Power producer Dynegy completes Chapter 11 bankruptcy

Dynegy, an electric power producer that operates gas-fired and coal power plants in California and four other states, recently emerged from a three-month bankruptcy and is being publicly traded again. The case is an example of how even a contentious Chapter 11 bankruptcy can help a company emerge from debt successfully.

Dynegy filed for Chapter 11 bankruptcy with a debt of more than $5 billion. Chapter 11 bankruptcy allows a business to restructure while maintaining control of the business. In many Chapter 11 cases involving corporations, however, shareholders do not receive a “piece of the pie.” Dynegy's case was slightly different – its shareholders almost won control of the company. After a lawsuit from the bondholders, however, a court-appointed examiner gave the rights to the company back to its bondholders and let shareholders retain a 1 percent interest in the company.

A Chapter 11 restructure plan gives the company’s unsecured creditors a 99 percent interest in the company and $200 million in cash. Shareholders are allowed to buy 13.5 percent of common stock with five-year warrants.

Every Chapter 11 bankruptcy/reorganization is different and often depends on the business entity type, and the amount and class of debt a business has. If your business has significant debt, Chapter 11 may allow you to restructure the debt without closing up shop. You may be able to work with your creditors to create a repayment plan that you can afford while you stay in possession of the business.

In some cases, businesses can even come out of Chapter 11 bankruptcy more profitable than when they entered it. Creative solutions and an experienced bankruptcy lawyer can make all the difference.

Source: Daily Finance, “Dynergy emerges from Chapter 11 bankruptcy protection,” Motley Fool Staff, Oct. 2, 2012.

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