plan is not

 

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confirmed, to the extent not otherwise resolved by the parties to the Settlement Agreement, the amount of the Dynegy Administrative Claim will be subject to arbitration proceedings. The Settlement Agreement provides that the amount of the Dynegy Administrative Claim is to be equal to the value of the equity consideration that would have been distributed on account of the Dynegy Administrative Claim if the Plan had been confirmed but, in any event, not less than $70 million nor more than $130 million in Cash. The potential outcome of such an arbitration proceeding is uncertain and there is no assurance that the Dynegy Administrative Claim would be valued at any specific amount within the prescribed range. If, however, the Plan is not confirmed because (1) Dynegy breached the Plan Support Agreement or the Plan Support Agreement is terminated under certain circumstances or (2) Dynegy and DH are unable to be combined other than as a result of any action or any inaction on the part of DH, then (x) the determination of the amount of the Dynegy Administrative Claim shall take into account (and shall be reduced in respect of) any value lost by DH as a result of the failure of Dynegy and DH to be combined and (y) the Dynegy Administrative Claim (as reduced) may be satisfied with plan securities or other non-cash consideration of equivalent value as determined by the Bankruptcy Court in connection with confirmation of any DH plan.  Additionally, if the Plan is not confirmed, an alternative plan of reorganization for DH would be necessary and it is unclear how Dynegy’s equity ownership of DH would be affected.  In light of the transfer of Coal Holdco to DH pursuant to the Settlement Agreement, the uncertain value of the Dynegy Administrative Claim is exacerbated by the uncertain treatment of Dynegy’s equity interest in DH in any plan of reorganization for DH other than the Plan.

 

C.                                    Risks Related to the Reorganized Dynegy Common Stock and Warrants

 

1.                                       An active trading market may not develop for the Reorganized Dynegy Common Stock or Warrants.

 

The Plan Securities (defined below) are new issues of securities and, accordingly, there is currently no established public trading market for the Plan Securities.  Although the Plan Proponents expect that Reorganized Dynegy will apply to list the Reorganized Dynegy Common Stock on the New York Stock Exchange or another national securities exchange, there can be no assurance that such listing will be obtained.  There can be no assurance that an active trading market for the Plan Securities will develop. If there is no active trading market in the Plan Securities, the market price and liquidity of the Plan Securities may be adversely affected. If a trading market does not develop or is not maintained, holders of Plan Securities may experience difficulty in reselling such securities at an acceptable price or may be unable to sell them at all.  Even if a trading market were to exist, such market could have limited liquidity and the Plan Securities could trade at prices higher or lower than the value attributed to such securities in connection with their distribution under the Plan, depending upon many factors, including, without limitation, markets for similar securities, industry conditions, financial performance or prospects and investor expectations thereof.  As a result, there may be limited liquidity in any trading market that does develop for the Plan Securities.  In addition, the liquidity in the trading market for the Plan Securities and the market prices quoted for the Plan Securities may be adversely affected by changes in the overall market for such types of securities and changes in Reorganized Dynegy’s financial performance or prospects or in the performance or prospects for companies in its industry generally.

 

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2.                                       Following the consummation of the Plan, certain holders of Allowed General Unsecured Claims may control the outcome of votes under the Reorganized Dynegy Common Stock, and may take actions conflicting with your interests.

 

Certain holders of Allowed General Unsecured Claims hold large aggregate principal amounts of such Claims and, following consummation of the Plan, they may accordingly hold a large aggregate principal amount of Reorganized Dynegy Common Stock issued pursuant to the Plan.  These holders may control the outcome of Reorganized Dynegy Common Stock votes and take actions that may conflict with the interests of other holders of Reorganized Dynegy Common Stock.

 

3.                                       The Reorganized Dynegy Common Stock is an equity interest and therefore subordinated to Reorganized Dynegy’s indebtedness.

 

In any liquidation, dissolution or winding up of Reorganized Dynegy, the Reorganized Dynegy Common Stock would rank below all debt claims against Reorganized Dynegy.  As a result, holders of Reorganized Dynegy Common Stock will not be entitled to receive any payment or other distribution of assets upon the liquidation, dissolution or winding up of Reorganized Dynegy until after all of its obligations to its debt holders have been satisfied.

 

4.                                       Certain holders of Reorganized Dynegy Common Stock or Warrants may be restricted in their ability to transfer or sell their securities.

 

To the extent that Reorganized Dynegy Common Stock or Warrants issued under the Plan are covered by section 1145(a)(1) of the Bankruptcy Code, they may be resold by the holders thereof without registration unless the holder is an “underwriter” with respect to such securities.  Resales by Persons who receive Reorganized Dynegy Common Stock or Warrants pursuant to the Plan that are deemed to be “underwriters” as defined in section 1145(b) of the Bankruptcy Code would not be exempted by section 1145 of the Bankruptcy Code from registration under the Securities Act of 1933, as amended (the “Securities Act”) or other applicable law.  Such Persons would only be permitted to sell such securities without registration if they are able to comply with the provisions of Rule 144 under the Securities Act or another applicable exemption.  See “Securities Law Matters.”  However, pursuant to the Plan, each holder of an Allowed General Unsecured Claim that is also a Registration Rights Holder will have the right to become a party to a registration rights agreement providing such holder with customary registration rights, including a customary shelf registration, with respect to any shares of Reorganized Dynegy Common Stock it receives under the Plan.  See Section 8.13 of the Plan.

 

D.                                    Risks Related to Business Operations

 

1.                                       The Company’s significant indebtedness could adversely affect its financial health.

 

After the Plan is consummated, the Company will continue to have a significant amount of debt obligations including the New Credit Facilities.  Such significant indebtedness could have negative consequences to the Company.  For example, the amount of indebtedness could:

 

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·                  make it more difficult for the Company to satisfy its financial obligations, including debt service requirements;

 

·                  increase the Company’s vulnerability to general adverse economic and industry conditions;

 

·                  require the Company to dedicate a substantial portion of its cash flow from operations to payments on its indebtedness, thereby reducing the availability of its cash flow to fund working capital, capital expenditures, acquisitions, and other general corporate purposes;

 

·                  limit the Company’s flexibility in planning for, or reacting to, changes in its business and the industry in which it operates;

 

·                  impact the evaluation of the Company’s creditworthiness by counterparties to commercial agreements both for hedging as well as operating contracts, such as for fuel and transportation, and affect their willingness to transact with the Company and/or the level of collateral the Company is required to post under such agreements;

 

·                  place the Company at a competitive disadvantage compared to its competitors that have less debt; and

 

·                  limit the Company’s ability to obtain financing in the future for working capital, capital expenditures, acquisitions or other purposes on acceptable terms, on a timely basis or at all.

 

2.                                       The Company’s actual financial results may vary significantly from the Projections.

 

The Projections were prepared by the Company’s management in consultation with their professional advisors.  The Company’s management relied upon the accuracy and completeness of financial and other information provided by such third parties, as well as publicly-available information, and portions of the information herein and in the exhibits hereto may be based upon certain statements, estimates, assumptions and forecasts provided by Dynegy and third parties with respect to Dynegy’s anticipated future performance.  Dynegy’s management did not conduct an independent investigation into any legal, tax or accounting matters affecting the projections.  The Projections have also not been examined or compiled by independent accountants.

 

While Dynegy has presented the Projections with numerical specificity, it has necessarily based the Projections on a variety of estimates and assumptions that may not be realized and are inherently subject to significant business, economic, competitive, industry, regulatory, market and financial uncertainties and contingencies, many of which will be beyond Dynegy’s control.  The Plan Proponents do not and cannot make any representations as to the accuracy of the Projections or to the Company’s ability to achieve the projected results.  Some assumptions inevitably will not materialize.  Furthermore, events and circumstances occurring subsequent to the date on which the Projections were prepared may differ from any assumed facts and circumstances.  Alternatively, any events and circumstances that come to pass may well have been unanticipated, and thus may affect financial results in a materially adverse or materially

 

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beneficial manner.  The Projections, therefore, may not be relied upon as a guaranty or other assurance of the actual results that will occur.

 

The Projections were based upon assumptions, qualifications, and explanations developed in January, 2012 and have not been updated to reflect changes in the market and other subsequent events, including, without limitation, the termination of certain tolling arrangements for the GasCo assets in the West, changes in the price of natural gas, and changed market costs for delivering coal.

 

3.                                       The composition of Dynegy’s Board may change.

 

Pursuant to the Plan, as of the Effective Date, the Board will be the persons identified on Exhibit “I” of the Plan (to be filed as a Plan Document).  The Board shall be selected in a manner to be agreed to among the Majority Consenting Senior Noteholders, the Lease Trustee and the Creditors’ Committee.  The term of any current members of the board of directors of Dynegy not identified as members of the Board shall expire upon the Effective Date.  The term of any current members of the board of managers of DH shall expire on the Merger Effective Time.  The current directors of Dynegy and DH are eligible to be, but there shall be no obligation that they be, selected for the Board pursuant to sections 1123(a)(7) and 1129(a)(5) of the Bankruptcy Code.  As of the date of this Disclosure Statement, the identities of the members of the Board have not been identified.  While the current directors of Dynegy and DH are eligible to be selected for the Board, the composition of such board is expected to change.

 

4.                                       There is uncertainty about Dynegy’s ability to continue as a going concern.

 

On June 5, 2012, and pursuant to the Settlement Agreement and the Settlement Order, Dynegy transferred the DCH Membership Interest to DH.  Subsequent to this transfer, Dynegy has no operating assets outside of its equity investment in DH and DNE.  As a result, unless and until DH emerges from bankruptcy, there is substantial doubt as to Dynegy’s ability to continue as a going concern.  These circumstances could impact Dynegy’s ability to transfer the Dynegy Administrative Claim prior to the combination of Dynegy and DH without action of the Bankruptcy Court.

 

5.                                       Restrictive covenants may adversely affect Dynegy’s operations.

 

The New Credit Facilities contain various covenants that limit the ability of Dynegy GasCo and Dynegy CoalCo to, among other things:

 

·                  incur additional indebtedness;

 

·                  pay dividends, repurchase or redeem stock or make investments in certain entities;

 

·                  enter into related party transactions;

 

·                  create certain liens;

 

·                  enter into sale and leaseback transactions;

 

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·                  enter into any agreements which limit the ability of such subsidiaries to make dividends or otherwise transfer cash or assets to Dynegy or certain other subsidiaries;

 

·                  create unrestricted subsidiaries;

 

·                  impair the security interests;

 

·                  issue certain capital stock;

 

·                  consolidate, merge, sell or otherwise dispose of all or substantially all of its assets; and

 

·                  sell and acquire assets.

 

These restrictions may affect the ability of Dynegy CoalCo or Dynegy GasCo to operate their businesses, may limit their ability to take advantage of potential business opportunities as they arise and may adversely affect the conduct of their current businesses, including restricting their ability to finance future operations and capital needs and limiting their ability to engage in other business activities.

 

6.                                       Dynegy GasCo and Dynegy CoalCo receive significant services from certain of Dynegy’s other subsidiaries and the loss of such services, as a result of such subsidiaries becoming the subject of a voluntary or involuntary bankruptcy case or otherwise, may have a material adverse impact on Dynegy GasCo’s and Dynegy CoalCo’s businesses, financial condition, and results of operations.

 

Dynegy GasCo and Dynegy CoalCo receive significant services from certain of Dynegy’s subsidiaries, including, among others, cash management and energy management services.  If the provision of these services were to be delayed, interrupted or otherwise halted for any reason, including if Dynegy or its subsidiaries that provide such services become the subject of a voluntary or involuntary bankruptcy case, this may have a material adverse impact on Dynegy GasCo’s and Dynegy CoalCo’s businesses, financial condition, and results of operations.  A replacement supplier of these services may not be found within a reasonable time (or at all) and/or on economic terms that are commercially reasonable.

 

7.                                       There is only limited historical financial information available for Dynegy Gas Holdco, LLC and its subsidiaries or for Dynegy Coal Holdco and its subsidiaries.

 

The financial information incorporated by reference in this Disclosure Statement is primarily in respect of Dynegy and DH and only Dynegy’s Annual Report on Form 10-K for the year ended December 31, 2011 filed on March 8, 2012 and Quarterly Report on Form 10-Q for the quarter ended March 31, 2012 filed on May 10, 2012 include certain audited financial information for Dynegy’s gas and coal segments. The limited available financial information with respect to the entities holding substantially all of Dynegy’s gas and coal-fired power generation businesses may make it difficult to assess their respective operating results or financial position for the dates and periods presented, nor may such limited financial information be necessarily indicative of future operating results or financial position.

 

8.                                       Acquisition of Reorganized Dynegy Common Stock may be subject to

 

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regulatory restrictions.

 

The acquisition of Reorganized Dynegy Common Stock (including through the exercise of the Warrants in accordance with their terms) and the ability to vote Reorganized Dynegy Common Stock may be subject to compliance with regulatory requirements and/or prior regulatory approvals (“Regulatory Authorizations”) by the holder or acquirer of Reorganized Dynegy Common Stock.  Such Regulatory Authorizations may include, without limitation, FERC authorization under section 203 of the FPA, approvals from any other regulatory body or bodies, or the satisfaction of any notification and waiting period requirements, such as those of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules promulgated thereunder (the “HSR Act”). The applicability of Regulatory Authorizations may depend on the amount of Reorganized Dynegy Common Stock to be acquired (including through the exercise of the Warrants in accordance with their terms) or to be voted, or, in the case of the HSR Act, if certain size of parties and size of transaction thresholds are satisfied and no exemption is applicable.  Regulatory Authorizations may be denied, conditioned or delayed and may not be available. Denial, condition or delay could prevent a holder from voting its Reorganized Dynegy Common Stock.

 

A holder or acquirer of Reorganized Dynegy Common Stock or Warrants should consult with its own legal counsel with regard to compliance with and/or obtaining Regulatory Authorizations.  The acquisition of Reorganized Dynegy Common Stock (including through the exercise of Warrants in accordance with their terms) or voting of Reorganized Dynegy Common Stock prior to obtaining and/or complying with any necessary Regulatory Authorizations may result in liability including potentially substantial civil penalties.

 

Additional details and documents regarding voting of Reorganized Dynegy Common Stock may be provided in subsequently filed Plan Documents.

 

9.                                       Because wholesale power prices are subject to significant volatility and because many of the Company’s power generation facilities operate without long-term power sales agreements, the Company’s revenues and profitability are subject to wide fluctuations.

 

Because the Company largely sells electric energy, capacity, and ancillary services into the wholesale energy spot market or into other power markets on a term basis, it is not guaranteed any rate of return on its capital investments. Rather, its financial condition, results of operations and cash flows will depend, in large part, upon prevailing market prices for power and the fuel to generate such power. Wholesale power markets are subject to significant price fluctuations over relatively short periods of time and can be unpredictable. Such factors that may materially impact the power markets and the Company’s financial results include:

 

·                  economic conditions;

 

·                  the existence and effectiveness of demand-side management;

 

·                  conservation efforts and the extent to which they impact electricity demand;

 

·                  regulatory constraints on pricing (current or future) or the functioning of the energy trading markets and energy trading generally;

 

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·                  the proliferation of advanced shale gas drilling increasing domestic natural gas supplies;

 

·                  fuel price volatility; and

 

·                  increased competition or price pressure driven by generation from renewable sources.

 

Many of the Company’s facilities operate as “merchant” facilities without long-term power sales agreements.  Consequently, there can be no assurance that the Company will be able to sell any or all of the electric energy, capacity or ancillary services from those facilities at commercially attractive rates or that the facilities will be able to operate profitably.  This could lead to less favorable financial results as well as future impairments of the Company’s property, plants and equipment or to the retirement of certain of the facilities resulting in economic losses and liabilities.

 

Given the volatility of commodity power prices, to the extent the Company does not secure long-term power sales agreements for the output of its power generation facilities, revenues and profitability will be subject to increased volatility, and the Company’s financial condition, results of operations and cash flows could be materially adversely affected.  Further, declines in the market prices of natural gas and wholesale electricity have reduced the outlook for cash flow that can be expected to be generated by the Company in the next several years.

 

10.                                 The Company’s commercial strategy may not be executed as planned or may result in lost opportunities.

 

The Company seeks to commercialize its assets through sales arrangements of various types. In doing so, the Company attempts to balance a desire for greater predictability of earnings and cash flows in the short- and medium-terms with a belief that commodity prices will rise over the longer term, creating upside opportunities for those with unhedged generation volumes. The ability to successfully execute this strategy is dependent on a number of factors, many of which are outside the control of the Company, including market liquidity, the availability of counterparties willing to transact with the Company or to transact with the Company at prices the Company believes are commercially acceptable, the availability of liquidity to post collateral in support of the Company’s derivative instruments, and the reliability of the people and systems comprising the Company’s commercial operations function.  The availability of market liquidity and willing counterparties could be negatively impacted by poor economic and financial market conditions, including impacts on financial institutions and other current and potential counterparties as well as counterparties’ views of the creditworthiness of the Company.  If the Company is unable to transact in the short- and medium-terms, its financial condition, results of operations and cash flows will be subject to significant uncertainty and volatility.  Alternatively, significant contract execution for any such period may precede a run-up in commodity prices, resulting in lost upside opportunities and mark-to-market accounting losses causing significant variability in net income and other GAAP reported measures.

 

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11.                                 The Company is exposed to the risk of fuel and fuel transportation cost increases and interruptions in fuel supplies.

 

The Company purchases the fuel requirements for many of its power generation facilities, primarily those that are natural gas-fired, under short-term contracts or on the spot market. As a result, the Company faces the risks of supply interruptions and fuel price volatility, as fuel deliveries may not exactly match those required for energy sales, due in part to the Company’s need to pre-purchase fuel inventories for reliability and dispatch requirements.

 

Moreover, profitable operation of many of the Company’s coal-fired generation facilities is highly dependent on coal prices and coal transportation rates. Power generators in the midwest and the northeast have experienced significant pressures on available coal supplies that are either transportation or supply related. Dynegy has entered into term contracts for Powder River Basin coal, which the Company uses for its coal facilities in the midwest.  The Company’s expected coal requirements are 100 percent contracted and priced for 2012.  The Company’s forecast coal requirements for 2013 are 62 percent committed.  Those volumes are unpriced but are subject to a price collar structure.  The Company’s coal transportation requirements are 100 percent contracted and priced through 2013.  Coal transportation rates will be renewed in 2014 at levels higher than our current rates.  The low sulfur content coal used at our facilities in order to meet the requirements of our air permits limits our coal supply options creating risks in terms of our ability to procure firm coal supplies for periods and prices the Company believes are favorable.

 

Further, any changes in the costs of coal, fuel oil, natural gas or transportation rates and changes in the relationship between such costs and the market prices of power will affect their financial results. If the Company is unable to procure fuel for physical delivery at prices it considers favorable, its financial condition, results of operations and cash flows could be materially adversely affected.

 

12.                                 The Company’s costs of compliance with existing environmental requirements are significant, and costs of compliance with new environmental requirements or factors could materially adversely affect its financial condition, results of operations and cash flows.

 

The Company’s businesses are subject to extensive and frequently changing environmental regulation by federal, state and local authorities. Such environmental regulation imposes, among other things, restrictions, liabilities and obligations in connection with the generation, handling, use, transportation, treatment, storage and disposal of hazardous substances and waste and in connection with spills, releases and emissions of various substances (including greenhouse gas into the environment, and in connection with environmental impacts associated with cooling water intake structures). Existing environmental laws and regulations may be revised or reinterpreted, new laws and regulations may be adopted or may become applicable to the Company or its facilities, and litigation or enforcement proceedings could be commenced against the Company.  Proposals being considered by federal and state authorities (including proposals regarding regulation of greenhouse gases) could, if and when adopted or enacted, require the Company to make substantial capital and operating expenditures or consider retiring certain of its facilities. If any of these events occur, the Company’s financial condition, results of operations and cash flows could be materially adversely affected.

 

Many environmental laws require approvals or permits from governmental authorities before construction, modification or operation of a power generation facility may commence.

 

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Certain environmental permits must be renewed periodically in order for the Company to continue operating its facilities. The process of obtaining and renewing necessary permits can be lengthy and complex and can sometimes result in the establishment of permit conditions that make the project or activity for which the permit was sought unprofitable or otherwise unattractive.  Even where permits are not required, compliance with environmental laws and regulations can require significant capital and operating expenditures.  The Company is required to comply with numerous environmental laws and regulations, and to obtain numerous governmental permits when it modifies and operates its facilities. If there is a delay in obtaining any required environmental regulatory approvals or permits, if the Company fails to obtain any required approval or permit, or if the Company is unable to comply with the terms of such approvals or permits, the operation of its facilities may be interrupted or become subject to additional costs.  Further, changed interpretations of existing regulations may subject historical maintenance, repair and replacement activities at the Company’s facilities to claims of noncompliance. As a result, the Company’s financial condition, results of operations and cash flows could be materially adversely affected. Certain of the Company’s facilities are also required to comply with the terms of a consent decree or other governmental orders.

 

With the continuing trend toward stricter environmental standards and more extensive regulatory and permitting requirements, the Company’s capital and operating environmental expenditures are likely to be substantial and may significantly increase in the future.

 

13.                                 The Company’s businesses are subject to complex government regulation. Changes in these regulations or in their implementation may affect costs of operating the Company’s facilities or the Company’s ability to operate its facilities, or increase competition, any of which would negatively impact the Company’s results of operations.

 

The Company is subject to extensive federal, state and local laws, and regulations governing the generation and sale of energy commodities in each of the jurisdictions in which it has operations. Compliance with these ever-changing laws and regulations requires expenses (including legal representation) and monitoring, capital and operating expenditures. Potential changes in laws and regulations that could have a material impact on the Company’s businesses include: re-regulation of the power industry in markets in which the Company conducts business; the introduction, or reintroduction, of rate caps or pricing constraints; increased credit standards, collateral costs or margin requirements, as well as reduced market liquidity, as a result of potential OTC market regulation; or a variation of these. Furthermore, these and other market-based rules and regulations are subject to change at any time, and the Company cannot predict what changes may occur in the future or how such changes might affect any facet of its businesses.

 

The costs and burdens associated with complying with the increased number of regulations may have a material adverse effect on the Company, if it fails to comply with the laws and regulations governing its businesses or if it fails to maintain or obtain advantageous regulatory authorizations and exemptions. Moreover, increased competition within the sector resulting from potential legislative changes, regulatory changes or other factors may create greater risks to the stability of the Company’s power generation earnings and cash flows generally.

 

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14.                                 Availability and cost of emission allowances could materially impact the Company’s costs of operations.

 

The Company is required to maintain, either through allocation or purchase, sufficient emission allowances to support its operations in the ordinary course of operating its power generation facilities.  These allowances are used to meet the Company’s obligations imposed by various applicable environmental laws, and the trend toward more stringent regulations (including regulations regarding greenhouse gas emissions) will likely require the Company to obtain new or additional emission allowances.  If the Company’s operational needs require more than its allocated quantity of emission allowances, the Company may be forced to purchase such allowances on the open market, which could be costly.  If it is unable to maintain sufficient emission allowances to match its operational needs, the Company may have to curtail its operations so as not to exceed its available emission allowances, or install costly new emissions controls.  As the Company uses the emissions allowances that it has purchased on the open market, costs associated with such purchases will be recognized as operating expense. If such allowances are available for purchase, but only at significantly higher prices, their purchase could materially increase the Company’s costs of operations in the affected markets and materially adversely affect the Company’s financial condition, results of operations and cash flows.

 

15.                                 Competition in wholesale power markets, together with the age of certain of the Company’s generation facilities and an oversupply of power generation capacity in certain regional markets, may have a material adverse effect on the Company’s financial condition, results of operations, and cash flows.

 

The Company has numerous competitors, and additional competitors may enter the industry.  The Company’s power generation businesses compete with other non-utility generators, regulated utilities, unregulated subsidiaries of regulated utilities, other energy service companies and financial institutions in the sale of electric energy, capacity and ancillary services, as well as in the procurement of fuel, transmission and transportation services. Moreover, aggregate demand for power may be met by generation capacity based on several competing technologies, as well as power generating facilities fueled by alternative or renewable energy sources, including hydroelectric power, synthetic fuels, solar, wind, wood, geothermal, waste heat and solid waste sources. Regulatory initiatives designed to enhance renewable generation could increase competition from these types of facilities. In addition, a buildup of new electric generation facilities in recent years has resulted in an oversupply of power generation capacity in certain regional markets the Company serves.

 

The Company also competes against other energy merchants on the basis of their relative operating skills, financial position and access to credit sources.  Electric energy customers, wholesale energy suppliers and transporters often seek financial guarantees, credit support such as letters of credit, and other assurances that their energy contracts will be satisfied. Companies with which the Company competes may have greater resources in these areas.  In addition, certain of the Company’s current facilities are relatively old.  Newer plants owned by competitors will often be more efficient than some of the Company’s plants, which may put these plants at a competitive disadvantage.  Over time, some of the Company’s plants may

 

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become unable to compete, because of the construction of new plants, and such new plants could have a number of advantages including: more efficient equipment, newer technology that could result in fewer emissions, or more advantageous locations on the electric transmission system.  Additionally, these competitors may be able to respond more quickly to new laws and regulations because of the newer technology utilized in their facilities or the additional resources derived from owning more efficient facilities.  Taken as a whole, the potential disadvantages of the Company’s aging fleet could result in lower run-times or even early asset retirement.

 

Other factors may contribute to increased competition in wholesale power markets.  New forms of capital and competitors have entered the industry in the last several years, including financial investors who perceive that asset values are at levels below their true replacement value.  As a result, a number of generation facilities in the United States are now owned by lenders and investment companies. Furthermore, mergers and asset reallocations in the industry could create powerful new competitors.  Under any scenario, the Company anticipates that it will face competition from numerous companies in the industry, some of which have superior capital structures.

 

Moreover, many companies in the regulated utility industry, with which the wholesale power industry is closely linked, are also restructuring or reviewing their strategies. Several of those companies have discontinued or are discontinuing their unregulated activities and seeking to divest or spin-off their unregulated subsidiaries. Some of those companies have had, or are attempting to have, their regulated subsidiaries acquire assets out of their or other companies’ unregulated subsidiaries. This may lead to increased competition between the regulated utilities and the unregulated power producers within certain markets. To the extent that competition increases, the Company’s financial condition, results of operations and cash flows may be materially adversely affected.

 

16.                                 The Company does not own or control transmission facilities required to sell the wholesale power from its generation facilities.  If the transmission service is inadequate, the Company’s ability to sell and deliver wholesale power may be materially adversely affected.  Furthermore, these transmission facilities are operated by RTOs and ISOs, which are subject to changes in structure and operation and impose various pricing limitations.  These changes and pricing limitations may affect the Company’s ability to deliver power to the market that would, in turn, adversely affect the profitability of its generation facilities.

 

The Company does not own or control the transmission facilities required to sell the wholesale power from its generation facilities.  If the transmission service from these facilities is unavailable or disrupted, or if the transmission capacity infrastructure is inadequate, the Company’s ability to sell and deliver wholesale power may be materially adversely affected.  RTOs and ISOs provide transmission services, administer transparent and competitive power markets, and maintain system reliability.  Many of these RTOs and ISOs operate in the realtime and day-ahead markets in which the Company sells energy.  The RTOs and ISOs that oversee most of the wholesale power markets impose, and in the future may continue to impose, offer caps and other mechanisms to guard against the potential exercise of market power in these markets as well as price limitations.  These types of price limitations and other regulatory

 

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mechanisms may adversely affect the profitability of the Company’s generation facilities that sell energy and capacity into the wholesale power markets.  Problems or delays that may arise in the formation and operation of new or maturing RTOs and similar market structures, or changes in geographic scope, rules or market operations of existing RTOs, may also affect the Company’s ability to sell, the prices it receives or the cost to transmit power produced by its generating facilities.  Rules governing the various regional power markets may also change from time to time, which could affect the Company’s costs or revenues.  Additionally, if the transmission service from these facilities is unavailable or disrupted, or if the transmission capacity infrastructure is inadequate, the Company’s ability to sell and deliver wholesale power may be materially adversely affected.  Furthermore, the rates for transmission capacity from these facilities are set by others and thus are subject to changes, some of which could be significant.  As a result, the Company’s financial condition, results of operations, and cash flows may be materially adversely affected.

 

17.                                 The Company’s financial condition, results of operations and cash flows would be adversely impacted by strikes or work stoppages by their unionized employees.

 

A majority of the employees at the Company’s facilities are subject to collective bargaining agreements with various unions.  Additionally, unionization activities, including votes for union certification, could occur at the Company’s non-union generating facilities in its fleet.  If union employees strike, participate in a work stoppage or slowdown or engage in other forms of labor strife or disruption, the Company could experience reduced power generation or outages if replacement labor is not procured.  The ability to procure such replacement labor is uncertain.  Strikes, work stoppages or an inability to negotiate future collective bargaining agreements on commercially reasonable terms could have a material adverse effect on the Company’s financial condition, results of operations and cash flows.

 

18.                                 The Company’s ability to comply with the Consent Decree may be materially adversely impacted by the Company’s future operating cash flows, or unforeseen labor, material and equipment costs.

 

As a result of the midwest consent decree (the “Consent Decree”), the Company is required to not operate certain of its power generating facilities after specified dates unless certain emission control equipment is installed.  As of December 31, 2011, only Baldwin Unit 2 has material outstanding Consent Decree work yet to be performed, which is scheduled for completion by the end of 2012.  The Company has incurred significant costs in complying with the Consent Decree and anticipate the remainder of the equipment installations to incur additional significant costs. Further, the Company is exposed to the risk of price increases in the costs of labor and to the risk that counterparties to the construction contracts may fail to perform, in which case the Company would be forced to enter into alternative arrangements at then-current market prices that may exceed its contractual prices and possibly cause delays to the project timelines.  Further, the Company’s production may be affected if the Company fails to meet certain performance standards under the Consent Decree.

 

19.                                 Dynegy’s ability to use its federal net operating losses or alternative minimum tax credits to offset its future taxable income may be further

 

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limited under sections 382 and 383 of the Internal Revenue Code and as a result of Dynegy’s having recognized certain cancellation of indebtedness income.

 

As discussed in greater detail below under the heading “Certain U.S. Federal Income Tax Consequences — Tax Consequences to Dynegy, DH and DNE Upon Consummation of the Plan,” Dynegy’s ability to use previously incurred federal NOLs (as defined below) and AMT Credits (as defined below), which have a maximum balance of $1,419 million and $271 million, respectively, at December 31, 2011, will likely be limited or modified on the Effective Date as a result of section 382 of the Internal Revenue Code and at the close of Dynegy’s taxable year as a result of COD Income (as defined below).  In addition, Dynegy had an Ownership Change (as defined below) in the second quarter of 2012 and thus its ability to utilize its federal NOLs and AMT Credits that existed at the time of the Ownership Change will be significantly limited (in an amount yet to be determined).  Notwithstanding that the use of the NOLs and AMT Credits existing at the time of this Ownership Change will be limited, such tax attributes continue to exist after such Ownership Change and, as a result of COD Income resulting on the Effective Date, such tax attributes held at DH will be reduced or eliminated prior to the reduction of tax attributes held by entities other than DH or produced after the Ownership Change.  Because the use of these tax attributes existing at the time of the Ownership Change has been limited and these tax attributes are expected to be reduced or eliminated as a result of COD Income, the impact of a further Ownership Change on the Effective Date should not have a significant impact on Dynegy’s use of these tax attributes.  The Dynegy Group is expected to produce additional NOLs after the Ownership Change in the second quarter of 2012 and prior to the Effective Date.  The use of these additional NOLs will not be limited by the Ownership Change in the second quarter of 2012 but may be limited by a further Ownership Change on the Effective Date.

 

E.                                      Disclosure Statement Disclaimer

 

1.                               This Disclosure Statement was not approved by the Securities and Exchange Commission.

 

This Disclosure Statement was not filed with the SEC under the Securities Act or applicable state securities laws.  Neither the SEC nor any state regulatory authority has passed upon the accuracy or adequacy of this Disclosure Statement, or the exhibits or the statements contained herein, and any representation to the contrary is unlawful.

 

2.                               No legal or tax advice is provided to you by this Disclosure Statement.

 

This Disclosure Statement is not legal advice to you.  The contents of this Disclosure Statement should not be construed as legal, business or tax advice.  Each holder of a Claim or an Equity Interest should consult his or her own legal counsel and accountant with regard to any legal, tax and other matters concerning his or her Claim or Equity Interest.  This Disclosure Statement may not be relied upon for any purpose other than to determine how to vote on the Plan or object to confirmation of the Plan.

 

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3.                               No admissions made.

 

The information and statements contained in this Disclosure Statement will neither (a) constitute an admission of any fact or liability by any entity (including, without limitation, the Plan Proponents) nor (b) be deemed evidence of the tax or other legal effects of the Plan on Dynegy, DH and its successors and assigns, the other Debtors, holders of Allowed Claims or Equity Interests, or any other parties in interest.

 

4.                               Failure to identify litigation claims or projected objections.

 

No reliance should be placed on the fact that a particular litigation Claim or projected objection to a particular Claim or Equity Interest is, or is not, identified in this Disclosure Statement.  The Plan Proponents may seek to investigate, file, and prosecute Claims and Equity Interests and may object to Claims after the Confirmation or Effective Date of the Plan irrespective of whether this Disclosure Statement identifies such Claims or objections to Claims.

 

5.                               Information was provided by the Plan Proponents and was relied upon by the Plan Proponents’ advisors.

 

Counsel to and other advisors retained by the Plan Proponents have relied upon information provided by Dynegy and DH in connection with the preparation of this Disclosure Statement.  Although counsel to and other advisors retained by the Plan Proponents have performed certain limited due diligence in connection with the preparation of this Disclosure Statement, they have not independently verified the information contained herein.

 

6.                               Potential exists for inaccuracies, and the Plan Proponents have no duty to update.

 

The statements contained in this Disclosure Statement are made by the Plan Proponents as of the date hereof, unless otherwise specified herein, and the delivery of this Disclosure Statement after that date does not imply that there has not been a change in the information set forth herein since that date.  While the Plan Proponents have used their reasonable business judgment to ensure the accuracy of all of the information provided in this Disclosure Statement and in the Plan, the Plan Proponents nonetheless cannot, and do not, confirm the current accuracy of all statements appearing in this Disclosure Statement.  Further, although the Plan Proponents may subsequently update the information in this Disclosure Statement, they have no affirmative duty to do so unless ordered to do so by the Bankruptcy Court.

 

7.                               No representations outside this Disclosure Statement are authorized.

 

No representations concerning or relating to Dynegy, DH, the Surviving Entity, the other Debtors, the Chapter 11 Cases, or the Plan are authorized by the Bankruptcy Court or the Bankruptcy Code, other than as set forth in the Disclosure Statement.  Any representations or inducements made to secure your acceptance or rejection of the Plan that are other than as contained in, or included with, this Disclosure Statement should not be relied upon by you in arriving at your decision.  You should promptly report any unauthorized representations or inducements to counsel for either of the Plan Proponents, counsel for the Creditors Committee, and the United States Trustee.

 

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F.                                      Forward Looking Statements

 

This Disclosure Statement and the documents incorporated by reference herein contain “forward-looking statements” within the meaning of the federal securities laws that involve risks and uncertainties. Forward-looking statements include statements the Plan Proponents make concerning their plans, objectives, goals, strategies, future events, future revenues or performance, capital expenditures, financing needs and other information that is not historical information and, in particular, appear under the heading “Risk Factors” and in Exhibit “D” hereto. These statements represent the Plan Proponents’ reasonable judgment on the future based on various factors and using numerous assumptions and are subject to known and unknown risks, uncertainties and other factors that could cause its actual results and financial position to differ materially. When used in this Disclosure Statement, the words “estimates,” “expects,” “anticipates,” “projects,” “forecasts,” “plans,” “intends,” “believes,” “foresees,” “seeks,” “likely,” “may,” “might,” “will,” “should,” “goal,” “target,” “approximately,” or “intends”, and variations of these words or similar expressions (or the negative versions of any such words), are intended to identify forward-looking statements. In addition, the Plan Proponents, through their senior management, from time to time make forward-looking public statements concerning their expected future operations and performance and other developments that are not, and will not be, incorporated by reference herein. These forward-looking statements are subject to risks and uncertainties that may change at any time, and, therefore, the Plan Proponent’s actual results may differ materially from those that it expected. Accordingly, investors should not place undue reliance on the Plan Proponent’s forward-looking statements. The Plan Proponents derive many of their forward-looking statements from their operating budgets and forecasts, which are based upon many detailed assumptions. While the Plan Proponents believe that their assumptions are reasonable, they caution that it is very difficult to predict the impact of known factors, and, of course, it is impossible for it to anticipate all factors that could affect its actual results. All forward-looking statements are based upon information available to the Plan Proponents on the date of this Disclosure Statement.

 

Important factors that could cause actual results to differ materially from the Plan Proponents’ expectations (“cautionary statements”) are disclosed elsewhere in this Disclosure Statement and in the documents incorporated by reference herein, including, without limitation, in conjunction with the forward-looking statements included in this Disclosure Statement and in the documents incorporated by reference herein. All forward-looking statements in this Disclosure Statement and subsequent written and oral forward-looking statements attributable to the Plan Proponents, or persons acting on their behalf, are expressly qualified in their entirety by such cautionary statements. Some of the factors that the Plan Proponents believe could affect their results include:

 

·                  the Plan Proponents’ ability to obtain approval of the Bankruptcy Court with respect to the Debtor’s motions in the chapter 11 cases and to develop, prosecute, confirm and consummate one or more plans of reorganization with respect to the Chapter 11 Cases, and to consummate all the transactions contemplated by the Settlement Agreement and the Plan Support Agreement;

 

·                  the Plan Proponents’ ability to consummate the Merger;

 

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·                  the Plan Proponents’ ability to sell the Roseton and Danskammer Facilities to one or more third parties as set forth in the Settlement Agreement;

 

·                  the Plan Proponents’ ability to obtain the acceptance of the requisite number of holders of Claims;

 

·                  beliefs and assumptions relating to the projections set forth in Exhibit “D” hereto, which include the timing, confirmation and consummation of the Plan in accordance with its terms, the anticipated future performance of the Plan Proponents, industry performance, general business and economic conditions and other matters;

 

·                  the Plan Proponents’ ability to accurately estimate the amount of Claims;

 

·                  beliefs and assumptions relating to the Plan Proponents’ liquidity, available borrowing capacity and capital resources generally, including the extent to which such liquidity could be affected by poor economic and financial market conditions or new regulations and any resulting impacts on financial institutions and other current and potential counterparties;

 

·                  the anticipated effectiveness of the overall restructuring activities and any additional strategies to address the Plan Proponents’ liquidity and their capital resources including accessing the capital markets;

 

·                  limitations on the Plan Proponents’ ability to utilize previously incurred federal net operating losses or alternative minimum tax credits;

 

·                  expectations regarding compliance with the New Credit Facilities, including collateral demands, interest expense, and other payments;

 

·                  the timing and anticipated benefits to be achieved through the company-wide cost savings programs, including the PRIDE initiative;

 

·                  expectations regarding environmental matters, including costs of compliance, availability and adequacy of emission credits, and the impact of ongoing proceedings and potential regulations or changes to current regulations, including those relating to climate change, air emissions, cooling water intake structures, coal combustion by-products, and other laws and regulations to which the Plan Proponents and their direct and indirect subsidiaries are, or could become, subject;

 

·                  beliefs, assumptions and projections regarding the demand for power, generation volumes and commodity pricing, including natural gas prices and the impact on such prices from shale gas proliferation and the timing of a recovery in natural gas prices, if any;

 

·                  sufficiency of, access to and costs associated with coal, fuel oil and natural gas inventories and transportation thereof;

 

·                  beliefs and assumptions about market competition, generation capacity and regional supply and demand characteristics of the wholesale power generation market, including the anticipation of higher market pricing over the longer term;

 

·                  beliefs and assumptions regarding the Plan Proponents’ ability to enhance or protect long-term value for stockholders;

 

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·                  the effectiveness of the Plan Proponents’ strategies to capture opportunities presented by changes in commodity prices and to manage their exposure to energy price volatility;

 

·                  beliefs and assumptions about weather and general economic conditions;

 

·                  projected operating or financial results, including anticipated cash flows from operations, revenues and profitability;

 

·                  the Plan Proponents and their subsidiaries’ focus on safety and their ability to efficiently operate their assets so as to capture revenue generating opportunities and operating margins;

 

·                  beliefs about the outcome of legal, regulatory, administrative and legislative matters;

 

·                  expectations regarding performance standards and estimates regarding capital and maintenance expenditures, including the Consent Decree and its associated costs and performance standards; and

 

·                  other risks identified in this Disclosure Statement and the documents specifically incorporated by reference herein.

 

In addition, there may be other factors that could cause the Plan Proponents’ actual results and financial condition to be materially different from the results referenced in the forward-looking statements. All forward-looking statements contained or incorporated by reference in this Disclosure Statement are qualified in their entirety by this cautionary statement.  Forward-looking statements speak only as of the date they are or were made, and may not be updated or otherwise revised to reflect events or circumstances after the date of this Disclosure Statement or to reflect the occurrence of unanticipated events, except as required by law.

 

XIII.

 

CONFIRMATION AND CONSUMMATION PROCEDURES

 

A.                                    Overview

 

A plan of reorganization may provide anything from a complex restructuring of a debtor’s business and its related obligations to a simple liquidation of the debtor’s assets.  In either event, upon confirmation of a plan, it becomes binding on the debtor and all of its creditors and equity holders, and the obligations owed by the debtor to such parties are compromised and exchanged for the obligations specified in the plan.  Before soliciting acceptances of a proposed plan, section 1125 of the Bankruptcy Code requires the debtor to prepare and file a disclosure statement containing adequate information of a kind, and in sufficient detail, to enable a hypothetical reasonable investor to make an informed judgment about the plan.  This Disclosure Statement is presented to holders of Claims against and Equity Interests in the Surviving Entity to satisfy the requirements of section 1125 of the Bankruptcy Code in connection with the Plan Proponents’ solicitation of votes on the Plan.

 

A bankruptcy court may confirm a plan if such bankruptcy court independently determines that the requirements of section 1129 of the Bankruptcy Code have been satisfied.  Section 1129 sets forth the requirements for confirmation of a plan and, among other things,

 

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requires that a plan meet the “best interests of creditors” test and be “feasible.”  The “best interests of creditors” test generally requires that the value of the consideration to be distributed to the holders of claims or equity interests under a plan may not be less than those parties would receive if the debtor were liquidated pursuant to a hypothetical liquidation occurring under chapter 7 of the Bankruptcy Code.  Under the “feasibility” requirement, a bankruptcy court generally must find that there is a reasonable probability that a debtor will be able to meet its obligations under its plan without the need for further financial reorganization.

 

The Bankruptcy Code does not require that each holder of a claim or interest in a particular class vote in favor of a plan of reorganization for the bankruptcy court to determine that the class has accepted a plan.  Rather, a class of creditors will be determined to have accepted the plan if the bankruptcy court determines that the plan has been accepted by a majority in number and two-thirds in amount of those claims entitled to vote and actually voting in such class.  Similarly, a class of equity security holders will have accepted a plan if the bankruptcy court determines that the plan has been accepted by holders of two-thirds of the number of shares actually voting in such class.

 

In addition, classes of claims or equity interests that are not “impaired” under a plan of reorganization are conclusively presumed to have accepted the plan and thus are not entitled to vote.  Accordingly, acceptances of a plan will generally be solicited only from those persons who hold claims or equity interests in an impaired class.  A class is “impaired” under a plan if the legal, equitable, or contractual rights associated with the claims or equity interests of that class are modified in any way under the plan.  Modification for purposes of determining impairment, however, does not include curing defaults and reinstating maturity on the effective date of the plan.  Furthermore, classes that are to receive no distribution under the plan are conclusively deemed to have rejected the plan.  Class 1 — Priority Claims, Class 2 — Secured Claims, and Class 4 — Convenience Claims are unimpaired under the Plan and are therefore deemed to have accepted the Plan.  Class 5 — Securities Claims and Class 6 - Equity Interests are not entitled to distributions under the Plan and are therefore deemed to have rejected the Plan.  Accordingly, only holders of Class 3 — General Unsecured Claims are entitled to vote on the Plan.

 

If a controversy arises as to whether any Claim or Equity Interest, or any class of Claims or Equity Interests, is impaired under the Plan, the Bankruptcy Court shall determine such controversy at the Confirmation Hearing.  Prior to the determination by the Bankruptcy Court with respect to any such controversy, each holder of a Claim or Equity Interest within the class of Claims or Equity Interests with respect to which such controversy has arisen may be provided a provisional ballot to cast a vote to accept or reject the Plan pursuant to the procedures approved by the Bankruptcy Court in the Disclosure Statement Order.

 

The bankruptcy court also may confirm a plan of reorganization even though fewer than all the classes of impaired claims and equity interests accept such plan.  For a plan of reorganization to be confirmed despite its rejection by a class of impaired claims or equity interests, the plan must be accepted by at least one class of impaired claims (determined without counting the vote of insiders) and the proponent of the plan must show, among other things, that the plan does not “discriminate unfairly” and that the plan is “fair and equitable” with respect to each impaired class of claims or equity interests that has not accepted the plan.

 

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Under section 1129(b) of the Bankruptcy Code, a plan is “fair and equitable” as to a rejecting class of claims or equity interests if, among other things, the plan provides: (a) with respect to secured claims, that each such holder will receive or retain on account of its claim property that has a value, as of the effective date of the plan, equal to the allowed amount of such claim; and (b) with respect to unsecured claims and equity interests, that the holder of any claim or equity interest that is junior to the claims or equity interests of such class will not receive or retain on account of such junior claim or equity interest any property from the estate, unless the senior class receives property having a value equal to the full amount of its allowed claim.

 

A plan does not “discriminate unfairly” against a rejecting class of claims or equity interests if (a) the relative value of the recovery of such class under the plan does not differ materially from that of any class (or classes) of similarly situated claims or equity interests, and (b) no senior class of claims or equity interests is to receive more than 100% of the amount of the claims or equity interest in such class.

 

The Plan has been structured so that it will satisfy the foregoing requirements as to any rejecting class of Claims or Equity Interests, and can therefore be confirmed, if necessary, over the objection of any (but not all) classes of Claims or Equity Interests.

 

B.                                    Confirmation of the Plan

 

1.                                       Elements of Section 1129 of the Bankruptcy Code

 

At the Confirmation Hearing, the Bankruptcy Court will confirm the Plan only if all of the conditions to confirmation under section 1129 of the Bankruptcy Code are satisfied.

 

Such conditions include the following:

 

a.                                       The Plan complies with the applicable provisions of the Bankruptcy Code.

 

b.                                      Each of the Plan Proponents has complied with the applicable provisions of the Bankruptcy Code.

 

c.                                       The Plan has been proposed in good faith and not by any means proscribed by law.

 

d.                                      Any payment made or promised by the Plan Proponents or by a person issuing securities or acquiring property under the Plan for services or for costs and expenses in, or in connection with, DH’s Chapter 11 Case, or in connection with the Plan and incident to DH’s Chapter 11 Case, has been approved by, or is subject to the approval of, the Bankruptcy Court as reasonable.

 

e.                                       The Plan Proponents have disclosed or will disclose the identity and affiliations of any individual proposed to serve, after confirmation of the Plan, as a director, officer or voting trustee of Reorganized Dynegy under the Plan and the appointment to, or continuance in, such office of such individual is consistent with the interests of creditors and equity holders

 

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and with public policy, and the Plan Proponents have disclosed the identity of any insider that will be employed or retained by Reorganized Dynegy, and the nature of any compensation for such insider.

 

f.                                         With respect to each impaired class of Claims or Equity Interests, each holder of an impaired Claim or Equity Interest has either accepted the Plan or will receive or retain under the Plan property of a value, as of the Effective Date, that is not less than the amount that such holder would receive or retain on account of such Claim if the Surviving Entity were liquidated on such date under chapter 7 of the Bankruptcy Code.

 

g.                                      Except to the extent that the holder of a particular Claim has agreed to a different treatment of such Claim, the Plan provides that Administrative Claims and Priority Claims will be paid in full, in Cash, on the Effective Date and Priority Tax Claims will be paid in regular installments over a period ending not later than five (5) years after the Petition Date, of a total value, as of the Effective Date, equal to the allowed amount of such Priority Tax Claims.

 

h.                                      At least one impaired class of Claims has accepted the Plan, determined without including any acceptance of the Plan by any insider holding a Claim in such class.

 

i.                                          Confirmation of the Plan is not likely to be followed by the liquidation or the need for further financial reorganization of Reorganized Dynegy under the Plan, except to the extent proposed in the Plan.

 

j.                                          All fees payable under 28 U.S.C. § 1930, as determined by the Bankruptcy Court at the Confirmation Hearing, have been paid or the Plan provides for the payment of all such fees on the Effective Date of the Plan.

 

The Plan Proponents believe that the Plan will satisfy all the statutory provisions of chapter 11 of the Bankruptcy Code, that they have complied or will have complied with all of the provisions of the Bankruptcy Code, and that the Plan is being proposed and submitted to the Bankruptcy Court in good faith.

 

2.                                       Acceptance

 

A class of Claims will have accepted the Plan if the Plan is accepted, with reference to a class of Claims, by at least two-thirds in amount and more than one-half in number of the Claims entitled to vote that actually vote in such class.

 

3.                                       Standards Applicable to Releases

 

As set forth in the subsection of this Disclosure Statement entitled “The Chapter 11 Plan — Means for Implementation,” Article VIII of the Plan provides for the release of certain Claims and Causes of Action against non-Debtors in consideration of, among other things, substantial value provided to pay holders of Allowed General Unsecured Claims under the Plan and

 

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valuable compromises made by the parties to achieve the settlement and compromise under the Plan.  Because the Plan provides holders of Claims and Equity Interests the opportunity to “opt out” of the releases in Section 8.20 of the Plan, the Plan Proponents believe that such releases are permissible under applicable Second Circuit precedent.  In addition, the United States Court of Appeals for the Second Circuit has determined that releases of non-debtors may be approved as part of a chapter 11 plan of reorganization if there are “unusual circumstances” that render the release terms important to the success of the plan.  See Deutsche Bank AG v. Metromedia Fiber Network Inc. (In re Metromedia Fiber Network, Inc.), 416 F.3d 136, 143 (2d Cir. 2005).  The Plan Proponents also believe that the releases proposed in the Plan and the circumstances of the Chapter 11 Cases satisfy the applicable legal standard within the Second Circuit and that such releases should be approved by the Bankruptcy Court.

 

4.                                       Best Interests of Creditors Test

 

With respect to each impaired class of holders of Claims and Equity Interests, confirmation of the Plan requires that each holder in such impaired class either (a) accept the Plan or (b) receive or retain under the Plan property of a value, as of the applicable consummation date under the Plan, that is not less than the value such holder would receive or retain if the Surviving Entity were liquidated under chapter 7 of the Bankruptcy Code.

 

To determine what holders of Claims and Equity Interests of each impaired class would receive or retain if the Surviving Entity were liquidated, the Bankruptcy Court must determine the proceeds that would be generated from the liquidation of the properties and interests in property of the Surviving Entity in a chapter 7 liquidation case.  The proceeds that would be available for satisfaction of Claims against and Equity Interests in the Surviving Entity would consist of the proceeds generated by disposition of the unencumbered equity in the properties and interests in property of the Surviving Entity and the cash held by the Surviving Entity at the time of the commencement of the liquidation case.  Such proceeds would be reduced by the costs and expenses of the liquidation and by such additional administration and priority claims that may result from the termination of the business of the Surviving Entity and the use of chapter 7 for the purposes of liquidation.  Further, under chapter 7 of the Bankruptcy Code, holders of Allowed Secured Claims (if any) against the Surviving Entity would be entitled to all proceeds from the sale of their collateral (net of any costs of sale) or to the return of such collateral, and only the excess value of such collateral after satisfaction in full of such Allowed Secured Claims (including interest, if any, on such Allowed Secured Claims from and after the Petition Date until the date of payment) may be available for distribution to the other holders of Claims and Equity Interests.

 

The costs of liquidation under chapter 7 of the Bankruptcy Code would include the fees payable to a trustee in bankruptcy, and the fees that would be payable to additional attorneys and other professionals that such a trustee may engage, plus any unpaid expenses incurred by DH during its Chapter 11 Case, such as compensation of its attorneys, financial advisors, accountants and costs that are allowed in the chapter 7 case.  In addition, Claims may arise by reason of the breach or rejection of obligations incurred and executory contracts entered into or assumed by DH during the pendency of its Chapter 11 Case.

 

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The foregoing types of Claims and such other Claims which may arise in the liquidation cases or result from DH’s pending Chapter 11 Case would be paid in full from the liquidation proceeds before the balance of those proceeds would be made available to pay other Claims and Equity Interests arising on or before the Petition Date.

 

To determine if the Plan is in the best interests of each impaired class, the present value of the distributions from the proceeds of the liquidation of the properties and interests in property of the Surviving Entity (net of the amounts attributable to the aforesaid claims) is then compared with the present value offered to such class of Claims and Equity Interests under the Plan.

 

After consideration of the likely effects that a chapter 7 liquidation would have on the ultimate proceeds available for distribution to holders of Claims and Equity Interest holders in DH’s Chapter 11 Case, including: (a) the increased costs and expenses of a liquidation under chapter 7 arising from fees payable to a trustee in bankruptcy and professional advisors to such trustee; (b) the erosion in value of assets in a chapter 7 case in the context of the expeditious liquidation required under chapter 7 and the “forced sale” environment in which such a liquidation would likely occur; (c) the adverse effects on the saleability of business segments as a result of the likely departure of key employees; and (d) the substantial increases in claims which would be satisfied on a priority basis or on parity with creditors in DH’s Chapter 11 Case, the Plan Proponents have determined that confirmation of the Plan will provide each holder of a Claim or Equity Interest with a recovery that is not less than such holders would receive pursuant to liquidation of the Surviving Entity under chapter 7 of the Bankruptcy Code.

 

The Liquidation Analysis is attached hereto as Exhibit “E.”

 

5.                                       Feasibility

 

The Bankruptcy Code conditions confirmation of a plan of reorganization on, among other things, a finding that it is not likely to be followed by the liquidation or the need for further financial reorganization of a debtor.  For purposes of determining whether the Plan satisfies this condition, the Plan Proponents have analyzed the capacity of each of the Plan Proponents, including DH, Dynegy and after the Effective Date, Reorganized Dynegy, to service their obligations under the Plan.  Based upon their analysis, the Plan Proponents believe that all such obligations imposed by the Plan will be met.  For a more detailed description of the Plan Proponent’s analysis that formed this belief, refer to the article of this Disclosure Statement entitled “Financial Projections and Assumptions.”

 

C.                                    Cramdown

 

In the event that any impaired class other than Class 3 — General Unsecured Claims —  does not accept the Plan, the Plan Proponents nevertheless may move for confirmation of the Plan.  To obtain such confirmation, it must be demonstrated to the Bankruptcy Court that the Plan “does not discriminate unfairly” and is “fair and equitable” with respect to such classes and any other classes of Claims or Equity Interests that vote to reject, or are deemed to reject, the Plan.

 

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1.                               No Unfair Discrimination

 

A plan of reorganization “does not discriminate unfairly” if (a) the legal rights of a nonaccepting class are treated in a manner that is consistent with the treatment of other classes whose legal rights are similar to those of the nonaccepting class, and (b) no class receives payments in excess of that which it is legally entitled to receive for its Claims or Equity Interests.  The Plan Proponents believe that under the Plan all impaired classes of Claims and Equity Interests are treated in a manner that is consistent with the treatment of other classes of Claims and Equity Interests that are similarly situated, if any, and no class of Claims or Equity Interests will receive payments or property with an aggregate value greater than the aggregate value of the Allowed Claims and Allowed Equity Interests in such class.  Accordingly, the Plan Proponents believe the Plan does not discriminate unfairly as to any impaired class of Claims or Equity Interests.

 

2.                               Fair and Equitable Test

 

The Bankruptcy Code establishes different “fair and equitable” tests for classes of secured claims, unsecured claims and equity interests as follows:

 

a.                                       Secured Claims.  Either (i) each holder of a claim in an impaired class of secured claims retains its liens securing its secured claim and it receives on account of its secured claim deferred cash payments having a present value equal to the amount of its allowed secured claim, (ii) each holder of a claim in an impaired class of secured claims realizes the indubitable equivalent of its allowed secured claim, or (iii) the property securing the claim is sold free and clear of liens, with such liens to attach to the proceeds and the treatment of such liens on proceeds as provided in clause (i) or (ii) of this subparagraph.

 

b.                                      Unsecured Claims.  Either (i) each holder of a claim in an impaired class of unsecured claims receives or retains under the plan property of a value equal to the amount of its allowed claim or (ii) the holders of claims and interests that are junior to the claims of the dissenting class will not receive any property under the plan of reorganization, subject to the applicability of the judicial doctrine of contributing new value.

 

c.                                       Equity Interests.  Either (i) each holder of an equity interest in an impaired class of interests will receive or retain under the plan of reorganization property of a value equal to the greater of (A) the fixed liquidation preference or redemption price, if any, of such stock or (B) the value of the stock or (ii) the holders of interests that are junior to the stock will not receive any property under the plan of reorganization, subject to the applicability of the judicial doctrine of contributing new value.

 

THE PLAN PROPONENTS WILL MOVE FOR CONFIRMATION NOTWITHSTANDING THE DEEMED REJECTION OF THE PLAN BY CLASS 5 — SECURITIES CLAIMS AND CLASS 6 — EQUITY INTERESTS

 

D.                                    Effect of Confirmation

 

Under section 1141 of the Bankruptcy Code, the provisions of a confirmed plan bind the debtor, any entity issuing securities under the plan, any entity acquiring property under the plan,

 

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and any creditor or equity security holder, whether or not the claim or interest of such creditor or equity security holder is impaired under the plan and whether or not such creditor or equity security holder voted to accept the plan.  Further, after confirmation of a plan, the property dealt with by the plan is free and clear of all claims and interests of creditors and equity security holders, except as otherwise provided in the plan or the confirmation order.

 

XIV.

 

SECURITIES LAW MATTERS

 

A.                                    Issuance of Plan Securities

 

Section 1145(a)(1) of the Bankruptcy Code exempts the offer and sale of securities under a plan of reorganization from registration under section 5 of the Securities Act, and state securities laws if the following three principal requirements are satisfied: (i) the securities must be offered and sold under a plan of reorganization by the debtor, an affiliate participating in a joint plan with the debtor or a successor to the debtor under the plan; (ii) the recipients of the securities must hold a claim against, an interest in, or a claim for an administrative expense in the case concerning, the debtor or such affiliate; and (iii) the securities must be issued entirely in exchange for the recipient’s claim against or interest in the debtor or such affiliate, or principally in exchange for such claim or interest and partly for cash or property.  In addition, under section 1145(a)(2) of the Bankruptcy Code, the issuance of securities upon the exercise of a warrant, option, right to subscribe, or conversion privilege (or the sale of a security upon the exercise of such a warrant, option, right or privilege), is exempt from registration assuming that the issuance of the warrant, option, right to subscribe or conversion privilege satisfied the requirements of section 1145(a)(1) of the Bankruptcy Code.

 

Except as noted below, the Plan Proponents believe that the offer and sale of (i) Reorganized Dynegy Common Stock, (ii) the Warrants, and (iii) any Reorganized Dynegy Common Stock issuable upon the exercise of the Warrants (collectively the “Plan Securities”) satisfies the requirements of section 1145(a)(1) and (2) of the Bankruptcy Code and, therefore, are exempt from registration under the Securities Act and state securities laws and regulations.

 

B.                                    Subsequent Transfers of Plan Securities

 

Section 1145(c) of the Bankruptcy Code provides that the offer or sale of securities pursuant to section 1145(a)(1) of the Bankruptcy Code is deemed to be a public offering.  Accordingly, the Plan Securities to be issued under the Plan will not be deemed to be “restricted securities” under the Securities Act.  Therefore, the Plan Securities issued pursuant to the exemption provided by section 1145 of the Bankruptcy Code may generally be resold by any holder thereof without registration under the Securities Act pursuant to the exemption provided by section 4(1) of the Securities Act, unless the holder is an “underwriter” with respect to such securities, as such term is defined in section 1145(b)(1) of the Bankruptcy Code.  However, the section 1145 exemption does not provide exemptions from any applicable shareholder or similar agreement or any other contractual agreement to which Plan Securities may be subject, which may restrict transferability of such securities, or any other applicable laws restricting transfers.    In addition, such securities generally may be resold by the recipients thereof without registration under state securities or “blue sky” laws pursuant to various exemptions provided by the

 

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respective laws of the individual states. However, recipients of securities issued under the Plan are advised to consult with their own counsel as to the availability of any such exemption from registration under federal securities laws and any relevant state securities laws in any given instance and as to any applicable requirements or conditions to the availability thereof.

 

Section 1145(b)(1) of the Bankruptcy Code defines an “underwriter” for the purposes of the Securities Act as one who, subject to certain exceptions:

 

(i)                                     purchases a claim against, an interest in, or a claim for an administrative expense against the debtor with a view to distributing any security received or to be received in exchange for such claim or interest;

 

(ii)                                  offers to sell securities offered under a plan for the holders of such securities;

 

(iii)                               offers to buy such securities from the holders of such securities, if the offer to buy is:

 

(A)                              with a view to distributing such securities; and

 

(B)                                under an agreement made in connection with the plan, the consummation of the plan, or with the offer or sale of securities under the plan; or

 

(iv)                              is an “issuer” with respect to the securities as the term “issuer” is defined in section 2(a)(11) of the Securities Act.

 

Under section 2(a)(11) of the Securities Act, an “issuer” includes any person directly or indirectly controlling or controlled by the issuer, or any person under direct or indirect common control of the issuer.  “Control” (as defined in Rule 405 under the Securities Act) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract, or otherwise. Accordingly, an officer or director of a reorganized debtor or its successor under a plan of reorganization may be deemed to be “in control” of such debtor or successor, particularly if the management position or directorship is coupled with ownership of a significant percentage of the reorganized debtor’s or its successor’s voting securities.  Moreover, the legislative history of section 1145 of the Bankruptcy Code suggests that a creditor who owns at least ten percent (10%) of the voting securities of a reorganized debtor may be presumed to be a “control person.”  See H.R. Rep. No. 95-595, 95th Cong., 1st Sess. 238 (1977).

 

Whether or not any particular person would be deemed to be an “underwriter” with respect to the Plan Securities or other securities to be issued pursuant to the Plan would depend upon various facts and circumstances applicable to that person.  Accordingly, the Plan Proponents express no view as to whether any particular person receiving Plan Securities or other securities under the Plan would be an “underwriter” with respect to such Plan Securities or other securities.

 

Notwithstanding the foregoing, to the extent that persons who receive securities pursuant to section 1145 are deemed to be “underwriters” (collectively, the “Restricted Holders”), resales of such securities by Restricted Holders would not be exempted by section 1145 of the

 

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Bankruptcy Code from registration under the Securities Act or other applicable law. Restricted Holders would, however, be permitted to sell the Plan Securities without registration if they are able to comply with the applicable provisions of Rule 144 under the Securities Act, as described further below, or if such securities are registered with the Securities and Exchange Commission.  Any person who is an “underwriter” but not an “issuer” with respect to an issue of securities (other than a holder of restricted securities) is, in addition, entitled to engage in exempt “ordinary trading transactions” within the meaning of section 1145(b)(1) of the Bankruptcy Code.

 

Under certain circumstances, Restricted Holders and holders of restricted securities may be entitled to resell their securities pursuant to the limited safe harbor resale provisions of Rule 144. Generally, Rule 144 provides that if certain conditions are met (e.g., the availability of current public information with respect to the issuer, volume limitations, and notice and manner of sale requirements), specified persons who resell restricted securities or who resell securities which are not restricted but who are “affiliates” of the issuer of the securities sought to be resold, will not be deemed to be “underwriters” as defined in section 2(a)(11) of the Securities Act. Rule 144 provides that: (1) a non-affiliate who has not been an affiliate during the preceding three months may resell restricted securities after a six-month holding period if at the time of the sale there is current public information regarding the issuer and after a one year holding period if there is not current public information regarding the issuer at the time of the sale; and (2) an affiliate may sell restricted or other securities after a six-month holding period if at the time of the sale there is current public information regarding the issuer, and also may sell restricted or other securities after a one-year holding period whether or not there was current public information regarding the issuer at the time of the sale, provided that in each case the affiliate otherwise complies with the volume, manner of sale and notice requirements of Rule 144.

 

Reorganized Dynegy will enter into a registration rights agreement on customary terms with certain creditors that are expected to be ten percent (10%) shareholders of Reorganized Dynegy immediately following the Effective Date that will permit such shareholders to sell their shares in Reorganized Dynegy on the NYSE or otherwise, subject to the applicable terms of the Registration Rights Agreement.

 

Rule 144A provides a non-exclusive safe harbor exemption from the registration requirements of the Securities Act for resales to certain “qualified institutional buyers” of securities that are “restricted securities” within the meaning of the Securities Act, irrespective of whether the seller of such securities purchased its securities with a view towards reselling such securities, if certain other conditions are met (e.g., the availability of information required by paragraph (d)(4) of Rule 144A and certain notice provisions). Under Rule 144A, a “qualified institutional buyer” is defined to include, among other persons, “dealers” registered as such pursuant to section 15 of the Exchange Act, and entities that purchase securities for their own account or for the account of another qualified institutional buyer and that, in the aggregate, own and invest on a discretionary basis at least $100 million in the securities of unaffiliated issuers. Subject to certain qualifications, Rule 144A does not exempt the offer or sale of securities that, at the time of their issuance, were securities of the same class of securities then listed on a national securities exchange (registered as such pursuant to section 6 of the Exchange Act) or quoted in a United States automated inter-dealer quotation system.

 

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PERSONS WHO BELIEVE THEY MAY BE “UNDERWRITERS” UNDER SECTION 1145(b) OF THE BANKRUPTCY CODE WITH RESPECT TO THE PLAN SECURITIES ARE ADVISED TO CONSULT WITH THEIR OWN LEGAL ADVISORS AS TO THE AVAILABILITY OF THE EXEMPTION PROVIDED BY RULE 144 OR RULE 144A PROMULGATED UNDER THE SECURITIES ACT OR ANY OTHER APPLICABLE EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OR STATE SECURITIES LAWS. THE PLAN PROPONENTS MAKE NO REPRESENTATION CONCERNING THE RIGHT OF ANY PERSON TO TRADE IN THE PLAN SECURITIES.

 

C.                                    Delivery of Disclosure Statement

 

Under section 1145(a)(4) of the Bankruptcy Code, “stockbrokers” (as that term is defined in section 101(53A) of the Bankruptcy Code) are required to deliver to their customers, for the first 40 days after the Effective Date, a copy of this Disclosure Statement (and any information supplementing such Disclosure Statement ordered by the Bankruptcy Court) at or before the time of a transaction in any Plan Security issued under the Plan in order for such transaction to be exempt from the registration requirements of section 5 of the Securities Act.

 

XV.

 

CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES

 

A.                                    General

 

The following summary describes certain United States federal income tax consequences to holders of Claims against DH and the Surviving Entity, and to Dynegy, DH, the Surviving Entity, Reorganized Dynegy and DNE as a result of the implementation of the Plan.  This summary is based on the Internal Revenue Code, its legislative history, existing Treasury regulations (“Treasury Regulations”) thereunder, and published rulings and court decisions, all as currently in effect and all subject to change at any time, possibly with retroactive effect.  Neither Dynegy nor DH will seek a ruling from the IRS with regard to the U.S. federal income tax treatment of the Plan and, therefore, there can be no assurance that the IRS will agree with the conclusions set forth below.  In addition, except as set forth below, the summary only applies to U.S. Holders (defined below) whose Claims are solely with respect to capital assets and does not address all of the tax consequences that may be relevant to U.S. Holders or tax consequences to investors in special tax situations (such as financial institutions, dealers in securities or currencies, tax-exempt organizations, insurance companies, partnerships or other pass-through entities or persons holding Claims through a partnership or other pass-through entity, persons holding Claims as part of a straddle, hedging or conversion transaction, and certain U.S. expatriates).  Accordingly, each holder should consult its own tax advisor with regard to the consequences of participating in the Plan and the application of U.S. federal income tax laws, as well as the laws of any state, local or foreign taxing jurisdictions, to its particular situation.

 

For purposes of this discussion, a “U.S. Holder” is a beneficial owner of a Claim that is, for U.S. federal income tax purposes:

 

·                                          an individual who is a citizen or resident of the United States;

 

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·                                          a corporation (or an entity taxable as a corporation) organized in or created under the laws of the United States or of any political subdivision of the United States;

 

·                                          an estate whose income is includible in gross income for U.S. federal income tax purposes regardless of its source; or

 

·                                          a trust, (i) if a U.S. court is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have authority to control all substantial decisions of the trust or (ii) that has validly elected to be treated as a U.S. person for U.S. federal income tax purposes.

 

If a partnership (or an entity treated as a partnership for U.S. federal income tax purposes) holds a Claim, the tax treatment of a partner generally will depend on the status of the partner and the activities of the partnership.  Each partner of a partnership (or an entity treated as a partnership for U.S. federal income tax purposes) holding a Claim should consult its own tax advisor with regard to the tax consequences of participating in the Plan.

 

A Non-U.S. Holder is a beneficial owner of a Claim other than (1) a U.S. Holder or (2) a partnership for U.S. federal income tax purposes.

 

Treasury Department Circular 230 Disclosure

 

TO COMPLY WITH TREASURY DEPARTMENT CIRCULAR 230, TAXPAYERS ARE HEREBY NOTIFIED THAT (A) ANY DISCUSSION OF U.S. FEDERAL TAX ISSUES CONTAINED OR REFERRED TO IN THIS DISCLOSURE STATEMENT (INCLUDING ANY ATTACHMENTS) IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY ANY TAXPAYER FOR THE PURPOSE OF AVOIDING PENALTIES THAT MAY BE IMPOSED ON A TAXPAYER UNDER THE INTERNAL REVENUE CODE, (B) ANY SUCH DISCUSSION IS WRITTEN IN CONNECTION WITH THE PROMOTION OR MARKETING OF THE TRANSACTIONS OR MATTERS ADDRESSED HEREIN, AND (C) TAXPAYERS SHOULD SEEK ADVICE BASED ON THEIR PARTICULAR CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISOR.

 

B.                                    Tax Consequences to Holders of Allowed General Unsecured Claims

 

1.                               U.S. Holders

 

a.                                       Whether the Exchange of Allowed General Unsecured Claims for Plan Consideration is a Reorganization

 

The U.S. federal income tax treatment of the transactions to be undertaken pursuant to the Plan is dependent on whether (i) the exchange of Allowed General Unsecured Claims for Reorganized Dynegy Common Stock, the Plan Cash Payment and the Allocated Facilities Sale Proceeds (collectively, the “Plan Consideration”) qualifies as part of a reorganization for U.S. federal income tax purposes (a “Reorganization”) and (ii) the property exchanged for the Reorganized Dynegy Common Stock is considered a “security” for U.S. federal income tax

 

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purposes.  Although not free from doubt, the Merger and other transactions undertaken pursuant to the Plan should constitute a Reorganization.

 

The rules for determining whether an obligation constitutes a security for U.S. federal income tax purposes are unclear.  The term “security” is not defined in the Internal Revenue Code or the Treasury Regulations and has not been clearly defined by judicial decisions. The test as to whether a debt instrument is a security involves an overall evaluation of the nature of the debt instrument, the extent of the investor’s proprietary interest in the issuer and certain other considerations (including the security for payment, the creditworthiness of the obligor, the subordination or lack thereof to other creditors, the right to vote or otherwise participate in the management of the obligor, the convertibility of the instrument into an equity interest of the obligor, whether payments of interest are fixed, variable, or contingent, and whether such payments are made on a current basis or accrued). One of the most significant factors considered in determining whether a particular debt instrument is a security is its original term. A debt instrument with an original term to maturity of five years or less generally does not qualify as a security, and a debt instrument with an original term to maturity of ten years or more generally does qualify as a security. Whether a debt instrument with an original term to maturity of between five and ten years qualifies as a security is less clear.

 

The Subordinated Notes and the various series of Senior Notes have different maturities and different terms.  Based on their terms, certain of the series of Senior Notes and the Subordinated Notes should constitute “securities” for U.S. federal income tax purposes, while other series of Senior Notes may not.  However, after an evaluation of the terms of the Lease Guaranty Claims taking into account the abovementioned factors, it is unlikely that the Lease Guaranty Claims constitute “securities” for U.S. federal income tax purposes.

 

b.                                      Consequences if Exchange of Allowed General Unsecured Claims for Plan Consideration is a Reorganization

 

Assuming the Senior Notes and Subordinated Notes constitute securities for U.S. federal income tax purposes, and the Merger and other transactions undertaken pursuant to the Plan constitute a Reorganization, then a U.S. Holder of a Senior Note or a Subordinated Note generally should not recognize any gain or loss on the exchange for Plan Consideration, provided, however, that such Holder may recognize gain if the sum of (X) the fair market value of the Reorganized Dynegy Common Stock, (Y) the amount of Plan Cash Payment received and (Z) the amount of Allocated Facilities Sale Proceeds received by such Holder, exceeds such Holder’s adjusted tax basis of the Senior Notes held by such Holder, but only in an amount not to exceed the amount of Plan Cash Payment and Allocated Facilities Sale Proceeds received by such Holder.  In addition, a Holder may recognize ordinary income to the extent the Plan Consideration received is attributable to interest that has accrued (on or after the start of such Holder’s holding period) on the Senior Note or Subordinated Notes, as the case may be, and that has not already been included in such Holder’s gross income.  U.S. Holders of Senior Notes and Subordinated Notes generally should have an initial tax basis in their Reorganized Dynegy Common Stock equal to their adjusted tax basis in such Senior Notes or Subordinated Notes, as the case may be, decreased by the amount of Plan Cash Payments and Allocated Facilities Sale Proceeds received by such Holder, and increased by the amount of any gain recognized by such Holder on the exchange and the amounts taxable as accrued interest (if not previously included

 

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in the adjusted tax basis of Senior Notes or Subordinated Notes held by such Holder). Such U.S. Holders’ holding period for the Reorganized Dynegy Common Stock should include their holding period for the Senior Notes.

 

Because it is unlikely that the Lease Guaranty Claims and the TIA Claims constitute securities for U.S. federal income tax purposes, the exchange of Lease Guaranty Claims, TIA Claims or any Senior Notes that do not constitute securities for U.S. federal income tax purposes for Plan Consideration will be treated as a taxable exchange in the same manner as the exchange of Allowed General Unsecured Claims for Reorganized Dynegy Common Stock would be treated in the event such exchange does not qualify as a Reorganization (as described in greater detail in the immediately succeeding paragraphs).

 

c.                                       Consequences if Exchange of Allowed General Unsecured Claims for Plan Consideration is not a Reorganization

 

If the exchange of Allowed General Unsecured Claims for Plan Consideration does not qualify as a Reorganization then the U.S. federal income tax consequences to a U.S. Holder of such exchange are as follows:

 

i.                       Gain or loss on receipt of Plan Consideration

 

A U.S. Holder that receives Plan Consideration pursuant to the Plan will recognize gain or loss in an amount equal to the difference between the amount realized (other than Plan Consideration that is attributable to accrued and unpaid interest, which will be treated as interest income if and to the extent not previously included in the U.S. Holder’s gross income) and such Holder’s adjusted tax basis in the Allowed General Unsecured Claims surrendered. The amount realized will equal the sum of the fair market value (on the Effective Date) of Reorganized Dynegy Common Stock received, the amount of Plan Cash Payment received and the amount of Allocated Facilities Sale Proceeds received by such Holder (in each case, other than Reorganized Dynegy Common Stock, Plan Cash Payment or Allocated Facilities Sale Proceeds that are attributable to accrued and unpaid interest).  A U.S. Holder recognizing gain as a result of the exchange pursuant to the Plan should consult with such Holder’s tax advisor regarding the application of the installment sale rules to defer the recognition of any gain as a result of the exchange.

 

ii.                    Character of gain or loss with respect to Holders of Senior Notes and Subordinated Notes

 

Any gain or loss recognized on the exchange of Senior Notes and Subordinated Notes for Plan Consideration generally will be treated as long-term capital gain or loss if the notes were held for more than one (1) year, except that any such gain will be treated as ordinary income to the extent of accrued market discount attributable to Senior Notes or Subordinated Notes, as the case may be, that has not previously been included in income for U.S. federal income tax purposes.  A Senior Note or Subordinated Note, as the case may be, generally will be treated as having been acquired with market discount if the U.S. Holder’s initial basis in such note was less than such note’s stated principal amount (or, in the case of Senior Notes issued with “original issue discount” (“OID”), its “revised issue price”) by more than a specified de minimis amount.

 

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iii.                 Character of gain or loss with respect to Holders of Lease Guaranty Claims and TIA Claims

 

The amount and character of any income resulting from an exchange of a Lease Guaranty Claim or TIA Claim for Plan Consideration pursuant to the Plan will depend on each U.S. Holder’s particular circumstances.  U.S. Holders exchanging Lease Guaranty Claims or TIA Claims for Plan Consideration should consult their own tax advisor with regard to the consequences of such exchange.

 

iv.                Tax basis and holding period of Reorganized Dynegy Common Stock

 

U.S. Holders generally will have an initial tax basis in Reorganized Dynegy Common Stock received in the exchange equal to its fair market value on the Effective Date.  A U.S. Holder’s holding period in Reorganized Dynegy Common Stock will commence on the day following the Effective Date.

 

d.                                      Market Discount on or with respect to the Senior Notes

 

U.S. Holders who hold Senior Notes or Subordinated Notes, as the case may be, bearing market discount should consult their own tax advisor regarding the consequences of participating in the Plan. If the exchange of such notes for Reorganized Dynegy Common Stock constitutes a Reorganization, any market discount accrued on or with respect to the Senior Notes or Subordinated Notes, as the case may be, may be carried over to the Reorganized Dynegy Common Stock, as discussed below under the heading “Taxation of Reorganized Dynegy Common Stock — U.S. Holders — Sale or Other Taxable Disposition of Reorganized Dynegy Common Stock.”

 

2.                               Non-U.S. Holders

 

The determination of whether a Non-U.S. Holder recognizes gain or loss on the exchange of Allowed General Unsecured Claims for Plan Consideration and the amount of such gain or loss is determined in the same manner as set forth above in connection with U.S. Holders.

 

a.                                       Gain Recognition

 

Non-U.S. Holders that recognize gain on the exchange of such holder’s Allowed General Unsecured Claim generally will not be subject to U.S. federal income taxation in respect of such gain unless: (1) the Non-U.S. Holder is an individual who was present in the United States for 183 days or more during the taxable year in which the transactions pursuant to the Plan occur and certain other conditions are met or (2) such gain is effectively connected with the conduct of a United States trade or business by the Non-U.S. Holder (and, if required by an applicable income tax treaty, the gain is attributable to a permanent establishment located in the United States).

 

b.                                      Accrued and Unpaid Interest

 

If a Non-U.S. Holder receives Plan Consideration that is attributable to accrued and unpaid interest, such amount will not be subject to U.S. federal income tax or withholding tax;

 

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provided that (1) the Non-U.S. Holder does not actually or constructively own 10% or more of the total combined voting power of all of DH’s classes of stock entitled to vote; (2) the Non-U.S. Holder is not a controlled foreign corporation for U.S. federal income tax purposes that is related to DH through stock ownership; (3) the Non-U.S. Holder is not a bank that received notes on an extension of credit made pursuant to a loan agreement entered into in the ordinary course of business; (4) the interest is not effectively connected with the conduct by the Non-U.S. Holder of a trade or business in the United States; and (5) either DH or DH’s paying agent has received or receives appropriate documentation from the Non-U.S. Holder (e.g,. IRS Form W-8BEN or IRS Form W-8IMY with required attachments) establishing that the Non-U.S. Holder is not a U.S. person.

 

A Non-U.S. Holder that does not qualify for exemption from U.S. federal tax under the preceding sentence generally will be subject to withholding of U.S. federal income tax at a 30% rate (or lower rate under an applicable income tax treaty, provided that a properly executed IRS Form W-8BEN (or suitable substitute form) is furnished to the relevant withholding agent) on payments of interest, unless the interest is effectively connected with the Non-U.S. Holder’s conduct of a trade or business within the United States. If interest that is received by a Non-U.S. Holder is effectively connected with a Non-U.S. Holder’s conduct of a U.S. trade or business, the Non-U.S. Holder generally will be subject to U.S. federal income tax on the interest on a net-income basis in the same manner as if the Non-U.S. Holder were a U.S. Holder, unless an applicable treaty provides otherwise. If interest income is taxable on a net-income basis, the U.S. federal withholding tax described above will not apply (assuming an appropriate certification on IRS Form W-8ECI or a suitable substitute form is provided). A Non-U.S. Holder that is a corporation may also be subject to a 30% branch profits tax on its effectively-connected earnings and profits attributable to such interest, unless it qualifies for a lower rate under an applicable income tax treaty.

 

C.                                    Tax Consequences to Holders of Dynegy Capital Stock Upon Receipt of the Dynegy Administrative Claim

 

As described in greater detail in the Settlement Agreement, dated as of May 1, 2012, entered into by and among the Parties (as such term is defined in such Settlement Agreement) one percent (1%) of the fully-diluted Reorganized Dynegy Common Stock and certain Warrants to purchase 13.5% of the fully-diluted Reorganized Dynegy Common Stock are to be transferred in satisfaction of the Dynegy Administrative Claim to a trust established to hold and distribute the proceeds of such claim for the benefit of and to holders of Dynegy capital stock or in some other efficient manner determined by Dynegy.  The transaction pursuant to which holders of the Dynegy capital stock receive such Reorganized Dynegy Common Stock and Warrants in satisfaction of the Dynegy Administrative Claim and have Dynegy capital stock cancelled should be treated as a “recapitalization” for U.S. federal income tax purposes.  Accordingly, no gain or loss should be recognized for U.S. federal income tax purposes by holders upon their receipt of such Reorganized Dynegy Common Stock and Warrants.

 

Holders that receive such Reorganized Dynegy Common Stock and Warrants generally should have an aggregate initial tax basis in the Reorganized Dynegy Common Stock and Warrants equal to such holder’s adjusted tax basis in the outstanding Dynegy capital stock previously held. Although not entirely clear, such holders should be required to allocate their

 

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adjusted tax basis in the Dynegy capital stock previously held between the Reorganized Dynegy Common Stock and Warrants received based on the relative fair market value of each upon receipt. A holder’s holding period for the Reorganized Dynegy Common Stock and Warrants should include such Holder’s holding period for its Dynegy capital stock.

 

D.                                    Tax Consequences to Holders of Priority, Secured, Convenience and Securities Claims

 

Holders of Class 1 — Priority Claims, Class 2 — Secured Claims and Class 4 — Convenience Claims generally should not recognize gain, loss or other taxable income upon the reinstatement of their Allowed Claims under the Plan. Holders of Class 5 — Securities Claims should recognize a loss equal to such holders’ adjusted tax basis in their respective Class 5 — Securities Claims. Holders of Class 5 — Securities Claims should consult with their tax advisors regarding the character of such loss associated with their Class 5 — Securities Claims.

 

E.                                      Tax Consequences to Dynegy, DH and DNE Upon Consummation of the Plan

 

1.                                       In General

 

Dynegy, DH and DNE file consolidated U.S. federal income tax returns which take into account the income and losses of all of the Debtors (some of which are disregarded as separate entities for U.S. federal income tax purposes) (the “Dynegy Group”).  The Dynegy Group’s consolidated net operating loss carryforwards (“NOLs”) and alternative minimum tax credit carryforwards (“AMT Credits”) for U.S. federal income tax purposes were approximately $1,419 million and $271 million, respectively, as of December 31, 2011.  The Dynegy Group’s NOLs and AMT Credits are subject to audit and possible challenge by the IRS.  Accordingly, the amount of the Dynegy Group’s NOLs and AMT Credits ultimately may vary from the amounts set forth above.

 

As discussed below, in connection with the implementation of the Plan, the amount of the Dynegy Group’s NOLs, AMT Credits and certain other tax attributes likely will be reduced or their use likely will be restricted and therefore the Dynegy Group’s utilization of any remaining NOLs, AMT Credits and certain other tax attributes may be limited following the exchanges contemplated by the Plan.  In addition, Dynegy had an Ownership Change (as defined below) in the second quarter of 2012 and thus its ability to utilize its federal NOLs and AMT Credits that existed at the time of the Ownership Change has been significantly limited.  Notwithstanding that the use of the NOLs and AMT Credits existing at the time of this Ownership Change has been limited, such tax attributes continue to exist after such Ownership Change and, as a result of COD Income resulting on the Effective Date, such tax attributes held at DH will be reduced or eliminated prior to the reduction of tax attributes held by entities other than DH or produced after the Ownership Change.  Because the use of these tax attributes existing at the time of the Ownership Change has been limited and these tax attributes are expected to be reduced or eliminated as a result of COD Income, the impact of a further Ownership Change on the Effective Date should not have a significant impact on Dynegy’s use of these tax attributes.  The Dynegy Group is expected to produce additional NOLs after the Ownership Change in the second quarter of 2012 and prior to the Effective Date.  The use of these additional NOLs will not be limited by the Ownership Change in the second quarter of 2012 but may be limited by a further Ownership Change on the Effective Date.

 

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2.                                       Cancellation of Indebtedness

 

The exchange of Allowed General Unsecured Claims for Plan Consideration generally will result in cancellation of indebtedness income (“COD Income”) to DH for U.S. federal income tax purposes. The amount of COD Income generally will be the excess of (x) the “adjusted issue price” of the Senior Notes and Subordinated Notes over (y) the sum of (i) the fair market value of the Reorganized Dynegy Common Stock on the Effective Date, (ii) the amount of Plan Cash Payments and (iii) the amount of the Allocated Facilities Sale Proceeds (other than such amounts attributable to accrued and unpaid interest).

 

The adjusted issue price of the Senior Notes and Subordinated Notes at the start of any accrual period is equal to their original issue price increased by the sum of the daily portions of any OID with respect to the Senior Notes and Subordinated Notes for each prior accrual period and reduced by payments other than qualified stated interest (stated interest that is unconditionally payable in cash or in property (other than debt instruments of the issuer) at least annually at a single fixed rate).

 

Because the fair market value of the Reorganized Dynegy Common Stock will be unknown prior to its issue date, the precise amount of COD Income, if any, resulting from the exchange cannot be determined until such time.

 

COD Income recognized by a corporate debtor will be excluded from gross income if the debt discharge occurs in a case brought under the Bankruptcy Code, the debtor is under the court’s jurisdiction in such case and the discharge is granted by the court or is pursuant to a plan approved by the court (the “Bankruptcy Exception”).  Because the Bankruptcy Exception will apply to the transactions consummated under the Plan, any COD Income that is recognized will be excluded from gross income.

 

A debtor that excludes COD Income from gross income under the Bankruptcy Exception, however, generally must reduce certain tax attributes by the amount of the excluded COD Income.  Attributes subject to reduction include NOLs, AMT Credits, certain other losses, credits and carryforwards and the debtor’s tax basis in its assets (including stock of subsidiaries).  A debtor’s tax basis in its assets generally may not be reduced below the amount of liabilities remaining immediately after the discharge of indebtedness.  If a debtor is a member of a consolidated group and is required to reduce its basis in the stock of another group member, a “look-through rule” requires a corresponding reduction in the tax attributes of the lower-tier member.  If the amount of a debtor’s excluded COD Income exceeds the amount of attribute reduction resulting from the application of the foregoing rules, certain other tax attributes of the consolidated group may also be subject to reduction.  NOLs for the taxable year of the discharge and NOL carryovers to such year generally are the first attributes subject to reduction.  The Dynegy Group currently anticipates that it will have to reduce NOLs and possibly AMT Credits, but not other attributes, as a result of the excluded COD Income.  However, the ultimate effect of this rule is uncertain because, among other things, it will depend on the amount of COD Income that is recognized.  In addition, an Ownership Change that occurred in the second quarter of 2012 and another that is expected to occur on the Effective Date each will limit Dynegy’s use of NOLs and AMT Credits existing at the time of these Ownership Changes pursuant to Section 382 of the Internal Revenue Code. Most (if not all) of these NOLs and AMT Credits will be required to be

 

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reduced as a result of the COD Income.  Thus, these Ownership Changes (which result in limitations on the use of these NOLs and AMT Credits) will lessen the significance of the reduction in the NOLs and AMT Credits resulting from the COD Income.

 

3.                                       Section 382 Limitation on Net Operating Losses

 

Under Internal Revenue Code sections 382 and 383, if a corporation or a consolidated group of corporations with NOLs (a “loss corporation”) undergoes an “ownership change,” the loss corporation’s use of its pre-change NOLs, AMT Credits, and certain other tax attributes generally will be subject to an annual limitation in the post-change period.  In general, an ownership change occurs if the percentage of the value of the loss corporation’s stock owned by one or more direct or indirect “five percent shareholders” increases by more than fifty percentage points over the lowest percentage of value owned by the five percent shareholders at any time during the applicable testing period (an “Ownership Change”).  The testing period generally is the shorter of (i) the three-year period preceding the testing date or (ii) the period of time since the corporation’s most recent Ownership Change.

 

Subject to the special bankruptcy rules discussed below, the amount of the annual limitation on a loss corporation’s use of its pre-change NOLs, AMT Credits and certain other tax attributes generally is equal to the product of the applicable long-term tax-exempt rate (as published by the IRS for the month in which the Ownership Change occurs (which rate was most recently announced as 3.26% for Ownership Changes occurring in June 2012)) and the value of the loss corporation’s outstanding stock immediately before the Ownership Change (excluding certain capital contributions).  If a loss corporation has a net unrealized built-in gain (“NUBIG”) immediately prior to the Ownership Change, the annual limitation may be increased as certain gains are recognized during the subsequent five-year period.  If a loss corporation has a net unrealized built-in loss (“NUBIL”) immediately prior to the Ownership Change, certain losses recognized during the subsequent five-year period also would be subject to the annual limitation and thus would reduce the amount of pre-change NOLs that could used by the loss corporation during the five-year period.

 

A NUBIG or NUBIL is generally the difference between the fair market value of a loss corporation’s assets and its tax basis in the assets, subject to a statutorily-defined threshold amount.  The amount of a loss corporation’s NUBIG or NUBIL must be adjusted for built-in items of income or deduction that would be attributable to a pre-change period if recognized during the five-year period beginning on the Ownership Change date (the “Recognition Period”).  The NUBIG or NUBIL of a consolidated group generally is calculated on a consolidated basis, subject to special rules.  For example, certain corporations that joined the consolidated group within the preceding five years may not be taken into account in determining whether the group has a NUBIL, but would be taken into account in determining whether the group has a NUBIG.

 

If a loss corporation has a NUBIG immediately prior to an Ownership Change, any recognized built-in-gains (“RBIGs”) will increase the annual limitation in the taxable year that the RBIG is recognized.  An RBIG generally is any gain (and certain income) with respect to an asset held at the time of the Ownership Change that is recognized in any taxable year any portion of which is within the Recognition Period.  The amount of an RBIG is limited to the lesser of (i) the excess of the fair market value of the asset over its tax basis immediately prior to the

 

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Ownership Change or (ii) the NUBIG less the amount of RBIGs from prior years ending during the Recognition Period.  On the other hand, if a loss corporation has a NUBIL immediately prior to an Ownership Change, any recognized built-in-losses (“RBILs”) will be subject to the annual limitation in the same manner as pre-change NOLs.  An RBIL generally is any loss (and certain deductions) with respect to an asset held at the time of the Ownership Change that is recognized in any taxable year any portion of which is within the Recognition Period.  The amount of an RBIL is limited to the lesser of (i) the excess of the tax basis of the asset over its fair market value immediately prior to the Ownership Change or (ii) the NUBIL less the amount of RBILs from prior years ending during the Recognition Period.

 

Under Internal Revenue Code section 382(l)(5), an Ownership Change in bankruptcy will not result in any annual limitation on the debtor’s pre-change NOLs and AMT Credits if the stockholders or qualified creditors of the debtor receive at least 50% of the stock (by vote and value) of the reorganized debtor in the bankruptcy reorganization as a result of being shareholders or creditors of the debtor.  Instead, the debtor’s pre-change NOLs are reduced by the amount of any interest deductions with respect to debt converted into stock in the bankruptcy reorganization that were allowed in the three taxable years preceding the taxable year in which the Ownership Change occurs and in the part of the taxable year prior to and including the effective date of the bankruptcy reorganization.

 

If an Ownership Change pursuant to a bankruptcy plan does not satisfy the requirements of Internal Revenue Code section 382(l)(5), or if a debtor elects not to apply Internal Revenue Code section 382(l)(5), the debtor’s use of its pre-change NOLs and AMT Credits (and certain other tax attributes) may be subject to an annual limitation as determined under Internal Revenue Code section 382(l)(6).  In such case, the amount of the annual limitation generally will be equal to the product of the applicable long-term tax-exempt rate and the value of the loss corporation’s outstanding stock immediately after the bankruptcy reorganization, provided that such value may not exceed the value of the debtor’s gross assets immediately before the Ownership Change, subject to certain adjustments.  As described above, depending on whether the debtor has a NUBIG or NUBIL immediately prior to the Ownership Change, the annual limitation would be increased by any RBIGs, or would also apply to any RBILs, during the Recognition Period.  However, if at the time of an Ownership Change any pre-change NOLs (and certain other tax attributes) of the debtor already are subject to an annual limitation under Internal Revenue Code section 382, those NOLs (and certain other tax attributes) will be subject to the lower of the two annual limitations.

 

If the Ownership Change occurs pursuant to the Plan and, if as expected here, Dynegy elects not to apply Internal Revenue Code section 382(l)(5), the use of pre-change NOLs, AMT Credits and certain other tax attributes is expected to be subject to an annual limitation as determined under Internal Revenue Code section 382(l)(6).  Although the matter is not free from doubt, Dynegy intends to take the position that Internal Revenue Code section 382(l)(6) will apply as a result of the implementation of the Plan.  Dynegy’s determination is not binding on the IRS and if the IRS were to successfully challenge this determination, Dynegy’s use of its pre-change NOLs, AMT Credits and certain other tax attributes will be limited further. Assuming Dynegy’s position is respected and Internal Revenue Code section 382(l)(6) applies, the pre-change NOLs, AMT Credits and certain other tax attributes remaining after reduction for excluded COD Income will be subject to an annual limitation generally equal to the product of

 

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the long-term tax-exempt rate for the month of the Effective Date and the value of Dynegy’s outstanding capital stock immediately after the Effective Date, prior to giving effect to the NUBIG and NUBIL rules described above.  At this time, Dynegy believes that the Dynegy Group has a NUBIG that will exceed the statutorily-defined threshold amount on the Effective Date and, as a result, any limitation determined pursuant to section 382(l)(6) will be increased by any RBIGs during the Recognition Period.  NOLs (and certain other tax attributes) not utilized in a given year due to the annual limitation may be carried forward for use in future years until their expiration dates.  To the extent the annual limitation exceeds the Dynegy Group’s taxable income in a given year, such excess will increase the annual limitation in future taxable years.

 

Dynegy had an Ownership Change in the second quarter of 2012 (the “Initial Ownership Change”).  Such Ownership Change will limit Dynegy’s ability to utilize any federal NOLs and AMT Credits existing at the time of the Initial Ownership Change.  Any NOLs produced after the Initial Ownership Change and prior to the Effective Date will not be subject to limitation pursuant to the Initial Ownership Change but may be subject to limitation as described above pursuant to the Ownership Change on the Effective Date.  In addition, the NOLs and AMT Credits existing at the time of the Initial Ownership Change also would be subject to limitation pursuant to the Ownership Change occurring on the Effective Date.  However, because the limitation that will apply as a result of the Ownership Change on the Effective Date is expected to be a higher dollar amount than the limitation that will apply to these NOLs and AMT Credits as a result of the Initial Ownership Change, it is not expected that the Ownership Change on the Effective Date will result in additional limitations on the use of the NOLs and AMT Credits existing at the time of the Initial Ownership Change.

 

4.                                       Accrued Interest

 

To the extent that the consideration issued to holders of Allowed General Unsecured Claims and Allowed Subordinated Notes Claims pursuant to the Plan is attributable to accrued but unpaid interest, such amount should be allowable as an interest deduction, but only to the extent that such amount has not been previously deducted.  No COD Income from the discharge of any accrued but unpaid interest pursuant to the Plan should be realized to the extent that the payment of such interest would have given rise to a deduction to DH.

 

5.                                       Federal Alternative Minimum Tax

 

In general, a federal alternative minimum tax (“AMT”) is imposed on a corporation’s alternative minimum taxable income (“AMTI”) at a rate of 20% to the extent that such tax exceeds the corporation’s regular federal income tax for the year.  A corporation’s AMTI generally is equal to its regular taxable income with certain adjustments.  In computing AMTI, certain tax deductions and other beneficial allowances are modified or eliminated.  In particular, even though a corporation otherwise might be able to offset all of its taxable income for regular federal income tax purposes by applying NOL carryforwards, only 90% of the corporation’s AMTI may be offset by available NOL carryforwards (as computed for AMT purposes).  Accordingly, usage of the Dynegy Group’s NOLs may be subject to limitations for AMT purposes in addition to any other limitations that may apply.

 

In addition, if a corporation undergoes an Ownership Change and has a NUBIL on the Ownership Change date, its aggregate tax basis in its assets may be reduced for certain AMT

 

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purposes to reflect the fair market value of the assets on the Ownership Change date.  Accordingly, if the Dynegy Group has a NUBIL on the Effective Date, for AMT purposes the tax benefits attributable to basis in assets may be reduced.

 

A corporation that pays AMT generally is later allowed a nonrefundable credit (equal to a portion of its prior year AMT liability) against its regular federal income tax liability in future taxable years when it is no longer subject to the AMT.

 

6.                                       Reorganization Treatment of Merger of DH and Dynegy

 

Pursuant to the Plan, DH will merge with and into Dynegy. Although not free from doubt, the Merger should qualify as, and Dynegy intends to take the position that such Merger qualifies as, a Reorganization for U.S. federal income tax purposes. As a Reorganization, there generally would be no gain or loss recognized by Dynegy or DH as a result of the transfer of the DH assets to Dynegy as the Surviving Entity pursuant to the Merger.  Dynegy expects to recognize a loss with respect to its DH stock as a result of the Merger, although the amount and character of this loss have not been determined.

 

In the event the Merger does not qualify as a Reorganization, DH will recognize gain or loss equal to the difference between each of its asset’s fair market values and such asset’s adjusted tax basis.

 

7.                                       Tax Consequences to Dynegy on the issuance of the Reorganized Dynegy Common Stock and Warrants

 

No gain or loss will be recognized for U.S. federal income tax purposes by Dynegy on the issuance of the Reorganized Dynegy Common Stock and Warrants and the cancellation of outstanding Dynegy capital stock.

 

F.                                      Taxation of Reorganized Dynegy Common Stock

 

1.                                 U.S. Holders

 

a.                                       Distributions

 

In general, distributions with respect to the Reorganized Dynegy Common Stock will be taxable as dividend income when paid to the extent of Dynegy’s current and accumulated earnings and profits as determined for U.S. federal income tax purposes.  To the extent that the amount of any distribution exceeds Dynegy’s earnings and profits with respect to such distribution, the excess will be applied against and will reduce a U.S. Holder’s adjusted tax basis in its Reorganized Dynegy Common Stock (but not below zero).  Any remaining excess will be treated as gain or loss from the sale or exchange of Reorganized Dynegy Common Stock, with the consequences discussed below under the heading “Sale or Other Taxable Disposition of Reorganized Dynegy Common Stock.”

 

Dividends to a non-corporate U.S. Holder in tax years beginning before January 1, 2013 will qualify for taxation at special rates if the non-corporate U.S. Holder meets certain holding

 

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period and other applicable requirements. Non-corporate holders should consult their own tax advisors regarding the applicability of such lower rates under their particular factual situation.

 

Dividends to a corporate shareholder generally will qualify for the 70% dividends received deduction that is available to corporate shareholders that own less than 20% of the voting power or value of the outstanding stock of the distributing corporation.  A corporate shareholder holding 20% or more of the distributing corporation may be eligible for a dividend received deduction equal to 80%.  No assurance can be given that Dynegy will have sufficient earnings and profits (as determined for U.S. federal income tax purposes) to cause distributions to be taxed as dividends and therefore eligible for the dividends received deduction.  Dividend income that is not subject to regular U.S. federal income tax as a consequence of the dividends received deduction may be subject to the U.S. federal alternative minimum tax.

 

The dividends received deduction is only available if certain holding period and taxable income requirements are satisfied.  The length of time that a shareholder has held stock is reduced for any period during which the shareholder’s risk of loss with respect to the stock is diminished by reason of the existence of certain options, contracts to sell, short sales, or similar transactions.  In addition, to the extent that a corporation incurs indebtedness that is directly attributable to an investment in the stock on which the dividend is paid, all or a portion of the dividends received deduction may be disallowed.  Finally, the tax consequences of the receipt of a dividend by a corporate shareholder may be different if the dividend were treated as an “extraordinary dividend” under applicable rules.

 

b.                                      Sale or Other Taxable Disposition of Reorganized Dynegy Common Stock

 

Any gain or loss recognized by a U.S. Holder on the sale, exchange, or other taxable disposition of the Reorganized Dynegy Common Stock generally should be capital gain or loss in an amount equal to the difference, if any, between (i) the amount realized by such holder and (ii) such holder’s adjusted tax basis in the Reorganized Dynegy Common Stock immediately before the sale, exchange, or other taxable disposition.  Any such capital gain or loss generally should be long-term capital gain or loss if the U.S. Holder’s holding period for its stock is more than one year at that time.  The use of capital losses is subject to limitations.  For a discussion of your holding period in respect of common stock received upon exercising the Warrants, see below under the heading “Taxation of Warrants — U.S. Holders — Exercise of the Warrants.”

 

2.                                 Non-U.S. Holders

 

a.                                       Distributions

 

Distributions received by a Non-U.S. Holder in respect of Reorganized Dynegy Common Stock, to the extent considered dividends for U.S. federal income tax purposes (including deemed dividends on Warrants described below under “Taxation of Warrants — U.S. Holders — Adjustments under the Warrants”), generally will be subject to U.S. federal withholding tax at a 30% rate, or a lower rate prescribed by an applicable income tax treaty, unless such distributions are effectively connected with a trade or business carried on by the Non-U.S. Holder within the United States and, if an income tax treaty applies, are attributable to a permanent establishment maintained by the Non-U.S. Holder within the United States.  For purposes of obtaining a

 

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reduced rate of withholding under an income tax treaty, a Non-U.S. Holder will be required to provide certain information concerning such holder’s country of residence and entitlement to income tax treaty benefits.  A Non-U.S. Holder that is eligible for a reduced rate of U.S. federal withholding tax pursuant to an income tax treaty may obtain a refund of any excess amounts currently withheld by timely filing an appropriate claim for refund.

 

Dividends effectively connected with a U.S. trade or business and, if a treaty applies, attributable to a U.S. permanent establishment, generally will not be subject to the 30% U.S. withholding tax provided that the Non-U.S. Holder provides appropriate certifications (currently IRS Form W-8ECI) to Dynegy or Dynegy’s paying agent.  Such effectively connected income instead will be subject to U.S. federal income tax on a net income basis in the same manner as if the Non-U.S. Holder were a resident of the United States.  In addition, if such holder is a foreign corporation, such effectively connected income may be subject to a branch profits tax equal to 30% (or such lower rate as specified by an applicable income tax treaty) of its effectively connected earnings and profits for the taxable year, subject to certain adjustments.

 

b.                                      Sale or Other Taxable Disposition of Reorganized Dynegy Common Stock

 

A Non-U.S. Holder generally will not be subject to U.S. federal income or withholding tax on gain realized on the sale or other taxable disposition of Reorganized Dynegy Common Stock unless:

 

·                                          the gain is “effectively connected” with the conduct of such holder’s trade or business in the United States, and the gain is attributable to a permanent establishment maintained by such holder in the United States if that is required by an applicable income tax treaty as a condition for subjecting such holder to United States taxation on a net income basis,

 

·                                          such holder is an individual that has been present in the United States for 183 or more days in the taxable year of the sale and certain other conditions exist, or

 

·                                          Dynegy is or has been a “United States real property holding corporation” for federal income tax purposes.

 

Under certain circumstances, corporate Non-U.S. Holders also may be subject to an additional “branch profits tax” at 30% rate (or lower if you are eligible for the benefits of an income tax treaty that provides for a lower rate) to the extent of any “effectively connected” gains recognized. Dynegy has not been, is not and does not anticipate becoming a United States real property holding corporation for U.S. federal income tax purposes.

 

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G.                                    Taxation of Warrants

 

1.                                 U.S. Holders

 

a.                                       Exercise of Warrants for cash

 

A U.S. Holder should not recognize gain or loss upon the receipt of Reorganized Dynegy Common Stock by exercising Warrants for cash, except to the extent such holder receives cash in lieu of a fractional share of Reorganized Dynegy Common Stock. In such case, a U.S. Holder generally will be treated as if it received the fractional share and then received such cash in redemption of such fractional share. Such redemption generally will result in capital gain or loss equal to the difference between the amount of cash received and a U.S. Holder’s adjusted federal income tax basis in the Reorganized Dynegy Common Stock that is allocable to the fractional shares. A U.S. Holder’s tax basis in the Reorganized Dynegy Common Stock received upon exercising a Warrant (including any basis allocable to a fractional share) generally will equal the aggregate adjusted tax basis in all Warrants exercised. A U.S. Holder’s tax basis in a fractional share will be determined by allocating its tax basis in the Reorganized Dynegy Common Stock between the Reorganized Dynegy Common Stock received upon exercise and the fractional share, in accordance with their respective fair market values at the time of exercise. The holding period of Reorganized Dynegy Common Stock acquired upon the exercise of the Warrants should commence upon the date of exercise (or possibly on the day following the date the warrant is exercised).

 

b.                                      Cashless exercise of Warrants

 

Although it is not free from doubt, it is expected that the exercise of the Warrants on a cashless basis as described in the Warrant Agreement should be treated as exercising a Warrant with an exercise price of zero to receive a variable number of shares. Under such characterization, U.S. Holders exercising Warrants on a cashless basis, should recognize no gain or loss, except to the extent cash is received in lieu of a fractional share of Reorganized Dynegy Common Stock. In such case, a U.S. Holder generally will be treated as if it had received the fractional share and then received such cash in redemption of such fractional share. Such redemption generally will result in capital gain or loss equal to the difference between the amount of cash received and such holder’s adjusted federal income tax basis in Reorganized Dynegy Common Stock that is allocable to the fractional shares. A U.S. Holder’s tax basis in the Reorganized Dynegy Common Stock received upon exercise of a Warrant (including any basis allocable to a fractional share) generally will equal the aggregate adjusted tax basis in all the Warrants exercised. A U.S. Holder’s tax basis in a fractional share will be determined by allocating its tax basis in the Reorganized Dynegy Common Stock between the Reorganized Dynegy Common Stock received upon exercise and the fractional share, in accordance with their respective fair market values at the time of exercise. The holding period of Reorganized Dynegy Common Stock acquired upon the exercise of the Warrants should commence upon the date of exercise (or possibly on the day following the date the Warrant is exercised).

 

However, other characterizations are possible. For instance, the exercise of the Warrants could also be characterized as a recapitalization for U.S. federal income tax purposes. Under such characterization, the tax consequences to a U.S. Holder who exercises the Warrants generally will be the same as described above, except that the holding period of Reorganized

 

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Dynegy Common Stock received upon the exercise of a Warrant will include such holder’s holding period of the Warrants.

 

Alternatively, the IRS could take the position that a U.S. Holder is treated as selling a portion of the Warrants or underlying Reorganized Dynegy Common Stock for cash that is used to pay the exercise price for the Warrant, and the amount of gain or loss will be the difference between that exercise price and the holder’s basis attributable to the Warrants or Reorganized Dynegy Common Stock deemed to have been sold. If a U.S. Holder is treated as selling Warrants, the holder will have long term capital gain or loss if the U.S. Holder’s holding period with respect of the Warrants is more than one year. If a U.S. Holder is treated as selling Reorganized Dynegy Common Stock, such holder will have short term capital gain or loss. In either case, a U.S. holder of a Warrant will also recognize gain or loss in respect of the cash received in lieu of a fractional share of Reorganized Dynegy Common Stock in an amount equal to the difference between the amount of cash received and the portion of the holder’s tax basis attributable to such fractional share.

 

Any gain or loss will be capital gain or loss and will be taxable in the same manner as described below under the heading “Sale of Warrants.”

 

U.S. Holders are urged to consult their tax advisors concerning these and other possible characterizations of the cashless exercise of such holder’s Warrants.

 

c.                                       Sale of Warrants

 

In general, U.S. Holders will recognize gain or loss upon the sale of a Warrant in an amount equal to the difference between the amount realized on the sale and such holder’s adjusted tax basis in such Warrant.  A U.S. Holder’s initial tax basis in a Warrant will equal that portion of such holder’s adjusted tax basis in the outstanding Dynegy capital stock it held previously that has been allocated to such Warrant (as described above under the heading “Consequences to Holders of Dynegy Equity Interests Upon Receipt of the Dynegy Administrative Claim”). Gain or loss attributable to the sale of a Warrant generally will be capital gain or loss. Such capital gain or loss will generally be long-term if the U.S. Holder’s holding period in respect of such Warrant is more than one year.

 

d.                                      Expiration of Warrants

 

Upon the expiration of the Warrants, a U.S. Holder will recognize a loss equal to the adjusted tax basis of the Warrants. Such loss generally will be a capital loss and will be a long-term capital loss if the Warrant has been held for more than one year on the date of expiration.

 

e.                                       Adjustments under the Warrants

 

Pursuant to the terms of the Warrants, the exercise price at which the Reorganized Dynegy Common Stock may be purchased and/or the number of shares of Reorganized Dynegy Common Stock that may be purchased will be subject to adjustment from time to time upon the occurrence of certain events.  Under section 305 of the Internal Revenue Code, a change in conversion ratio or any transaction having a similar effect on the interest of a Warrant holder may be treated as a distribution with respect to any holder of Warrants whose proportionate

 

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interest in Dynegy’s earnings and profits is increased by such change or transaction. Thus, under certain circumstances, which may or may not occur, such an adjustment pursuant to the terms of the Warrants may be treated as a taxable distribution to the Warrant holder to the extent of Dynegy’s current or accumulated earnings and profits, without regard to whether such Warrant holder receives any cash or other property. In particular, an adjustment that occurs as a result of a cash distribution to the holders of Reorganized Dynegy Common Stock will be treated as such a taxable distribution. In the event of such a taxable distribution, a holder’s basis in its Warrants will be increased by an amount equal to the deemed taxable distribution.

 

The rules with respect to adjustments are complex and U.S. Holders of Warrants should consult their own tax advisors in the event of an adjustment.

 

2.                                 Non-U.S. Holders

 

A Non-U.S. Holder will not be subject to U.S. federal income tax on gain recognized on the sale or other disposition or upon the exercise of such holder’s Warrants unless:

 

·                                          the gain is “effectively connected” with the conduct of such holder’s trade or business in the United States, and the gain is attributable to a permanent establishment maintained by such holder in the United States if that is required by an applicable income tax treaty as a condition for subjecting such holder to United States taxation on a net income basis,

 

·                                          such holder is an individual that has been present in the United States for 183 or more days in the taxable year of the sale and certain other conditions exist, or

 

·                                          Dynegy is or has been a “United States real property holding corporation” for federal income tax purposes.

 

Under certain circumstances, corporate Non-U.S. Holders also may be subject to an additional “branch profits tax” at 30% rate (or lower if you are eligible for the benefits of an income tax treaty that provides for a lower rate) to the extent of any “effectively connected” gains recognized. Dynegy has not been, is not and does not anticipate becoming a United States real property holding corporation for U.S. federal income tax purposes.

 

H.                                   Information Reporting and Backup Withholding

 

Taxable exchanges pursuant to the Plan, payments of dividends (actual or constructive) on Reorganized Dynegy Common Stock (or associated with adjustments under the Warrants), and proceeds from the disposition of Reorganized Dynegy Common Stock paid to a U.S. Holder generally will be subject to information reporting requirements.  In addition, a U.S. Holder may be subject to backup withholding at the applicable rate with respect to such payments that the U.S. Holder receives on or with respect to Reorganized Dynegy Common Stock unless such U.S. Holder (i) comes within certain exempt categories and, when required, demonstrates this fact to Dynegy or Dynegy’s paying agent, or (ii) provides its correct taxpayer identification number on an IRS Form W-9 (or suitable substitute form to Dynegy or Dynegy’s paying agent), certifies under penalties of perjury that it is not currently subject to backup withholding and otherwise complies with applicable requirements of the backup withholding rules.

 

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A Non-U.S. Holder generally will not be subject to information reporting or backup withholding with respect to the receipt of Reorganized Dynegy Common Stock for Allowed General Unsecured Claims exchanged pursuant to the Plan, payments of dividends on Reorganized Dynegy Common Stock (actual or constructive), and proceeds from the disposition of Reorganized Dynegy Common Stock paid to a Non-U.S. Holder, if it certifies its nonresident status.  In general, a Non-U.S. Holder may claim an exemption from information reporting and backup withholding by properly completing and submitting to Dynegy or Dynegy’s paying agent the applicable IRS Form W-8 signed under penalties of perjury and attesting to the status of such Non-U.S. Holder as a non-U.S. person.  Copies of the information returns may be made available to the tax authorities in the country in which the Non-U.S. Holder is a resident under the provisions of an applicable income tax treaty or similar information exchange agreement between the United States and such foreign jurisdiction.

 

Holders generally will be entitled to credit any amounts withheld under the backup withholding rules against their U.S. federal income tax liability provided the required information is furnished to the IRS in a timely manner.

 

XVI.

 

ALTERNATIVES TO CONFIRMATION AND
CONSUMMATION OF THE PLAN

 

The Plan Proponents have evaluated numerous alternatives to the Plan.  After studying these alternatives, the Plan Proponents have concluded that the Plan is the best alternative and will maximize recoveries to holders of Claims.  The following discussion provides a summary of the analysis of the Plan Proponents supporting their conclusion that a liquidation of DH or the Surviving Entity or an alternative plan of reorganization for DH will not provide higher value to holders of Claims and Equity Interests.

 

A.                                    Liquidation Under Chapter 7 of the Bankruptcy Code

 

If no plan of reorganization can be confirmed, the Chapter 11 Case of DH or the Surviving Entity may be converted to a case under chapter 7, in which event a trustee would be elected or appointed to liquidate the properties and interests in property for distribution to creditors in accordance with the priorities established by the Bankruptcy Code.  The Plan Proponents believe that liquidation under chapter 7 would result in smaller distributions being made to holders of impaired Claims than those provided for under the Plan because of, among other things, (i) the increased costs and expenses of a liquidation under chapter 7 arising from fees payable to a trustee for bankruptcy and professional advisors to such trustee; (ii) the erosion in value of assets in the context of the expeditious liquidation required under chapter 7 and the “forced sale” environment in which such a liquidation would likely occur; (iii) the adverse effects on the salability of business segments as a result of the likely departure of key employees and the loss of customers; and (iv) potential increases in claims which would have to be satisfied on a priority basis or on parity with creditors in the Chapter 11 Case of DH.  Accordingly, the Plan Proponents have determined that confirmation of the Plan will provide each holder of an impaired Claim with a greater recovery than it would receive pursuant to liquidation of DH or

 

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the Surviving Entity under chapter 7 and that a liquidation of DH or the Surviving Entity under chapter 7 would not result in any recovery for the holders of Equity Interests.

 

A discussion of the effects that a chapter 7 liquidation would have on the holders of Claims and Equity Interests is set out in the Liquidation Analysis, attached as Exhibit “E” hereto.

 

B.                                    Alternative Plans of Reorganization

 

If the Plan is not confirmed, any other party in interest could undertake to formulate a different plan of reorganization.  Such a plan of reorganization might involve a reorganization and continuation of the business of DH, the sale of DH as a going concern or an orderly liquidation of the properties and interests in property of DH.  With respect to an alternative plan of reorganization, the Plan Proponents have examined various other alternatives in connection with the process involved in the formulation and development of the Plan.  The Plan Proponents believe that the Plan, as described herein, enables holders of Claims and Equity Interests to realize the best recoveries under the present circumstances.  In a liquidation of DH under chapter 11, DH’s properties and interests in property likely would be sold in a more orderly fashion and over a more extended period of time than in a liquidation under chapter 7, probably resulting in marginally greater recoveries.  Further, if a trustee were not appointed, since one is not required in a chapter 11 case, the expenses for professional fees would most likely be lower in a chapter 11 liquidation than in a chapter 7 case.  However, although preferable to a chapter 7 liquidation, the Plan Proponents believe that a liquidation under chapter 11 for DH is a much less attractive alternative to the Plan because the recovery realized by holders of Allowed Claims and Equity Interests under the Plan is likely to be greater than their recovery under a chapter 11 liquidation.

 

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XVII.

 

CONCLUSION

 

The Plan Proponents believe that the Plan is in the best interest of all holders of Claims, and urge all holders of impaired Claims entitled to vote on the Plan to vote to accept the Plan and to evidence such acceptance by returning their ballots in accordance with the instructions accompanying this Disclosure Statement.

 

Dated:             June 18, 2012

 

 

Respectfully submitted,

 

 

 

DYNEGY HOLDINGS, LLC

 

 

 

By:

/s/ David Hershberg

 

 

Name: David Hershberg

 

 

Title: Independent Manager

 

 

 

 

 

DYNEGY INC.

 

 

 

By:

/s/ Robert C. Flexon

 

 

Name: Robert C. Flexon

 

 

Title: President and Chief Executive Officer

 

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SCHEDULE 1

 

LIST OF OTHER DEFINED TERMS(1)

 

Adversary Proceeding

60

AICPA

45

Allocated Facilities Sale Proceeds

10

Alternative Plan

43

Amended LLC Agreement

42

Amended Stipulated Rejection Order

22

AMT

150

AMT Credits

146

AMTI

150

ARI

37

Assignment

24

Bankruptcy Court

1

Bankruptcy Exception

147

Bankruptcy Rules

3

Bar Date

75

Bar Date Order

75

Board

35

Borrower Debtors

53

Business License Fees

52

Central Hudson

50

Chevron

19

Claims Agent

4

Claren Joinder

64

Claren Road

64

Claren Trustee Motion

64

Claren Trustee Motions

64

Clearinghouse

19

Closing Date

29

CoalCo Borrower Obligations

27

CoalCo Credit Facility

24

CoalCo Guarantees

27

CoalCo Guarantors

27

COD Income

147

Company

17

Confirmation Hearing

4

Consent Decree

125

Consenting Lease Certificate Holders

2

Consenting Senior Noteholders

1

Consenting Subordinated Noteholders

2

CQS

59

CQS Joinder

64

Credit Agreement

24

Credit Suisse Cayman

28

Creditors’ Committee

1

Danskammer Facility

20

Danskammer Owner Lessor

20

DCH Membership Interests

24

Debtor Lessees

29

Debtors

6

DH

1

DH Note

24

Disclosure Statement Order

1

DPM

19

Dynegy

1

Dynegy Administrative Claim

9

Dynegy CoalCo

23

Dynegy Danskammer

20

Dynegy GasCo

23

Dynegy Group

146

Dynegy Roseton

20

EMAs

52

Enterprise Value

47

EPA

21

Epiq

4

Equity Consideration

67

Examiner

63

Examiner Motion

63

Examiner Order

63

Examiner Report Response

64

Examiner’s Report

64

Exchange Act

5

Exclusive Filing Period

7

 


(1)  Certain terms listed on this Schedule 1 may also appear as defined terms in Exhibit “A” to the Plan.  To the extent there is a conflict between how such terms are defined in this Disclosure Statement and how such terms are defined in the Plan, the Plan shall control.

 

1



 

Exclusive Solicitation Period

7

Exclusivity Motion

75

Facilities

57

Facilities Sale

10

Facility Leases

30

February 3, 2012 8-K

32

FERC

21

Forward-Looking Statements

46

FPA

21

FTI Retention Motion

59

GasCo Borrower Obligations

26

GasCo Collateral

26

GasCo Credit Facility

23

GasCo Guarantees

26

GasCo Guarantors

26

Hedging/Cash Management Arrangements

26

Houlihan

66

HSR Act

119

Hudson Power

20

Independent Approval Matters

42

Independent Manager

42

Initial Ownership Change

150

Insurance Policies

52

Intercompany Credit Facility

53

Intercompany Credit Facility Motion

53

Intercompany Credit Facility Order

54

Intercompany Receivable

32

Interim Compensation Motion

60

Lazard

47

Lease Certificates

30

Lease Documents

21

Lease Guarantees

31

Lease Indentures

30

Lease Trustee

1

Lease Trustee Claims

69

Lease Trustee Litigation

31

Leased Facilities

21

Lessor Notes

30

Lessor Recovery Cap

57

Letter of Credit Agreement

28

Letter of Credit Facility

28

Liquidation Analysis

112

Mediation

9

Membership Interest Purchase Agreement

24

Merger

8

Merger Effective Time

10

Motion to Dismiss

61

Motion to Reject

22

MW

18

New Credit Facilities

24

NGC

19

NGC Trust

29

NGC Trust Capital Income Securities

29

NOLs

146

Noteholder Litigation

31

Noteholder Restructuring Support Agreement

33

November 2011 Restructuring Support Agreement

33

NRG Energy

37

NUBIG

148

NUBIL

148

NYISO

21

NYPSC

21

OID

143

Ordinary Course Professionals

59

Ordinary Course Professionals Retention Motion

59

Original Consenting Noteholders

33

Original Plan Support Agreement

66

Original Settlement Agreement

65

Original Settlement Parties

65

Owner Lessors

20

Ownership Change

148

Plan

1

Plan Consideration

141

Plan Proponents

1

Plan Securities

137

Plan Support Agreement

9

Prepetition Lawsuits

31

Projection Period

44

Projections

44

PSEG

20

PSEG Entities

2

PSEG Litigation

31

PSEG Settlement

62

Qualified Marketmaker

75

RBIGs

148

RBILs

149

RCM

2

Recognition Period

148

 

2



 

Regulatory Authorizations

119

Rejection Orders

22

Reorganization

141

Reorganized Dynegy Common Stock

10

Restricted Holders

138

Roseton Facility

21

Roseton Owner Lessor

20

Sales Taxes

52

SEC

3

Second Amended Plan

9

Senior Notes Indenture

28

Series A SKIS

29

Series A Subordinated Notes

29

Settlement Agreement

9

Settlement Approval Motion

66

Settlement Effective Date

25

Settlement Order

66

Settlement Parties

9

Settling Claimant Fee Recipients

70

Settling Claimants

68

Sidley

58

Sidley Retention Motion

58

Silsby

32

Solicitation Agent

4

Stipulated Rejection Order

22

Subordinated Notes

29

Subordinated Notes Indenture Trustee

65

Subpoenas

66

Supporting Creditors

9

TIA

62

Transfer

74

Transferees

56

Treasury Regulations

140

U.S. GAAP

45

U.S. Holder

140

Undertaking Agreement

24

United States Trustee

58

Use Taxes

52

UST Trustee Motion

64

Utility Providers

50

Utility Services

50

Voting Deadline

2

W&C

58

W&C Retention Motion

58

Warrants

10

YCST

44

Young Conaway Retention Application

59

 

3



 

*EXHIBIT “A”

 

PLAN

 


*Included as Exhibit 99.1 to the Current Report on Form 8-K filed June 19, 2012.

 



 

*EXHIBIT “B”

 

DISCLOSURE STATEMENT ORDER

 

[to be filed separately with the Bankruptcy Court]

 


*Exhibit B is not included in the Current Report on Form 8-K filed on June 19, 2012, Exhibit B will be filed with the Bankruptcy Court at a later date not yet determined.

 



 

*EXHIBIT “C”

 

SELECTED FINANCIAL INFORMATION

 


*Exhibit C filed as Form 10-Q of Dynegy Inc. on May 10, 2012.

 



 

EXHIBIT “D”

 

PROJECTIONS

 

These notes should be read in conjunction with the Plan and the Disclosure Statement in their entirety. Capitalized terms not defined in these notes shall have the meanings ascribed to them in the Plan or the Disclosure Statement, as applicable. Attached are the consolidated projected financial results (“Projections”) for Dynegy for the four-year period from 2012 through 2015 (the “Projection Period”).

 

THE PROJECTIONS HAVE BEEN PREPARED BY DYNEGY’S MANAGEMENT. SUCH PROJECTIONS WERE NOT PREPARED TO COMPLY WITH THE GUIDELINES FOR PROSPECTIVE FINANCIAL STATEMENTS PUBLISHED BY THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS (“AICPA”), UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPALS (“U.S. GAAP”), OR THE RULES AND REGULATIONS OF THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION. IN PREPARING THE PROJECTIONS, DYNEGY’S MANAGEMENT RELIED UPON THE ACCURACY AND COMPLETENESS OF FINANCIAL AND OTHER INFORMATION FURNISHED BY THIRD PARTIES, AS WELL AS PUBLICLY-AVAILABLE INFORMATION, AND PORTIONS OF THE INFORMATION HEREIN MAY BE BASED UPON CERTAIN STATEMENTS, ESTIMATES, ASSUMPTIONS AND FORECASTS PROVIDED BY DYNEGY AND THIRD PARTIES WITH RESPECT TO DYNEGY’S ANTICIPATED FUTURE PERFORMANCE. DYNEGY’S MANAGEMENT DID NOT ATTEMPT INDEPENDENTLY TO AUDIT OR VERIFY SUCH INFORMATION. DYNEGY’S MANAGEMENT DID NOT CONDUCT AN INDEPENDENT INVESTIGATION INTO ANY OF THE LEGAL, TAX, OR ACCOUNTING MATTERS AFFECTING THE PROJECTIONS AND, THEREFORE, DOES NOT MAKE ANY REPRESENTATION AS TO THEIR POTENTIAL IMPACT ON DYNEGY FROM A FINANCIAL POINT OF VIEW. FURTHER, DYNEGY’S INDEPENDENT ACCOUNTANTS HAVE NEITHER EXAMINED NOR COMPILED THE ACCOMPANYING ACTUAL RESULTS AND PROJECTIONS AND, ACCORDINGLY, DO NOT EXPRESS AN OPINION OR ANY OTHER FORM OF ASSURANCE WITH RESPECT TO THE PROJECTIONS, ASSUME NO RESPONSIBILITY FOR THE PROJECTIONS, AND DISCLAIM ANY ASSOCIATION WITH THE PROJECTIONS. AS A MATTER OF COURSE, NEITHER DYNEGY, NOR DH, PUBLISH THEIR BUSINESS PLANS AND STRATEGIES OR PROJECTIONS OF THEIR ANTICIPATED FINANCIAL POSITION OR RESULTS OF OPERATIONS. ACCORDINGLY, THE PLAN PROPONENTS DO NOT INTEND, AND DISCLAIM ANY OBLIGATION, TO: (1) FURNISH UPDATED BUSINESS PLANS OR PROJECTIONS TO HOLDERS OF CLAIMS AGAINST OR EQUITY INTERESTS IN DH PRIOR TO THE EFFECTIVE DATE, OR TO HOLDERS OF SECURITIES OF DH OR DYNEGY, OR ANY OTHER PARTY AFTER THE EFFECTIVE DATE; (2) INCLUDE SUCH UPDATED INFORMATION IN ANY DOCUMENTS THAT MAY BE REQUIRED TO BE FILED WITH THE SEC; OR (3) OTHERWISE MAKE SUCH UPDATED INFORMATION PUBLICLY AVAILABLE. HOWEVER, FROM TIME TO TIME, DYNEGY MAY PREPARE UPDATED PROJECTIONS IN CONNECTION WITH PURSUING FINANCING, CREDIT RATINGS AND OTHER PURPOSES. SUCH PROJECTIONS MAY DIFFER MATERIALLY FROM

 



 

PRIVILEGED & CONFIDENTIAL
ATTORNEY WORK PRODUCT

 

THE PROJECTIONS PRESENTED HEREIN.

 

THE PROJECTIONS ARE PRESENTED SOLELY FOR THE PURPOSE OF PROVIDING “ADEQUATE INFORMATION” UNDER SECTION 1125 OF THE BANKRUPTCY CODE TO ENABLE THE HOLDERS OF CLAIMS AGAINST THE SURVIVING ENTITY ENTITLED TO VOTE UNDER THE PLAN TO MAKE AN INFORMED JUDGMENT ABOUT THE PLAN AND SHOULD NOT BE USED OR RELIED UPON FOR ANY OTHER PURPOSE, INCLUDING THE PURCHASE OR SALE OF SECURITIES OF, OR CLAIMS AGAINST OR EQUITY INTERESTS IN, THE SURVIVING ENTITY, DYNEGY, THE DEBTORS OR ANY AFFILIATES.

 

THE PROJECTIONS CONTAIN CERTAIN STATEMENTS THAT ARE “FORWARD-LOOKING STATEMENTS” WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. THESE STATEMENTS ARE SUBJECT TO A NUMBER OF ASSUMPTIONS, RISKS, AND UNCERTAINTIES, MANY OF WHICH ARE AND WILL BE BEYOND THE CONTROL OF THE PLAN PROPONENTS, INCLUDING THE IMPLEMENTATION OF THE PLAN, THE CONTINUING AVAILABILITY OF SUFFICIENT BORROWING CAPACITY OR OTHER FINANCING TO FUND OPERATIONS, ACHIEVING OPERATING EFFICIENCIES, CURRENCY EXCHANGE RATE FLUCTUATIONS, EXISTING AND FUTURE GOVERNMENTAL REGULATIONS AND ACTIONS OF GOVERNMENT BODIES, NATURAL DISASTERS AND UNUSUAL WEATHER CONDITIONS AND OTHER MARKET AND COMPETITIVE CONDITIONS. HOLDERS OF CLAIMS ARE CAUTIONED THAT THE FORWARD-LOOKING STATEMENTS ARE AS OF THE DATE MADE AND ARE NOT GUARANTEES OF FUTURE PERFORMANCE. ACTUAL RESULTS OR DEVELOPMENTS MAY DIFFER MATERIALLY FROM THE EXPECTATIONS EXPRESSED OR IMPLIED IN THE FORWARD-LOOKING STATEMENTS, AND THE PLAN PROPONENTS UNDERTAKE NO OBLIGATION TO UPDATE, MODIFY, CLARIFY OR REVISE ANY SUCH STATEMENTS FOR ANY REASON.

 

THE PROJECTIONS, WHILE PRESENTED WITH NUMERICAL SPECIFICITY, ARE NECESSARILY BASED ON A VARIETY OF ESTIMATES AND ASSUMPTIONS WHICH, THOUGH CONSIDERED REASONABLE BY DYNEGY’S MANAGEMENT, AT THE TIME WHEN MADE, MAY NOT BE REALIZED AND ARE INHERENTLY SUBJECT TO SIGNIFICANT BUSINESS, ECONOMIC, COMPETITIVE, INDUSTRY, REGULATORY, MARKET AND FINANCIAL UNCERTAINTIES AND CONTINGENCIES, MANY OF WHICH ARE AND WILL BE BEYOND DYNEGY’S CONTROL. DYNEGY CAUTIONS THAT NO REPRESENTATIONS CAN BE MADE OR ARE MADE AS TO THE ACCURACY OF THE HISTORICAL FINANCIAL INFORMATION OR THE PROJECTIONS OR TO DYNEGY’S ABILITY TO ACHIEVE THE PROJECTED RESULTS. SOME ASSUMPTIONS INEVITABLY WILL BE INCORRECT. MOREOVER, EVENTS AND CIRCUMSTANCES OCCURRING SUBSEQUENT TO THE DATE ON WHICH THESE PROJECTIONS WERE PREPARED MAY BE DIFFERENT FROM THOSE ASSUMED, OR, ALTERNATIVELY, MAY HAVE BEEN UNANTICIPATED, AND THUS THE OCCURRENCE OF THESE EVENTS MAY AFFECT FINANCIAL RESULTS IN A MATERIALLY ADVERSE OR MATERIALLY BENEFICIAL MANNER. THE PLAN

 

2



 

PROPONENTS DO NOT INTEND AND DO NOT UNDERTAKE ANY OBLIGATION WHATSOEVER TO UPDATE OR OTHERWISE REVISE THE PROJECTIONS (OR ANY ASSUMPTIONS, ESTIMATES OR OTHER INFORMATION CONTAINED THEREIN) TO REFLECT EVENTS OR CIRCUMSTANCES EXISTING OR ARISING AFTER THE DATE THE DISCLOSURE STATEMENT IS INITIALLY FILED OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS. THE PROJECTIONS, THEREFORE, MAY NOT BE RELIED UPON FOR ANY OTHER PURPOSE OR RELIED UPON AS A GUARANTY OR OTHER ASSURANCE OF THE ACTUAL RESULTS THAT WILL OCCUR. IN DECIDING WHETHER TO VOTE TO ACCEPT OR REJECT THE PLAN, HOLDERS OF CLAIMS AGAINST THE SURVIVING ENTITY MUST MAKE THEIR OWN DETERMINATIONS AS TO THE REASONABLENESS OF SUCH ASSUMPTIONS AND THE RELIABILITY OF THE PROJECTIONS.

 

The Projections should be read in conjunction with the assumptions, qualifications and explanations set forth herein and the historical financial information of Dynegy reported on Forms 10-K and 10-Q as filed with the Securities and Exchange Commission, including the notes thereto. The Projections should also be read in conjunction with the Plan and Disclosure Statement.

 

The Projections have been prepared based on the assumption that the Effective Date of the Plan will be September 30, 2012, and assume the successful implementation of the Plan. Although the Plan Proponents presently intend to cause the Effective Date to occur as soon as is practicable following confirmation of the Plan, there can be no assurance as to when the Effective Date will actually occur given the conditions for the Effective Date to occur pursuant to the terms of the Plan.  The Projections were based upon assumptions, qualifications and explanations developed in January 2012 and have not been updated, other than as described below under “Subsequent Factors Affecting the Assumptions.”  For a discussion of certain factors subsequent to January 2012 that could have an impact on the Projections, please see the discussion below under “Q1 2012 Actuals vs. Projections” and “Subsequent Factors Affecting the Assumptions.”

 

The Projections are based on, among other things, the following: (a) current and projected market conditions and (b) confirmation of the Plan.

 

1)             General assumptions

 

a)              Methodology

 

The Projections have been prepared by Dynegy’s management and are based upon Dynegy’s consolidated operating forecast for 2012-2015. The Projections reflect various restructuring initiatives.

 

Dynegy has utilized an average of five natural gas third party curves as the basis for the Projections. This approach has been taken due to inherent volatility in this commodity environment and the different third party views for natural gas.

 

b)              Plan Consummation

 

The Projections assume the Effective Date will occur on September 30, 2012.

 

3



 

c)              Portfolio and Ongoing Business

 

The Projections were prepared based on the assumption that Dynegy and its operating subsidiaries continue to operate throughout the Projection Period with 14 plants in its remaining operating subsidiaries: “CoalCo” and “GasCo”.

 

GasCo represents a natural gas-fired portfolio of merchant and contracted assets, with 6,771 MW in the West, Northeast and Midwest. GasCo consists of 8 plants featuring approximately 65% intermediate dispatch facilities and 35% peaking dispatch facilities. The Projections take into account the decommissioning costs of South Bay. CoalCo represents one of the largest coal-based independent power producers in the United States. The CoalCo portfolio consists of 6 plants, all located in the MISO region, and totaling 3,132 MW.

 

On November 7, 2011, the Debtors filed the Motion to Reject the Facility Leases for the Leased Facilities at the Dynegy Danskammer and Dynegy Roseton plants and, on December 20, 2011 and December 28, 2011, respectively, the Bankruptcy Court entered the Stipulated Rejection Order and Amended Stipulated Rejection Order approving the rejection.  On June 1, 2012, the Bankruptcy Court entered an order approving the Settlement Agreement, pursuant to which the Settlement Parties agreed, among other things, to pursue a sale of the Leased Facilities.  Accordingly, upon completion of such sale process, the Debtors will no longer operate the Leased Facilities. The Projections reflect that Dynegy will not incur the related forecasted costs after the projected Plan Effective Date of September 30, 2012.

 

2)             Operating Assumptions

 

a)              Gross Margin

 

Consolidated gross margin includes gross margin generated by the GasCo and CoalCo businesses.

 

Gross margin estimates are based on the following assumptions:

 

·                  Natural gas priced based on the average of five forecasts from industry participants including banks and energy market analytics companies

 

·                  Power pricing derived from the natural gas curves

 

·                  Capacity pricing based on market quotes and fundamental assumptions

 

·                  Delivered coal cost based on broker quotes and forecasted transportation rate

 

·                  CSAPR program assumed implemented as of January 1, 2013(1)

 

b)              Operating Expenses and General and Administrative Expenses

 

The combined Operating Expenses (“OpEx”) and General and Administrative expenses (“G&A”) for 2012 are forecasted to be approximately $440 million, including nine months (through September 30, 2012) of operations for the Debtors DNE, Hudson Power, Dynegy Danskammer and Dynegy Roseton.

 

Beginning in 2013, combined costs reflect Dynegy’s cost reduction program (“PRIDE”) as described in Dynegy’s third quarter 2011 earnings presentation (November 14, 2011). Projected combined OpEx and G&A rate, excluding DNE, is approximately $370 million. G&A currently allocated to Debtors DNE, Hudson Power, Dynegy Danskammer and Dynegy Roseton will be reallocated to the remaining businesses following the sale and transition of the Leased Facilities. Based on the lease rejection and proposed sale of the Leased Facilities,

 


(1)  The CSAPR program is the Cross-State Air Pollution Rule.

 

4



 

the lease expense has been excluded from the Projections.

 

c)              Adjusted EBITDA

 

Adjusted EBITDA is calculated as gross margin less OpEx and G&A and includes the impact of the settlement of Dynegy’s financial positions as of December 12, 2011. Adjusted EBITDA does not include the contract amortization expense associated with the Independence facility.

 

d)              Capital Expenditures

 

Capital expenditures are forecast based on expected operations as well as existing initiatives to comply with environmental regulations. Environmental expenditures related to CoalCo will be largely completed by the end of 2012.

 

e)              Change in Working Capital

 

Change in working capital primarily reflects ordinary course changes in receivables and payables, the costs of South Bay decommissioning, as well as the cash impact of mark-to-market settlements.

 

f)                Taxes

 

Dynegy has significant existing NOLs and tax attributes.  As a result, the Projections assume that Dynegy will not be a tax payer during the Projection Period.  This assumption is not certain, however, because Dynegy had an “ownership change” for federal income tax purposes in the second quarter of 2012 and, as a result of such ownership change, Dynegy’s use of NOLs and tax attributes existing at the time of the ownership change is limited.  Nevertheless, Dynegy will be able to utilize some of these NOLs and tax attributes to offset COD income at emergence and will be able to utilize other tax attributes (not subject to the limitation) during the Projection Period and thus it is not certain whether this ownership change will cause Dynegy to be a tax payer during the Projection Period.

 

3)             Capital Structure Assumptions

 

a)              Unrestricted and Restricted Cash

 

Consolidated Dynegy, based on an audited balance sheet as of December 31, 2011, had $794 million of unrestricted cash, of which $683 million are outside of CoalCo and GasCo. In addition, it had $842 million of restricted cash related to collateral in various accounts at CoalCo, GasCo and DH, of which $323 million was not utilized for existing letters of credit and cash collateral.

 

b)              CoalCo and GasCo and the Senior Secured Financings

 

CoalCo and GasCo are each ring-fenced, indirect subsidiaries of Dynegy. Their ability to distribute cash to their ultimate parent company is governed by separate GasCo and CoalCo credit facilities (the “GasCo Credit Facility” and the “CoalCo Credit Facility”, together the “New Credit Facilities”), completed on August 5, 2011.

 

The New Credit facilities each bear a Libor+775bps interest rate, with a 150bps Libor floor, and have 0.25% quarterly mandatory amortization that commenced in December 2011. Following their entry into the New Credit Facilities, CoalCo and GasCo have purchased several swap instruments to limit the volatility of their future interest expenses.

 

5



 

In addition to the credit facilities, CoalCo and GasCo have collateralized letter of credit facilities with a $558 million capacity as of December 31, 2011, including a 3% reserve, and several cash collateral accounts.

 

Under the New Credit Facilities, CoalCo and GasCo are permitted to prepay such credit facilities if they elect to reduce their collateral outstanding below the $118 million and $574 million thresholds, respectively. CoalCo and GasCo are forecasted to prepay a portion of the New Credit Facilities in the Projections.

 

CoalCo and GasCo can each distribute annual restricted payments to Dynegy of $90 million and $135 million, respectively, subject to meeting a $50 million minimum cash and cash equivalents test. In the future, such potential cash distributions will depend on the cash generation in each single ring-fenced entity and managerial judgment on future liquidity prospects.

 

As an additional potential source of liquidity, CoalCo and GasCo have the ability under the New Credit Facilities to incur revolving credit facilities of up to $350 million. Such potential revolving facilities are not currently in place and are thus not included in the Projections.

 

c)              Uses of Cash at Emergence

 

Upon emergence, the Projections assume that Dynegy will make a cash payment in the amount of $200 million as provided in the Plan.

 

The Projections also take into account that the Plan Proponents will incur approximately $100 million of transaction costs through the Effective Date of the Plan.

 

4)             Projections

 

DYNEGY CONSOLIDATED FINANCIALS

 

 

 

Q4 2011

 

Q1 2012E

 

Q2 2012E

 

Q3 2012E

 

Q4 2012E

 

2012E

 

2013E

 

2014E

 

2015E

 

Adjusted Gross Margin

 

 

 

$

163.1

 

$

145.4

 

$

239.7

 

$

135.8

 

$

684.1

 

$

829.4

 

$

656.7

 

$

685.2

 

Operating Expense

 

 

 

(84.1

)

(97.0

)

(89.1

)

(73.1

)

(343.3

)

(283.5

)

(279.2

)

(279.5

)

General & Administrative Expense

 

 

 

(25.2

)

(23.7

)

(23.4

)

(23.8

)

(96.1

)

(86.2

)

(86.0

)

(85.9

)

Adjusted EBITDA

 

 

 

$

53.8

 

$

24.7

 

$

127.2

 

$

38.9

 

$

244.6

 

$

459.7

 

$

291.5

 

$

319.8

 

Change in Working Capital

 

 

 

(10.8

)

27.1

 

12.7

 

48.1

 

77.1

 

(10.1

)

(4.1

)

(3.2

)

Capital Expenditures

 

 

 

(47.3

)

(49.6

)

(46.4

)

(84.9

)

(228.2

)

(141.8

)

(127.8

)

(86.0

)

Unlevered Cash Flow

 

 

 

$

(4.4

)

$

2.3

 

$

93.6

 

$

2.2

 

$

93.6

 

$

307.8

 

$

159.7

 

$

230.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

First Lien Facilities Cash Interest Expense

 

 

 

$

(39.4

)

$

(39.3

)

$

(39.2

)

$

(39.1

)

$

(156.9

)

$

(141.4

)

$

(143.7

)

$

(141.0

)

First Lien Facilities Debt Repayment

 

 

 

(4.3

)

(4.3

)

(4.3

)

(169.3

)

(182.1

)

(53.2

)

(57.0

)

(0.4

)

Release of Cash from L/C’s / Cash Collateral

 

 

 

 

 

 

292.1

 

292.1

 

34.5

 

38.7

 

0.4

 

Transaction Costs

 

 

 

(18.8

)

(18.8

)

(62.5

)

 

(100.0

)

 

 

 

Cash Payments to Creditors

 

 

 

 

 

(200.0

)

 

(200.0

)

 

 

 

Change in Unrestricted Cash

 

 

 

$

(66.8

)

$

(60.0

)

$

(212.4

)

$

85.9

 

$

(253.2

)

$

147.7

 

$

(2.3

)

$

89.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrestricted Cash

 

$

794.5

 

$

727.7

 

$

667.7

 

$

455.3

 

$

541.3

 

$

541.3

 

$

688.9

 

$

686.7

 

$

776.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

First Lien Facilities

 

1,695.8

 

1,691.5

 

1,687.3

 

1,683.0

 

1,513.7

 

1,513.7

 

1,460.5

 

1,403.5

 

1,403.1

 

DH Unsecured Notes

 

3,370.3

 

3,370.3

 

3,370.3

 

 

 

 

 

 

 

DH Subordinated Notes

 

200.0

 

200.0

 

200.0

 

 

 

 

 

 

 

Total Debt

 

5,266.1

 

5,261.8

 

5,257.6

 

1,683.0

 

1,513.7

 

1,513.7

 

1,460.5

 

1,403.5

 

1,403.1

 

Net Debt (net of Unrestricted Cash and Unused Restricted Cash)

 

4,148.3

 

4,210.9

 

4,266.6

 

904.4

 

827.4

 

827.4

 

626.5

 

571.8

 

481.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding Restricted Cash for L/C’s / Cash Collateral

 

518.5

 

518.5

 

518.5

 

518.5

 

377.3

 

377.3

 

342.8

 

304.0

 

303.6

 

Unused Collateral Accounts Restricted Cash

 

323.3

 

323.3

 

323.3

 

323.3

 

145.0

 

145.0

 

145.0

 

145.0

 

145.0

 

Total Restricted Cash

 

841.8

 

841.8

 

841.8

 

841.8

 

522.3

 

522.3

 

487.8

 

449.0

 

448.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Natural Gas Price ($/MMBtu)

 

 

 

 

 

 

 

 

 

 

 

$

3.67

 

$

4.30

 

$

4.58

 

$

4.97

 

 

5)             Q1 2012 Actuals vs. Projections

 

The business plan projections are based on a fundamental view of natural gas prices.  The Q1 2012 actual results differ from the Q1 2012 projections shown above.  The variance is

 

6



 

primarily at CoalCo, and is driven mostly by natural gas pricing. Indiana Hub peaks prices averaged $6.34 lower ($29.70 vs. $36.04) and off-peak prices averaged $4.34 lower ($24.33 vs. $28.67) than what was initially forecasted. Also impacting CoalCo, but to a lesser extent, were lower volumes primarily associated with outages at Baldwin.  Other minor effects include basis differentials at both GasCo and CoalCo.

 

6)             Subsequent Factors Affecting the Assumptions

 

The Projections were prepared based upon assumptions, qualifications and explanations developed in January 2012 and have not been updated, except to reflect: 1) inclusion of the Roseton and Danskammer operations for the 3rd quarter 2012; 2) changes based upon the Amended and Restated Settlement Agreement and related Amended and Restated Plan Support Agreement, including eliminating the secured notes, eliminating the debt reserve balance, and decreasing the cash payment to creditors upon emergence; and 3) updated year-end 2011 cash balances.

 

Among other variables, these Projections do not take into account the following:

 

·                  Termination of certain contractual arrangements for the GasCo assets in the West.  Such termination will likely impact the timing and cash flows during the forecast period.  Dynegy is actively seeking other commercial arrangements for the affected units and has been offering the output in the day-ahead market administered by the California Independent System Operator since May 19, 2012.

 

·                  The fact that commodity prices have changed, specifically the price of natural gas. The cost of natural gas is based on the average of five forecasts from industry participants and all such forecasts were made in 2011.

 

·                  The expectation that projected market costs for delivering coal are anticipated to decrease as compared to those on which the projections are based.  Our coal transportation contract will terminate at the end of 2013 and is subject to renegotiation, including possible renegotiation of the remaining terms of the contract.

 

7



 

*EXHIBIT “E”

 

LIQUIDATION ANALYSIS

 

[to be filed separately with the Bankruptcy Court]

 


*Exhibit E is not included in the Current Report on Form 8-K filed on June 19, 2012, Exhibit E will be filed with the Bankruptcy Court at a later date not yet determined.

 



 

EXHIBIT F

VALUATION OF DYNEGY

 

THIS VALUATION IS PRESENTED SOLELY FOR THE PURPOSE OF PROVIDING “ADEQUATE INFORMATION” UNDER SECTION 1125 OF THE BANKRUPTCY CODE TO ENABLE THE HOLDERS OF CLAIMS ENTITLED TO VOTE UNDER THE PLAN TO MAKE AN INFORMED JUDGMENT ABOUT THE PLAN AND SHOULD NOT BE USED OR RELIED UPON FOR ANY OTHER PURPOSE, INCLUDING THE PURCHASE OR SALE OF SECURITIES OF, OR CLAIMS AGAINST OR EQUITY INTERESTS IN, THE SURVIVING ENTITY, DYNEGY, THE DEBTORS OR ANY AFFILIATES.

 

THE VALUATION INFORMATION SET FORTH HEREIN REPRESENTS A HYPOTHETICAL VALUATION OF REORGANIZED DYNEGY, WHICH ASSUMES THAT REORGANIZED DYNEGY WILL CONTINUE AS AN OPERATING BUSINESS IN ACCORDANCE WITH THE PROJECTIONS SET FORTH IN EXHIBIT D TO THE DISCLOSURE STATEMENT. THE ESTIMATED VALUE SET FORTH IN THIS VALUATION DOES NOT PURPORT TO CONSTITUTE AN APPRAISAL OR NECESSARILY REFLECT THE ACTUAL MARKET VALUE THAT MIGHT BE REALIZED THROUGH A SALE OR LIQUIDATION OF THE SURVIVING ENTITY, ITS SECURITIES OR ITS ASSETS, WHICH MAY BE MATERIALLY DIFFERENT THAN THE ESTIMATE SET FORTH IN THIS VALUATION. ACCORDINGLY, SUCH ESTIMATED VALUE IS NOT NECESSARILY INDICATIVE OF THE PRICES AT WHICH ANY SECURITIES OF REORGANIZED DYNEGY MAY TRADE AFTER GIVING EFFECT TO THE TRANSACTIONS SET FORTH IN THE PLAN. ANY SUCH PRICES MAY BE MATERIALLY DIFFERENT THAN INDICATED BY THIS VALUATION.

 

1.             Overview

 

Dynegy has been advised by its financial advisor, Lazard Frères & Co. LLC (“Lazard”), with respect to the estimated going concern value of Dynegy. Lazard undertook this analysis to determine the value available for distribution to holders of Allowed Claims pursuant to the Plan and to analyze the relative recoveries to such holders thereunder. The estimated total value available for distribution to holders of Allowed Claims (the “Enterprise Value”) consists of the estimated value of Dynegy’s operations on a going concern basis and the value of cash on the Assumed Effective Date (defined below). The valuation analysis herein is based on information available as of the date of the Disclosure Statement. The valuation analysis assumes that the effective date of the reorganization takes place on September 30, 2012 (the “Assumed Effective Date”) and is based on projections provided by Dynegy’s management (the Projections”) for 2012 — 2015 (the “Projection Period”).

 

Based on these Projections and solely for purposes of the Plan, Lazard estimates that the Enterprise Value of Dynegy falls within a range from approximately $3,191 million to $4,465 million, with a midpoint estimate of $3,828 million, which consists of the value of Dynegy’s operations on a going concern basis. For purposes of this valuation, Lazard assumes that no material changes that would affect value occur between the date of the Disclosure Statement and the Assumed Effective Date. Lazard’s estimate of Enterprise Value does not constitute an opinion as to fairness from a financial point of view of the consideration to be received under the Plan or of the terms and provisions of the Plan.

 

THE ASSUMED ENTERPRISE VALUE RANGE, AS OF THE ASSUMED EFFECTIVE DATE, REFLECTS WORK PERFORMED BY LAZARD ON THE BASIS OF INFORMATION AVAILABLE TO LAZARD AS OF MAY 2012 AND THE PROJECTIONS PROVIDED BY THE COMPANY. ALTHOUGH SUBSEQUENT DEVELOPMENTS MAY AFFECT LAZARD’S CONCLUSIONS, NEITHER LAZARD, NOR THE PLAN PROPONENTS HAVE ANY OBLIGATION TO UPDATE, REVISE OR REAFFIRM THE ESTIMATED ENTERPRISE VALUE.

 

Lazard assumed that the Projections were reasonably prepared in good faith and on a basis reflecting Dynegy’s most accurate available estimates and judgments as of the date of such Projections as to the future operating and financial performance of Dynegy. Lazard’s estimated Enterprise Value range assumes that Dynegy will achieve its Projections in all material respects, including revenue growth, EBITDA margins, and cash flows as projected. If the

 



 

business performs at levels below those set forth in the Projections, such performance may have a materially negative impact on Enterprise Value.

 

In estimating Dynegy’s Enterprise Value, Lazard: (a) reviewed certain historical financial information of Dynegy for recent years and interim periods; (b) reviewed certain internal financial and operating data of Dynegy; (c) discussed Dynegy’s operations and future prospects with Dynegy’s senior management team; (d) reviewed certain publicly available financial data for, and considered the market value of, public companies that Lazard deemed generally comparable to the operating business of Dynegy; (e) considered certain economic and industry information relevant to the operating businesses; and (f) conducted such other studies, analyses, inquiries and investigations as it deemed appropriate. Although Lazard conducted a review and analysis of Dynegy’s business, operating assets and liabilities, and the Projections, it assumed and relied on the accuracy and completeness of all financial and other information furnished to it by Dynegy’s management as well as publicly available information.

 

In addition, Lazard did not independently verify the Projections in connection with preparing estimates of Enterprise Value, and no independent valuations or appraisals of Dynegy were sought or obtained in connection herewith. Such estimates were developed solely for purposes of the formulation and negotiation of the Plan and the analysis of implied relative recoveries to holders of Allowed Claims thereunder, and to provide “adequate information” pursuant to section 1125 of the Bankruptcy Code.

 

Lazard’s estimated Enterprise Value of Dynegy does not constitute a recommendation to any holder of Allowed Claims as to how such person should vote or otherwise act with respect to the Plan. Lazard has not been asked to and does not express any view as to what the trading value of Dynegy’s securities would be on issuance or at any other time. The estimated Enterprise Value of Dynegy set forth herein does not constitute an opinion as to fairness from a financial point of view to any person of the consideration to be received by such person under the Plan or of the terms and provisions of the Plan.

 

Lazard’s estimate of Enterprise Value reflects the application of standard valuation techniques and does not purport to reflect or constitute appraisals, liquidation values or estimates of the actual market value that may be realized through the sale of any securities to be issued pursuant to the Plan, which may be significantly different than the amounts set forth herein. The value of an operating business is subject to numerous uncertainties and contingencies which are difficult to predict and will fluctuate with changes in factors affecting the financial condition and prospects of such a business. As a result, the estimated Enterprise Value range of Dynegy set forth herein is not necessarily indicative of actual outcomes, which may be significantly more or less favorable than those set forth herein. None of Dynegy, Lazard, or any other person assumes responsibility for any differences between the Enterprise Value range and such actual outcomes. Actual market prices of such securities at issuance will depend upon, among other things, the operating performance of Dynegy, prevailing interest rates, conditions in the financial markets, the anticipated holding period of securities received by holders of Allowed Claims (some of whom may prefer to liquidate their investment rather than hold it on a long-term basis), developments in Dynegy’s industry and economic conditions generally, including gas price trends, and other factors that generally influence the prices of securities.

 

2.                                       Valuation Methodology

 

The following is a brief summary of certain financial analyses performed by Lazard to arrive at its estimated Enterprise Value range for Dynegy. An estimate of Enterprise Value is not entirely mathematical but, rather, involves complex considerations and judgments concerning various factors that could affect the value of an operating business. Lazard performed certain procedures, including each of the financial analyses described below, and reviewed the assumptions on which such analyses were based and other factors, including the Projections, with the senior management team of Dynegy.

 

Lazard’s estimated Enterprise Value is highly dependent on Dynegy’s ability to meet its Projections. Lazard’s valuation analysis must be considered as a whole. Lazard’s estimates of the hypothetical range of Enterprise Values predominately relied upon the sum-of-the-parts Discounted Cash Flow (“DCF”) analysis given the limitations associated with the applicability of the comparable company analysis and the precedent transaction analysis in determining the Enterprise Value of Dynegy for reasons described below.

 

10



 

Sum-of-the-Parts Discounted Cash Flow Analysis

 

Given the corporate structure of Dynegy, the different characteristics of its various assets and other considerations, the Enterprise Value has been estimated through a sum-of-the-parts of various DCF valuations with a valuation date as of the Assumed Effective Date.

 

The DCF analysis is a forward-looking enterprise valuation methodology that estimates the value of an asset or business by calculating the present value of expected future cash flows to be generated by that asset or business. Under this methodology, projected future cash flows are discounted by the business’ weighted average cost of capital (the “Discount Rate”). The Discount Rate reflects the estimated blended rate of return that would be required by debt and equity investors to invest in the business based on its capital structure. The enterprise value of the firm is determined by calculating the present value of Dynegy’s unlevered after-tax free cash flows based on the Projections plus an estimate for the value of the firm beyond the Projection Period known as the terminal value. The terminal value is derived by taking the simple average of applying terminal value multiples to Dynegy’s projected EBITDA and by applying dollar-per-kilowatt multiples to Dynegy’s projected generation capacity; subsequently, the terminal value is discounted back to the Assumed Effective Date, by the Discount Rate.

 

To estimate the Discount Rate, Lazard calculated the cost of equity and the after-tax cost of debt for GasCo and CoalCo, assuming a targeted long-term debt-to-total capitalization ratio based on an assumed range of GasCo and CoalCo pro forma capitalization. Lazard calculated the cost of equity based on the “Capital Asset Pricing Model,” which assumes that the required equity return is a function of the risk-free cost of capital and the correlation of a publicly traded stock’s performance to the return on the broader market. To estimate the cost of debt, Lazard estimated the blended cost of debt of GasCo and CoalCo based on current capital markets conditions and the financing costs for comparable companies with leverage similar to Dynegy’s target capital structure.

 

Although formulaic methods are used to derive the key estimates for the DCF methodology, their application and interpretation still involve complex considerations and judgments concerning potential variances in the projected financial and operating characteristics of Dynegy, which in turn affect its cost of capital and terminal values. Lazard calculated its sum-of-the-parts DCF valuation on a range of Discount Rates of 8.5% – 10.0%. Terminal values were calculated by taking the simple average of an EBITDA multiple (ranging from 4.0x – 10.5x, depending on differences in generation plant characteristics) to the estimated terminal year EBITDA, and a dollar-per-kilowatt multiple (ranging from $75/kW – $950/kW depending on differences in generation plant characteristics) to Dynegy’s generation capacity to obtain the terminal value. Some generation plants were ascribed no terminal value beyond the Projection Period.

 

In applying the above methodology, Lazard utilized detailed Projections for the Projection Period to derive unlevered after-tax free cash flows. Free cash flow includes sources and uses of cash not reflected in the income statement, such as changes in working capital and capital expenditures. For purposes of the sum-of-the-parts DCF, Dynegy was assumed to be a full tax payer at applicable corporate income tax rates. The value of net operating losses, other corporate overhead and hedges were also taken into account and were valued separately from GasCo and CoalCo. These cash flows, along with their associated terminal values, are discounted back to the Assumed Effective Date using the range of Discount Rates described above to arrive at a range of Enterprise Values.

 

THE SUMMARY SET FORTH ABOVE DOES NOT PURPORT TO BE A COMPLETE DESCRIPTION OF THE ANALYSES PERFORMED BY LAZARD AND SHALL BE READ IN CONJUNCTION WITH THE PROJECTIONS IN EXHIBIT D TO THE DISCLOSURE STATEMENT. THE PREPARATION OF A VALUATION ESTIMATE INVOLVES VARIOUS DETERMINATIONS AS TO THE MOST APPROPRIATE AND RELEVANT METHODS OF FINANCIAL ANALYSIS AND THE APPLICATION OF THESE METHODS IN THE PARTICULAR CIRCUMSTANCES AND, THEREFORE, SUCH AN ESTIMATE IS NOT READILY SUITABLE TO SUMMARY DESCRIPTION. IN PERFORMING THESE ANALYSES, LAZARD AND THE PLAN PROPONENTS MADE NUMEROUS ASSUMPTIONS WITH RESPECT TO INDUSTRY PERFORMANCE, BUSINESS AND ECONOMIC CONDITIONS AND OTHER MATTERS. THE ANALYSES PERFORMED BY LAZARD ARE NOT NECESSARILY INDICATIVE OF ACTUAL VALUES OR FUTURE RESULTS, WHICH MAY BE SIGNIFICANTLY MORE OR LESS FAVORABLE THAN SUGGESTED BY SUCH ANALYSES.

 

11



 

RECOVERY ANALYSIS

 

1.   General Assumptions

 

The Recovery Analysis is based upon the terms of the Plan and is subject to the assumptions identified in the Plan and as described herein.

 

The Recovery Analysis assumes, among other items: (i) the Effective Date of the Plan occurs on or about the Assumed Effective Date of September 30, 2012; (ii) the enterprise value of Dynegy as of the Assumed Effective Date, is approximately $3,191 million to $4,465 million and (iii) the projected fair value of restricted and unrestricted cash and cash equivalents as of the Assumed Effective Date, as reflected in the Projections, is approximately $804 million.

 

The recovery for Class 3 — General Unsecured Claims does not take into account any potential proceeds from the proposed sale of the Leased Facilities that may be available for distribution to holders of Class 3 — General Unsecured Claims pursuant to the Settlement Agreement.

 

2.   Estimated Dynegy Equity Value

 

Equity Value of Dynegy

 

The equity value includes (i) the equity value of each of GasCo and CoalCo, (ii) the value of Dynegy’s NOLs(1), and (iii) cash at Dynegy and other subsidiaries, excluding GasCo and Coalco, net of (iv) overhead costs not allocated to GasCo and CoalCo(1) and (v) the value of the hedges(1).

 

To determine the range of values for GasCo and CoalCo equity, the following elements have been taken into consideration:

 

a)              The enterprise value of each of GasCo and CoalCo

b)             The senior secured debt of each of GasCo and CoalCo at the Effective Date

c)              Any excess unrestricted cash and cash equivalents of each of GasCo and CoalCo at the Effective Date

d)             The value of restricted cash and cash equivalents, as it is projected to become available throughout the Projection Period through the release of letters of credit and cash collateral

 

 

 

$ in millions

 

Low

 

High

 

 

 

CoalCo Enterprise Value

 

$

923

 

$

1,064

 

 

 

CoalCo Total Debt

 

(594

)

(594

)

 

 

CoalCo Unrestricted Cash

 

52

 

52

 

 

 

CoalCo Restricted Cash

 

89

 

89

 

A

 

CoalCo Equity Value

 

$

471

 

$

611

 

 

 

GasCo Enterprise Value

 

$

2,289

 

$

3,062

 

 

 

GasCo Total Debt

 

(1,089

)

(1,089

)

 

 

GasCo Unrestricted Cash

 

43

 

43

 

 

 

GasCo Restricted Cash

 

260

 

260

 

B

 

GasCo Equity Value

 

$

1,503

 

$

2,276

 

 

Restricted and Unrestricted Cash and Cash Equivalents of Dynegy

 

The Recovery Analysis includes estimated restricted and unrestricted cash and cash equivalents as of the Assumed Effective Date of Dynegy, excluding GasCo and CoalCo, based on the Projections as of the Assumed Effective Date.

 


(1)           A DCF methodology has been used to determine the range of value for Dynegy’s NOLs, hedges and the overhead costs not allocated to GasCo and CoalCo.  The range of value of Dynegy’s NOLs assumes a change of control on the Assumed Effective Date.

 

12



 

Transaction Costs

 

Transaction costs and other extraordinary expenses related to the Chapter 11 proceeding are taken into account in this analysis through the assumption that all these costs will be incurred and are reflected in the unrestricted cash and cash equivalents as of the Assumed Effective Date.

 

Danskammer and Roseton

 

The costs related to the operations of Danskammer and Roseton for the first 9 months of 2012 are reflected in the unrestricted cash and cash equivalents as of the Assumed Effective Date. The Recovery Analysis does not assume any other costs associated with those plants after that date, as it assumes that they will no longer be operated by Dynegy Danskammer and Dynegy Roseton.

 

The table below shows the range of estimated values for Dynegy Equity Value:

 

 

 

$ in millions

 

Low

 

High

 

A

 

CoalCo Equity Value

 

$

471

 

$

611

 

B

 

GasCo Equity Value

 

$

1,503

 

$

2,276

 

C

 

Hedges Value (MTM)

 

$

(3

)

$

(3

)

D

 

NOLs Value

 

$

0

 

$

365

 

E

 

Overhead Costs

 

$

(18

)

$

(23

)

F

 

Dynegy Unconsolidated Cash

 

$

361

 

$

361

 

G = A + B + C + D + E + F

 

Dynegy Equity Value

 

$

2,312

 

$

3,586

 

Memo:

 

Dynegy Consolidated Net Debt

 

$

879

 

$

879

 

Memo:

 

Dynegy Enterprise Value

 

$

3,191

 

$

4,465

 

 

3.   Recovery Estimates

 

As set forth in greater detail in the section of the Disclosure Statement entitled “Overview of the Plan”, holders of Allowed Class 3 — General Unsecured Claims will receive, among other things, their pro rata share of $200 million in cash and 99% of the shares of common stock, subject to dilution, to be issued or reserved for issuance by Reorganized Dynegy on or after the Effective Date.  Based on the range of the estimated values for Dynegy, the holders of Allowed Class 3 — General Unsecured Claims will receive aggregate consideration with a value of between $2,489 million and $3,750 million, before taking into account the potential dilution from the exercise of warrants issued as part of the Plan.

 

Based on the estimated value range of the Equity Interests, holders of Allowed Class 3 — General Unsecured Claims receive 59-89% value for their claims.

 

 

 

$ in millions

 

Low

 

High

 

H = G x 99%

 

Equity Value to General Unsecured Claims

 

$

2,289

 

$

3,550

 

I

 

Cash to General Unsecured Claims

 

$

200

 

$

200

 

J = H + I

 

Total Value to General Unsecured Claims

 

$

2,489

 

$

3,750

 

K

 

General Unsecured Claims

 

$

4,207

 

$

4,207

 

J / K

 

Recovery

 

59

%

89

%

 

13



 

*EXHIBIT “G”

 

SETTLEMENT AGREEMENT

 


*Included as Exhibit 10.1 to the Current Report on Form 8-K filed May 31, 2012.