Dynegy to repay bank debt with proceeds from Midstream natural gas business sale

By Sara Rosenberg

New York, Aug. 2 - Dynegy Inc. will be required to repay its credit facility and $189 million Riverside note using proceeds from the sale of its Midstream natural gas business to Targa Resources Inc., according to an 8-K filed with the Securities and Exchange Commission Tuesday.

Furthermore, the company anticipates replacing its current revolving credit facility with a cash collateralized letter-of-credit facility concurrently with the closing of the sale.

As of June 30, Dynegy had $594 million in outstanding term loan debt.

Dynegy expects to receive $2.475 billion in cash for the assets, subject to working capital adjustments, of which $2.35 billion will be paid at closing.

In addition, based on current expectations, Dynegy will realize a return of cash collateral of $125 million and eliminate its responsibility for about $75 million in letters of credit for the Midstream business, both within 60 days of the transaction closing.

Under the terms of the indenture governing Dynegy's second priority senior secured notes, the company can elect to use the balance of the sale proceeds to offer to repay parity debt on a pro rata basis or invest in replacement assets.

"The implementation of any debt reduction strategy will consider the cash interest savings to be gained, overall yield and our maturity timeline," the filing added.

Dynegy is a Houston-based holding company engaged in the power generation and natural gas liquids businesses.

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